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. Continue reading »
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. Continue reading »
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. Continue reading »
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. Continue reading »
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. Continue reading »
Venezuela’s central bank announcement of inflation data this week was remarkable more for its rhetoric than for the figures themselves.
Announcing the numbers a fortnight behind schedule, it said monthly inflation rose to 4.1 per cent in March, up from 2.4 per cent the previous month. But it did not mention an annualised rate, which hit 57 per cent in February. Instead, it launched a rhetorical broadside against the ongoing protests in the country, which it said have unleashed a “new concrete wave of economic war”. Continue reading »
There is no doubt that emerging market (EM) investors have cheered up considerably of late. Following a torrid January and February, virtually all asset classes in the EM universe appear – on aggregate at least – to be gaining in value.
The bellwether stock index, the MSCI EM index, is up 9.6 per cent from its low on February 5. EM sovereign bonds are yielding an average of 5.51 per cent, down 0.37 per cent since January 1. Local currency bonds are, in many cases, producing stellar returns sharpened by windfall currency gains. Indeed, some EM currencies are among the world’s best performers, with the Indonesian rupiah rising 7.81 per cent, the Brazilian real gaining 7.3 per cent and the Indian rupee climbing 2.8 per cent so far this year. Continue reading »
One of the world’s most complex foreign exchange regimes, in a country with some of the world’s cheapest petrol, is wiping out profits at some of the world’s biggest carmakers.
First, Ford said it would take a charge of $350m in the first quarter because of currency losses in Venezuela, adding to its woes after a $126m loss on its South American operations in Q4 2013 caused by downtime in Brazil preparing for new products and “limited availability of US dollars” in Venezuela. Continue reading »
That was then
Back in 2008, President Luis Inácio Lula da Silva boasted that the tsunami of the global financial crisis would register barely a ripple, uma marolinha, in Brazil. Bar Mexico, this was true for the rest of the region too. Today, though, Latin America is more vulnerable to a devastating “sudden stop” in international capital flows.
As Agustin Carstens, the head of the Mexican central bank, warned last week, such an event could be triggered by higher US interest rates. Or, more worryingly, it could follow a sudden collapse of commodity prices should China’s economy slow abruptly. But how much more vulnerable is Latin America today? About 20 per cent more, according to the Inter-American Development Bank. Continue reading »
Let me explain
By Andrew Rosati and Andres Schipani
The world’s most complicated foreign exchange regime got a bit more complicated this week. Venezuela now has four more-or-less-functioning exchange rates: three official ones plus the black market or innombrable (unmentionable) rate – so called because although its use is widespread among companies and individuals, merely to mention it was, until recently, a crime.
Confused? We’d love to say you won’t be after this episode of beyondbrics. Here’s our explainer. Continue reading »
Well, that didn’t last long.
Venezuela launched its long-awaited Sicad 2 dollar market on Monday, in what many hoped would be a step towards normalisation of the country’s dysfunctional foreign exchange market. Continue reading »
From Jason Mitchell
I am a British freelance journalist who has been based in the city of Merida in the Venezuelan Andes for the past three and a half years.
On Thursday last week I was forced to leave Merida at short notice after receiving a death threat from an extortioner. The person said he was phoning on behalf of the commander of the local paramilitaries and that if I did not pay 100,000 bolivares (about $1,400 at the black market exchange rate), I would be murdered. Continue reading »
Another sign of the stresses in Venezuela’s economy: annual inflation hit 57.3 in February according to the central bank, up from 56.3 per cent in January.
The numbers were bad enough for Nelson Merentes, central bank president, to admit at the weekend that Venezuela was in an economic crisis. Continue reading »
The unrest that has left at least 20 people dead goes on in Venezuela. Over the weekend, protesters were confronted by security forces while attempting to make an “empty pots march” on the food ministry in Caracas, fed up with worsening shortages that have left one in four basic goods missing from the city’s shops.
One cause is a chronic, government-imposed shortage of dollars to pay for imports. While resisting calls for wholesale reform, on Monday officials are set to launch a new, less stringent system of foreign exchange controls that, it is hoped, will provide some relief. Continue reading »
Investors in Ukrainian bonds have heaved a collective sigh of relief over the past few days – or, if not that, they have at least moved further away from the threat of default, if the recent retraction in bond yields and CDS spreads is any guide. But even in the darkest days of last week when Ukrainian yields soared to panic levels, investors could have taken one grain of comfort. Things, after all, could have been worse: they could have invested in Venezuela. Continue reading »