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Apr
5
2013
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In Case You Missed It… Articles Roundup Week of 4/05/13

12630596 copia1.jpg.520.360.thumb 1 e1365195898833 In Case You Missed It… Articles Roundup Week of 4/05/13

Courtesy of: El Universal

This week: A month after his death, Hugo Chávez continues to cast a shadow on the Venezuelan presidential election; amid personal attacks against opposition candidate Henrique Capriles, the official presidential campaign begins in Venezuela; Capriles leads a march with supporters in Caracas to kick off his presidential campaign; and Maduro steps up insults and slurs, this time calling the country’s opposition “heirs of Hitler.” Maduro bizarrely claims Chávez appeared to him in the form of a “little bird” and blessed him; Venezuela’s opposition warns that the military should not take sides in the upcoming election; Capriles points out the Venezuelan state media’s overwhelming bias toward Maduro; and Venezuela tries to weaken the influence of the respected Inter-American Commission on Human Rights. Cuba throws its support behind Maduro in the Venezuelan elections, hoping his victory will allow them more control over the country and its resources; dollar scarcity and an inflation rate of 22 percent continue to take their toll on the Venezuelan people, as businesses in Venezuela foresee only tough times ahead;  a decade of currency controls leave Venezuelans desperate for money and vulnerable to fraudsters; and crop numbers in Venezuela show that 2012 production fell behind the already-low 2010 levels.

Chávez casts shadow on Venezuela poll, Financial Times

Last year, Henrique Capriles proved no match for the electoral juggernaut of Hugo Chávez, who won over a dozen nationwide polls in as many years.

Venezuela presidential race begins amid personal attacks and tension, The Miami Herald

Drugs, lies and murder plots. Venezuela’s compressed presidential campaign officially begins Tuesday in a race that will determine the future of the Andean nation after the death of President Hugo Chávez, who led the country for 14 years.

Venezuela Opposition Marches as Presidential Campaign Kicks Off, Bloomberg

Venezuela opposition leader Henrique Capriles Radonski led a march of supporters last night in Caracas to mark today’s formal start to the presidential campaign against Hugo Chavez’s hand-picked successor.

Maduro calls Venezuela opposition “heirs of Hitler”, Reuters

Venezuela’s acting President Nicolas Maduro on Saturday called the country’s opposition “heirs of Hitler,” accusing them of persecuting Cuban doctors working in the South American country the way Jews were persecuted in Nazi Germany.

Venezuela: Ruling Party Candidate Said ‘Little Bird’ Told Him He’ll Become President, Fox News Latino

A little birdie whistled in his ear that he’s ready to become the next president of Venezuela.

Venezuela Opposition: Military Can’t Take Sides, TIME

Venezuela’s presidential campaign on Wednesday veered between warnings of military meddling in the April 14 vote and opposition mirth at the acting president’s suggestion that the spirit of Hugo Chavez visited him as “a little bird” while he prayed.

Henrique Capriles accuses Venezuelan state media of bias in favouring political rival, The Independent

Henrique Capriles has hit out at the overwhelming bias of the Venezuelan state media, claiming that the VTV channel alone has given 46 hours and 43 minutes of coverage to Nicolas Maduro since the former bus driver became acting President after the death of Hugo Chavez on 8 March.

Venezuela Tries to Weaken Human Rights Watchdog, The Heritage Foundation

A group of populist Latin American states—led by Bolivia, Ecuador, and Venezuela—hopes to reduce the role of an international human rights commission and watchdog.

Cuba’s Venezuelan Pawn, The Wall Street Journal

Venezuela’s military government will hold what it refers to as a presidential “election” on April 14, and one of the candidates on the ballot will be Hugo Chávez’s handpicked successor, Nicólas Maduro.

Tough times ahead in post-Chavez Venezuela as dollar scarcity takes its toll, The Washington Post

Doing business in post-Hugo Chavez Venezuela is not for the faint of heart. Thousands of companies suffer under currency controls that all but deny them the U.S. dollars they need to import vital items into this oil-rich country, from food to cars to spare parts — even gasoline.

Dollar-Desperate Venezuelans Get Defrauded on Internet, Bloomberg

The retired Venezuelan teacher says he was so desperate for dollars that he wired his life savings to a front company posing as a Margarita Island inn.

Crop area in 2012 lags behind 2010 levels in Venezuela, El Universal

The results provided by the Venezuelan Ministry of Agriculture and Lands (MAT) reveal that in 2012, the agricultural activity recovered, featuring an important upturn in several highly demanded agricultural items.

