Monthly Archives: December 2011

Dec
16
2011
Posted by
admin
Comments

ICYMI: Chavez Rolls Back Seizures as Shortages Hurt Re-Election Bid

Chavez Rolls Back Seizures as Shortages Hurt Re-Election Bid
Businessweek
December 16, 2011
By Charlie Devereux

Venezuela’s President Hugo Chavez is enlisting Mexico’s Gruma SAB, French retailer Casino and other international companies to boost supplies of milk, corn flour and cement as shortages threaten to dent his bid for re-election in 2012.

Chavez, a self-declared Marxist, is rolling back policies that have allowed him to expand control over the economy. He is forging alliances with corporations he previously accused of price-gouging, such as Casino Guichard Perrachon SA, based in Saint-Etienne, and Gruma, Mexico’s largest corn flour maker.

“The government has realized that 100 percent expropriations don’t work and that’s why they’re looking to work with the private sector,” said Luis Vicente Leon, president of Caracas-based pollster Datanalisis, in a phone interview. “For the government, it’s the best of both worlds.”

Since taking office in 1999, Chavez has seized assets of 1,045 companies, according to Venezuelan manufacturing association Conindustria. The nationalizations have cost the government at least $9.9 billion in compensation paid to companies, while claims for another $20 billion are under dispute at international courts, said Jose Luis Saboin, an economist at Caracas-based research company Ecoanalitica.

Earlier this month, Chavez and Gruma agreed to form joint ventures to produce corn flour, rice, pasta and oatmeal. Last year, Chavez seized one of the Monterrey-based company’s local units.

‘Flexible Model’

“In the past, socialist models that nationalized everything were forced to later ease their policies,” the 57- year-old Chavez said Aug. 1 on state television. “We’re moving towards a flexible model, our historic creation.”

Calls to Gruma’s press department by Bloomberg News weren’t returned.

Cali, Colombia-based Forsa SA, which produces aluminum molding for construction, last month agreed to form a joint venture with Chavez to produce materials for his housing projects.

Chavez also invited Cemex SAB, the largest cement maker in the Americas, to re-invest in the country after paying the Monterrey-based company $600 million this month to resolve a three-year dispute over compensation for assets he had seized in 2008.

Shortages are being aggravated by 27 percent inflation that’s the highest of 78 economies tracked by Bloomberg, and a slow recovery from a year-and-a-half recession. Foreign direct investment has plunged 75 percent to $1.2 billion in 2010 from $5 billion in 1998, according to the central bank.

In the first nine months of this year, gross domestic product grew 3.8 percent, according to the government.

Borrowing Costs

Venezuela has the highest borrowing costs of major emerging-market countries. Investors demand a yield of 1,276 basis points, or 12.76 percentage points, more than U.S. Treasury bills to hold the government’s debt, according to JPMorgan Chase & Co.’s EMBI Global index.

Steel and cement producers are among the companies that have pared output this year, delaying Chavez’s hallmark program to build homes for the poor, while supermarket shelves are missing staple foods at a time when the former tank commander is canvassing for votes.

Milk is one item difficult to obtain. Angela Mera, a 51- year-old house cleaner, said she hasn’t found powdered milk for two months in the three supermarkets near her home in the Caracas working-class neighborhood of El Valle. Cooking oil is also in short supply, while the only coffee she has was brought by a friend from Colombia, she said in a Dec. 15 interview.

“Even my friends who work at supermarkets sometimes can’t get hold of products,” she said.

Past Hostility

The recent accords with private business show Chavez has become aware of the failings of many state enterprises, Leon said. They also mark an end to past hostility to foreign companies.

In January 2010, Chavez seized a chain of 41 stores partly owned by Casino on accusations of price gouging following a 50 percent devaluation of the bolivar. “You must respect our house,” he said at the time. Ten months later he agreed to pay Casino $690 million for an 80 percent stake in the company’s local supermarkets.

Casino retained the other 20 percent and is “providing operational support to and developing co-operation with the new state-controlled entity,” Casino spokesman Frederic Croccel said in an e-mailed response to questions. He declined to comment on how the relationship with the Venezuelan government works.

Some Protection

For foreign companies, partnering with Chavez provides some protection from further meddling, Leon said. It also allows them to retain a “foot in the door” in the anticipation of an improvement in the investment climate if the opposition holds onto a lead in polls and unseats Chavez in next year’s presidential election, he said.

“It’s a commercial operation without the risk of being the sole owner in a country where the state can do what it likes,” Leon said.

Venezuela’s Information Ministry didn’t immediately return an e-mail seeking comment on Chavez’s nationalization policy.

Chavez’s last nationalization of a publicly traded U.S. company was in October 2010 when he seized a unit of glass container manufacturer Owens-Illinois Inc. The Perrysburg, Ohio- based company filed for arbitration in September after posting a $335 million charge from writing off the takeover.

Rusoro Mining Ltd., a Vancouver-based miner that operated two prospects in Venezuela, is currently in talks to form a joint venture with the state after Chavez nationalized the gold industry in August.

