Venezuela

By Eric Platt and Andres Schipani

Another lurch lower for Venezuela: the country’s sovereign credit rating was cut deeper into junk territory to ‘CCC+’ by Standard & Poor’s on Tuesday as it grapples with recession, rocketing inflation, dwindling foreign reserves and widespread shortages of goods.

S&P lowered its rating one notch from ‘B-’, which the agency said indicated a “one-in-two likelihood of default over the next two years”. Read more

By Francisco Rodríguez of Bank of America Merrill Lynch

In a provocative article published last week by Project Syndicate (Should Venezuela Default?), Venezuelan economists Ricardo Hausmann and Miguel Angel Santos make an interesting argument. They contend that Venezuela cannot meet all of its foreign currency obligations and is already defaulting on some of them. If authorities adopted a set of common-sense policies, they argue, these would include defaulting on the country’s foreign debt and making bondholders bear part of the burden of adjustment.

Default is the economic equivalent of major invasive surgery: an aggressive intervention with high risks and side effects which is only justified when it is indispensable for restoring an economy to health. Default makes sense only when a country is insolvent. Read more

Sometimes it’s hard to worry about Venezuela’s bondholders even as the possibility is raised of default. After all, the country’s citizens still have to deal with one of the world’s highest rates of inflation when they go to the shops.

This week, after some months of silence on the subject, the central bank reported that Venezuela’s annualised inflation rate hit 63.4 per cent in August. Read more

On Tuesday night, halfway through announcing what he had trailed earlier would be a major cabinet re-shuffle, Nicolás Maduro (pictured) let slip a telling phrase. The Venezuelan president praised outgoing oil minister Rafael Ramírez because, as Maduro said, he had rescued the country from “the claws of the meritocracy”. No kidding. Read more

A long-proposed sale of Citgo, the US subsidiary of Venezuela’s state oil company PDVSA, is once again making some waves. Rafael Ramírez, the powerful boss of PDVSA who is also oil minister and deputy president for the economy, said this month that a sale could go ahead “as soon as we receive a proposal that serves our interests.”

But in the US on Wednesday, Joe García, an energy savvy Democratic Congressman from Miami, urged the Obama administration to block the sale. Read more

For more than 50 years, citizens of Communist Cuba have been assured access to basic foodstuffs by the libreta, or ration book. But the subsidised system in increasingly controversial and last year Raúl Castro, the country’s president, rubbished it as “paternalistic, irrational and unsustainable”.

Nevertheless, across the Caribbean, Castro’s friend and colleague Nicolás Maduro of Venezuela is planning a similar system in a bid to combat the shortages that are ravaging the home of 21st century socialism. Maduro said his government would introduce a rationing system using mandatory fingerprinting in supermarkets, calling it “perfect” and an “anti-fraud blessing”Read more

The sale this month of the Caracas-based newspaper El Universal to a little known Spanish private equity firm raised concerns that it may turn out to be yet another example of the dwindling space for government critics in the Venezuelan media.

The culling of some of the newspaper’s regular columnists this week has brought those fears back into the spotlight. Read more

There has been an outpouring of bitter comments under the hashtag #GuisoChino – “Chinese Stew”, slang for fraud and corruption – in Venezuela sparked by this week’s visit by Chinese president Xi Jinping, who granted more financial support to the cratering economy of president Nicolás Maduro.

China has granted some $50bn in loans to Venezuela in recent years according to the Inter-American Dialogue/Boston University China-Latin America Finance Database, far more than to any other country in the region. Venezuela, after all, has the world’s biggest oil reserves. Read more

With Venezuela’s economy in tatters, corruption allegations abounding and political infighting the name of the game, it may be time for changes at the top.

A fortnight ahead of the ruling socialist party’s third congress at the end of July, President Nicolás Maduro (pictured) is expected to make the first announcements of a government restructuring this week. What’s at stake in the country with the world’s largest oil reserves, but where shoppers struggle to find basics such as toilet paper and powdered milk? Read more

As your correspondent found out while visiting Caracas this week, it can be hard to take a shower there these days because of drought-fuelled water rationing. But it is also hard to find bottled water if you want to give yourself a splash instead. Of course, you can always just reach for the deodorant and hope it does the job in the heat of the Venezuelan tropics. Or rather, you can’t, because it is increasingly hard to find deodorant.

No hay – Spanish for “there isn’t any” – is a mantra often heard in today’s Venezuela. Read more

By Samuel George of the Bertelsmann Foundation

When the presidents of Chile, Colombia, Mexico and Peru meet on June 19 and 20 for the ninth Pacific Alliance summit in Nayarit, Mexico, they’ll likely debate a proposal that could transform their quietly successful pact while boosting Latin American unity.

At the urging of Chile’s Michelle Bachelet, the gathering is expected to broach the potential integration of the Alliance, which was formed among the four countries in 2012, and Mercosur, an older grouping that includes the regional heavyweights of Brazil and Argentina. The issue would represent a crossroads for the Alliance, however, since Mercosur does not generally share the enthusiasm for international trade shown by its neighbours on the Pacific coast. Read more

Should one laugh or cry over Venezuela? The answer is: it depends on who you are, and when. Usually, it is investors and businesses that do the crying. That is especially so since President Nicolás Maduro (pictured) took charge after Hugo Chávez’s death last year and struggled to control chavismo’s disparate factions. As a result, policy making was paralysed. Increasingly, though, it seems that Maduro and the pragmatists are gaining the upper hand, at least over the country’s more militant radicals. They now seem to be doing more of the crying. Read more

Ticket offices may soon be pushing down their blinds at Maiquetia, the international airport outside Caracas, as civil aviation in Venezuela enters a downward spiral that is symptomatic of a broader economic vortex.

Last week, Italy’s Alitalia said it was temporarily suspending services “due to the ongoing critical currency situation” preventing it from repatriating funds. Germany’s Lufthansa followed suit, halting ticket sales in the country. Weeks earlier, Panama’s Copa said it would cut routes to and from Venezuela.

That’s tough on airlines and on Venezuelans keen to get away from it all. But the malaise runs wide and deep throughout the economy. Read more

Venezuela’s state-run oil giant, PDVSA, is calling on bold bond-buyers in the financial sector – and traders say they have already been receiving calls.

The company announced on Wednesday it is to issue $5bn in new bonds, that will mature in 2022, 2023, and 2024 with a 6 per cent coupon, in a private placement with the public banking sector. Read more

The International Pasta Association ranks Venezuelans as the world’s second-biggest consumers of Italy’s staple food.

But Venezuela’s foreign exchange controls have forced Empresas Polar, a giant food producer and the country’s largest private company, to close down its pasta production plant. Read more