 
Apr
2
2013
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ICYMI: Tough times ahead in post-Chavez Venezuela

The Associated Press
April 1, 2013
By Fabiola Sanchez

ijKok4dzw3DM e1364924737530 ICYMI: Tough times ahead in post Chavez Venezuela

Courtesy of: Bloomberg

CARACAS, Venezuela (AP) — Doing business in post-Hugo Chavez Venezuela is not for the faint of heart.

Thousands of companies suffer under currency controls that all but deny them the U.S. dollars they need to import vital items into this oil-rich country, from food to cars to spare parts — even gasoline. Venezuelan firms must sell their wares at state-controlled prices that don’t reflect the 22 percent inflation rate, the highest in Latin America. Even Venezuela’s socialist government admits the controls don’t work — but its attention is focused on the April 14 election to replace the late President Hugo Chavez.

It’s a largely improvised economic policy that, despite oil earnings, has turned people’s lives upside down and produced shortages of flour, coffee, butter and medicines. It’s also a mess that will immediately challenge whoever becomes the president of this 28 million-person country.

Jeni Suarez, a 51-year-old Caracas homemaker, experienced the crisis first hand after waiting three months for a colonoscopy at a public hospital. When she got there, doctors told her they needed new parts from abroad to perform the procedure, and the deliveries weren’t coming any time soon because the hospital didn’t get dollars from Venezuela’s government to buy them.

“I have an intense pain, and I don’t know what to do,” Suarez said after the appointment at Jose Maria Vargas Hospital.

Such economic headaches have, in fact, defined much of the late president’s legacy here.

Chavez imposed draconian currency controls a decade ago to punish business leaders who had mounted a crippling opposition strike. He was also trying to stem the flight of dollars abroad as political instability spooked investors.

“The policy of currency controls is very negative for the country and hasn’t met any of its objectives,” said Alejandro Grisanti, an analyst at investment bank Barclays Capital. “It hasn’t stopped capital flight. It hasn’t stopped inflation, (and) it has been very costly for the treasury.”

Neither Chavez successor Nicolas Maduro nor opposition candidate Gov. Henrique Capriles has delivered specific proposals to address the crisis, said Alejandro Gutierrez, an economics professor at the University of the Andes. The most effective solution would likely involve unpopular measures such as a mass devaluation of the currency to spur exports, or an end to price controls.

Capriles has spent much of the campaign trying to assure Chavistas he will not take away their government-funded social programs, while Maduro vows to continue the late leader’s legacy, which would include the controls.

“We are facing a transition situation, and they are going to wait until this situation is cleared up,” Gutierrez said Monday.

Only Capriles has suggested a possible way of injecting more dollars into the economy: Ending subsidized oil exports to Cuba that began under Chavez.

The late leader had aided his allies by providing oil at preferential terms to more than a dozen countries in Latin America and the Caribbean. Cuba receives Venezuelan oil worth around $3.2 billion a year, estimates Jorge Pinon, a University of Texas energy analyst. Nicaragua gets about $1.2 billion worth of oil, according to economist Nestor Avendano.

Yet whoever wins the vote won’t be able to put off action indefinitely. The wave of national mourning for Chavez and the heated campaign have so far masked the plight of dollar-poor food makers, dairy farmers, ranchers and auto manufacturers. But consumers are feeling the shortages of appliances, automobiles and staples such as flour, coffee, butter and medicines.

Venezuela’s automakers are operating at 50 percent capacity because they don’t have dollars needed for auto parts made abroad, according to Omar Bautista, president of a national carmakers group that includes Ford, General Motors and Mitsubishi. And foreign suppliers are hesitant to sell to Venezuela because they don’t know when or if they’ll be paid, Bautista said in remarks reported by Caracas’ El Universal newspaper.

“New (parts) shipments are being held back as long as we cannot honor these contracts,” Bautista said.

Even as Venezuelans fight for dollars, the country sits atop the world’s largest proven oil reserves, with those exports delivering nearly $1 trillion in revenues to the country since Chavez was elected in 1999.

Thanks to oil, Chavez’s government had invested $500 billion on social programs since 1999, according to Planning Minister Jorge Giordani. Venezuela’s poverty rate fell from 50 percent in 1999 to 32 percent in 2011 while unemployment dropped from 13 to 8 percent.

After the 2002-03 strike, Chavez began using the enormous influx of dollars as a political weapon, with the government selling businesses limited quantities of dollars at a rate that didn’t reflect the bolivar’s real black market value. The official rate is now about a quarter of what the dollar sells for on the black market.

