The late Hugo Chávez once rubbished Citgo as a “bad business”. But the US refining unit of PDVSA, Venezuela’s state oil group, may now be coming to the rescue of its socialist owners in Caracas, and in a thoroughly capitalist way.
Venezuela is in deep recession, its citizens are struggling to buy food and the government is struggling to meet debt commitments of at least $10bn this year. Step forward Citgo, which is reportedly preparing to issue $2.5bn in loans and bonds to raise some much-needed cash for its embattled parent company, and hence its embattled sovereign. Read more
While crude prices extended losses, Venezuela’s President Nicolás Maduro extended his trip abroad, seeking support to stop the collapse in the price of oil, which accounts for some 96 per cent of his country’s foreign earnings.
Meanwhile, back home, something else also extended: queues and discontent. Read more
Venezuela’s President Nicolás Maduro had many words of praise for his Chinese counterpart, Xi Jinping, after their meeting in Beijing this week.
However, as fastFT reports, the announcement that he had taken more than $20bn in investment from China for various types of projects left many wondering if the president of the oil-dependent Caribbean nation had really got what he wanted. Read more
Another year, another announced change to one of the world’s tightest and most complex foreign exchange regimes. Unsurprisingly, however, the long-awaited change has fallen short of the full scale reform of currency controls promised last week by Nicolás Maduro, Venezuela’s increasingly isolated president. Read more
By Russ Dallen, Caracas Capital Markets
Trying to predict what will happen in South America’s wildest emerging markets in 2015 has the degree of difficulty of trying to compute pi to the 100th digit in your head.
With Venezuela, in particular, the range of options of what could happen next year is almost as infinite – ranging from more of the same and muddling through, to default, violence, coup, civil war and international brigades. On the economic front, whether Venezuela survives 2015 will depend almost purely on the price of oil, however. Read more
Among the many woes afflicting Venezuela, one of the most pressing is the rapid decline in its reserves of hard currency. These fell from some $29bn at the start of 2013 to a low of about $19bn last week. But Beijing’s generous hand has since boosted them to $23.5bn, according to the central bank.
The fall in reserves had raised concerns about Venezuela’s ability to pay its debts, so the influx brought some relief to rattled markets, fuelling a small rally off recent lows in Venezuelan bonds, which remain among the highest yielding in the world.
But is the influx all it appears to be? Read more
One could talk about Venezuela’s economic policy in Shakespearean terms. To devalue or not to devalue; to converge foreign exchange rates or not to converge; to raise the price of the world’s cheapest gasoline or not to raise; to sell Citgo or not to sell; to default or not to do so – these are the questions.
The distortions created by the government’s foreign exchange and price controls – covering even Barbie dolls – keep playing a treacherous role in Venezuela’s unfolding tragedy. Why is this happening instead of not happening? To some analysts, that is the question. Read more
Blame the Empire.
Venezuela’s socialist President Nicolás Maduro on Wednesday accused the United States of oversupplying the market -in his words, “inundating the market”- to rattle oil prices. His government is maybe having a tough time coping with a sliding crude price as oil accounts for some 95 per cent of export revenues of the energy rich country.
The toxic combination of dropping oil prices, an economy in shambles and lower levels of foreign reserves, has been reinvigorating fears of a debt default. Alejandro Grisanti, head of Latin America economics research at Barclays, said on Wednesday in report titled “Venezuela: The perfect storm”: Read more
By Pan Kwan Yuk and Andres Schipani
Thumbing his nose at critics, Venezuela’s finance minister, Rodolfo Marco Torres, said on Wednesday via a series of tweets that the socialist government has paid a $1.5bn government bond that was due.
As fastFT reported, Mr Torres took to Twitter, under the hashtag #VenezuelaSeRespeta, or Respect for Venezuela, to write:
Acknowledging the instruction of our president Nicolás Maduro, today we paid #GlobalBond2014 #RespectForVenezuela
Today we paid $1.561.665.000 in capital and corresponding interests of #GlobalBond2014 #RespectForVenezuela
The Boliviarian government shows its commitment to the Motherland and the capacity to honour its obligations #GlobalBond2014 #RespectForVenezuela
Venezuela’s black market foreign exchange rate, the innombrable – or unmentionable in Spanish – broke the supersonic barrier of a 100 bolívares per dollar on Friday afternoon.
Amid the country’s deepening malaise, the fall has been a fast one: a year ago, a greenback fetched less than 40 bolívares fuertes. The fuerte – or strong in Spanish – has since become a wisp of a thing with the country’s biggest banknote – the 100 bolivar – now changing hands for a mere US dollar.
Nevertheless, Venezuelans are desperate to get hold of greenbacks to hedge against runaway inflation at 63 per cent. But due to tight controls imposed over a decade ago, the government sells a limited amount of dollars at overvalued rates ranging from 6.3 to roughly 50 bolívares, depending on the country’s multiple exchange rates. Read more
Venezuela’s economy is in disarray and many blame its tight foreign exchange system. Some within the socialist government are resistant to reform it, so for a while now, officials have instead opted to tinker with it. One could say they did so, albeit slightly, again on Thursday by allowing the state-owned oil company, PDVSA, to sell dollars at different rates.
PDVSA, the cash cow of the country with the world’s largest oil reserves, will now be able to use any of Venezuela’s three legal exchange rates when it contributes to the government’s social development fund, Fonden. Read more
Nicolás Maduro, Venezuela’s president, made his debut at the United Nations this week. While in New York he talked about Citgo, the US-based subsidiary of his country’s state oil company PDVSA, which is supposedly up for sale. Only last month, a government minister said Caracas was open to proposals.
Maduro seemed keen to scotch that idea. He said his government’s plans for Citgo were to keep on “strengthening our investments” – and to keep on warming the homes of some 150,000 families in the US through a subsidised heating oil programme launched by his mentor and predecessor, the late Hugo Chávez. Read more
Clorox, the cleaning products company, has finally bit the dust in Venezuela, announcing on Monday it was pulling the plug on the embattled Caribbean nation amid the country’s growing economic woes and restrictions.
“This is a very difficult situation for our company,” Don Knauss, chairman and chief executive, said in a statement.
Aside from price controls, foreign companies operating in the country have to deal with runaway inflation, which drives up operating costs. They also have to watch the money they make depreciate because Venezuela’s tight capital controls mean they cannot easily repatriate it. Read more
No devaluation here
One could say that a clear sign that Venezuela – a country where beauty enhancements are a serious issue – has hit rock bottom is that there is now a shortage of breast implants. But as FastFT reports, the real nervousness appears to lie elsewhere.
Growing concerns over the embattled Caribbean country’s ability and willingness to make $4.5bn of debt repayments next month has pushed the cost of insuring against a default to the highest in seven months. Read more
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
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
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