At the same time, the government’s own dollar supply may be diminishing. Oil income trailed off from $5.6 billion in 2008 to $3.8 billion in 2012, partly because of slumps in production and refining. The government also spent heavily to re-elect Chavez in October and help Maduro’s candidacy after the president’s March 5 death, further squeezing the dollar supply to private businesses.

As long as government dollar sales are frozen, “foreign exporters are not going to start selling to us,” said Carlos Larrazabal, president of one of Venezuela’s largest business chambers. “We cannot understand how it can be that we have a country with an oil price of more than 100 dollars per barrel and we have this scarcity of currency.”

In a bid to inject some liquidity into the economy — and a tacit admission that the currency controls aren’t working — Maduro’s interim government held a one-day auction of $200 million last week.

Jorge Roig, vice president of the Fedecamaras business chamber, said the rules for bidders were late in coming, overly complicated and discouraged small and medium-size firms from participating. At least $1 billion more is needed to keep companies rolling, Roig told Caracas’ Union Radio on Wednesday.

The Venezuelan Association of Medical, Dental and Laboratory Equipment says its members collectively owe $300 million for past imports, which were suspended in November because they couldn’t pay.

“There are no test tubes to collect blood samples. There are no colostomy bags. No electrocardiogram paper. No X-ray plates,” said Anerlin Garcia, the group’s executive director.

Simon Nobile, president of the Venezuelan Association of Pasta Foods, says more dollars alone won’t help. The government also must raise its official prices on hundreds of products because they don’t reflect the effects of inflation, he said.

Eleven manufacturers in Nobile’s association employ 5,000 people but are close to shutting down because the price of pasta has been frozen for two years. The official selling price of 68 U.S. cents per kilogram (2.2 pounds) makes up only half the production cost, Nobile said. He said firings could happen at his company as early as April.

“If the government doesn’t make a decision,” he said, “this is the end.”

To read this article at Associated Press, please click here.

 
Oct
5
2012
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Chavez Losing Invincibility Tag Spurs Election Bond Rally

Bloomberg
October 5, 2012
By Ye Xie and Daniel Cancel

ixDiU hPfnVQ Chavez Losing Invincibility Tag Spurs Election Bond Rally

Courtesy of: Leo Ramirez / AFP / Getty Images

Venezuelan bonds are posting the biggest rally among major developing nations as investors bet that President Hugo Chavez’s tenure will end soon even if he wins the closest election he’s faced in 14 years.

The country’s dollar bonds returned 30 percent this year as Chavez’s battle with cancer slowed his campaign for another six- year term that would allow him to extend his push for more state control of the economy. Only the Ivory Coast’s debt has gained more, according to JPMorgan Chase & Co.’s EMBI Global Index.

While Chavez is still the likely winner, investors are betting on a change in government in South America’s largest oil exporter after the Oct. 7 vote as his health deteriorates, according to TCW Group Inc. Henrique Capriles Radonski, who leads the president according to one poll, is promising to dismantle Chavez’s economic policies, including currency and price controls that have created food shortages and failed to contain the world’s third-highest inflation rate.

“Even if Chavez wins these elections, people are still focusing on a political transition within two years,” said Marcela Meirelles, a Los Angeles-based strategist at TCW, which oversees $128 billion of assets, including Venezuelan bonds. “Putting politics aside for a moment, Venezuela bonds still offer attractive yields, given risks involved.”

The securities are on pace for their biggest annual advance in three years after Chavez had three operations in the past 15 months to remove tumors from his pelvic area. The 58-year-old Chavez says he is now cancer free.

Yield Spread

“I’m recovered and doing exercise,” Chavez said during a radio interview Sept. 4, according to a statement from the Information Ministry. “I thought at one point that I would have to leave politics, but I’m recovered and now my life is in the hands of God and the people.”

Venezuela’s dollar bonds yield 11.05 percent on average, down 3.06 percentage points this year while still the highest among major emerging-market countries tracked by JPMorgan’s EMBIG index. The extra yield investors demand to hold Venezuelan bonds instead of U.S. Treasuries has narrowed 298 basis points, or 2.98 percentage points, this year to 960. The so-called spread is on par with Pakistan, and 249 basis points above Ukraine, which shares Venezuela’s B+ credit rating at Standard and Poor’s, four levels below investment grade.

Benchmark bonds due in 2027 rallied today, sending the yield down 11 basis points to 10.42 percent as of 10:16 a.m. New York time, according to data compiled by Bloomberg.

Barclays Plc said in a report today that Capriles is “likely” to beat Chavez.

‘Real Chance’

Polls are split on who is leading in the race. None show Chavez dominating as he did in 2006, when he won 63 percent of votes. Capriles, 40, was supported by 51.8 percent of those who were sure they would vote among 1,546 people surveyed Sept. 27 – Oct. 2 by Caracas-based Consultores 21, compared with Chavez’s 47.2 percent. Chavez’s lead in Datanalisis polls narrowed to 10.4 percentage points in September from 15.3 points in June among people who said they’re certain to vote.

Capriles, a Caracas-born lawyer, has vowed to attract foreign investment, eradicate corruption, create jobs and phase out currency controls while maintaining some of Chavez’s popular social programs such as subsidized food markets and free health care.

Chavez, a former paratrooper and a self-claimed socialist who led a failed coup in 1992, has nationalized everything from utilities to banks to steel companies, leading to a drop in investment from foreign and local companies.

Dollar Reserves

“This is the first time that there’s a real chance for the opposition to upset Chavez,” said Gorky Urquieta, who helps oversee $15 billion of emerging-market debt, including Venezuelan bonds, at ING Investment Management International in Atlanta. Any bond selloff following a Chavez win will be short- lived because “the business environment is unfriendly already and I don’t see things getting significantly worse,” he said.

In a bid to bolster economic growth ahead of the election, Chavez has overseen a 30 percent jump in government spending this year, with outlays going to low-income housing projects and new social programs to assist the elderly and children.

Foreign reserves have declined 12 percent this year to $26.3 billion, and touched $24.8 billion last month, the lowest level since 2007. Oil production has dropped 22 percent since Chavez took office to 2.7 million barrels a day last year, according to British Petroleum Statistical Review. Venezuela relies on oil for 95 percent of its exports and half of public spending.

Cancer Treatment

Consumer prices rose 18.1 percent in August from a year ago, the highest official rate among the 102 countries tracked by Bloomberg after Belarus and Iran. Venezuela will devalue the bolivar 31 percent to 6.2 per dollar in the first quarter of 2013 to keep the economy competitive and close a budget deficit by boosting oil revenue in bolivars, according to the median estimate of 14 analysts surveyed by Bloomberg in July.

Venezuela’s economy may contract next year as the government reigns in spending after the election, according to Bank of America Corp. and Nomura Securities International Inc. Gross domestic product will increase 5 percent this year, according to the median estimate of 12 analysts surveyed by Bloomberg.

“The underlying picture has deteriorated,” said Bob Maes, who holds less Venezuelan debt than benchmark indexes in his emerging-market bond funds at KBC Asset Management SA in Luxembourg. “I won’t join the rally at the moment.”

Political Transition

Bank of America recommended in a note Oct. 2 that its clients sell Venezuelan bonds because Chavez is likely to win the election by as much as 10 percentage points, allowing him to pursue “more radical” policies. JPMorgan cut Venezuelan bonds to the equivalent of hold from buy on Sept. 17, saying that the securities were priced appropriately following gains.

Venezuelan bonds rallied the most in 13 years in February as Chavez’s trips to Cuba for cancer treatment fueled speculation he wouldn’t be able to stay in power. Questions remain even as the president says he’s healthy. Chavez campaigned on live television for about 20 hours in September, one quarter of the time he spent in the month leading up to the 2006 election, according to a Sept. 26 report by Barclays Plc.

Under Venezuelan law, if Chavez wins and becomes too ill to serve during the first four years of his term, Vice President Elias Jaua would assume the presidency and have to call new elections within 30 days. If he can’t serve the final two years of his mandate, the vice president would finish the term.

Oil Prices

Chavez, who sits over the world’s largest oil reserves, has never missed a debt payment since taking office, even as crude prices dropped below $20 a barrel in 2002. Oil has increased 21 percent over the past year to $92 a barrel.

Thomas Cooper, who oversees the $2.1 billion GMO Emerging Country Debt Fund at Grantham, Mayo, Van Otterloo & Co. in Boston, said he’s betting on Venezuelan bonds to outperform regardless of the result of the election as the government has enough oil revenue to pay off debt. His fund returned 19 percent annually over the past three years to beat 97 percent of its competitors, according to data compiled by Bloomberg.

“The likelihood of a political transition within two years is something that will continue to support sponsorship of the credit,” TCW’s Meirelles said. “It’s awkward to say since we’re talking about someone’s health, but it is what it is.”

To contact the reporters on this story: Ye Xie in New York at [email protected]; Daniel Cancel in Caracas at [email protected].

To contact the editor responsible for this story: David Papadopoulos at [email protected].

To read this article on Bloomberg, please click here.