Production Plunging

The policy shift comes as nationalized companies flounder under inexperienced management and fail to attain production targets, said Richard Obuchi, a professor in public policy at the Institute of Superior Administrative Studies business school in Caracas.

Output at Siderurgica del Orinoco has dropped 35 percent since 2009, when Chavez acquired Venezuela’s biggest steelmaker from Luxembourg-based Ternium SA for $1.97 billion, union leader Jose Jimenez said Sept. 23.

Steel rods are key to Chavez’s plan to eradicate a housing deficit. Chavez on Dec. 11 said the project would build 50,000 fewer homes next year than the initial goal of 200,000.

Henrique Capriles Radonski, a front runner to win an opposition presidential primary scheduled for February, said nationalizations have sapped productive industries.

“There’s an excess of government intervention in everything,” Capriles, Governor of Miranda state, said Dec. 12.

Agricultural Output

Boosting agricultural production to slow inflation and replenish food stocks is another part of Chavez’s electoral strategy. Food processors, stores and more than 2.5 million hectares (6 million acres) of farm land and ranches have been seized during his administration.

While forming partnerships with the private sector may cut the financial burden for the government, Chavez is unlikely to drift far from his radical course, Saboin said.

“While Chavez may adapt the format for nationalizations, if he wins another term he will continue to increase his hold over the economy and won’t cut back on nationalizations any more than he needs to,” Saboin said. “Pragmatism is the order of the day, but only in the areas where it’s required.”

 
Dec
16
2011
Posted by
admin
Comments

In Case You Missed It… Articles Roundup Week of 12/16/11

In this week’s roundup…President Hugo Chávez’s repatriation of Venezuela’s gold continues apace; Venezuelan judge sentences an anti-Chávez colleague to two more years of house arrest; a prominent economic expert says that Chávez’s policies have hurt the Venezuelan economy; and the new regional body led by Chávez gets off to an underwhelming start.

Chavez flies Venezuela gold home to avoid EU turmoil, The Telegraph

Billions of dollars worth of gold is being flown around the globe in a massive drive to bring home Venezuela’s riches from the West. Officials are under orders from Hugo Chavez, the country’s socialist president, to repatriate the nation’s gold reserves against the backdrop of a wider effort to nationalise its gold sector. Last week Venezuela said it had safely received its second load of gold from overseas. It would not give much detail, but the first cargo welcomed by flag-waving crowds last month was said to be18 tonnes worth some $300m (£192m).

Venezuela authorities rule anti-Chavez judge to spend 2 more years under house arrest, The Washington Post

Venezuelan authorities on Tuesday extended house arrest for a judge whose case has been strongly criticized by human rights groups. Judge Ali Fabricio Paredes ruled that his colleague, Maria Lourdes Afiuni, must remain under house arrest for two more years, saying she has intentionally delayed her own trial by repeatedly refusing to enter a courtroom.

Expert: Venezuela’s economic model leads to weak economic growth, El Universal

Venezuelans’ quality of life has been affected by the economic policies implemented by Hugo Chávez’s Administration. Changes to the institutional structure are creating uncertainty and are affecting the possibilities for development, according to Efraín Velásquez, the President of Venezuela’s National Economic Council. Velásquez warned against high inflation and said that while Venezuela’s economic activity began to show an upward trend this year, these results have a limited effect. “In principle, the level attained in the third quarter of 2011 (3.5%) has the same size as in 2009,” he said.

Zakaria: The Hugo Chavez show, CNN

Last week saw the debut of a big new regional alliance. Thirty three countries came together to promote relations in the Americas. But, guess what – America itself (that is, the United States of America) was missing. And that was the point. What in the World is going on? To explain, let me tell you a bit more about the summit. It’s called “CELAC” – a Spanish acronym for “the Community of Latin American and Caribbean States.” It was held in Caracas, Venezuela, and the organizer was none other than that perennial America basher – President Hugo Chavez.

New CELAC organization faces detractors, funding issues, The Washington Times

A new organization meant to unite 33 nations in the Americas against the United States just adds to the region’s crowded field of largely meaningless multilateral entities, observers say. The Community of Latin American and Caribbean States, made up of all of the hemisphere’s sovereign nations except the United States and Canada, last week held its inaugural summit, hosted amid great fanfare by Venezuelan President Hugo Chavez. But, the bloc, known by its Spanish initials CELAC, lacks brick-and-mortar structures as much as common interests among its members, ranging from U.S. allies such as Mexico and Colombia to foes including Mr. Chavez, experts at Washington-based think tanks say.

 
Dec
9
2011
Posted by
admin
Comments

In Case You Missed It… Articles Roundup Week of 12/9/11

In this week’s roundup…After nearly 13 years of “21st Century socialism,” Hugo Chávez wants to remain in power for 30 more years; a new regional body, CELAC, is born in Caracas; the Venezuelan economy continues to weaken with prices rising, investments falling and a staggering inflation rate; Venezuela’s opposition candidates agree on need to reform country’s judicial and law enforcement systems; and Russian state-owned oil behemoth Rosneft strikes a $2.6 billion deal to refine Venezuelan oil reserves.

Chávez’s 40-Year Plan to Conquer Vice, The Wall Street Journal

Venezuela’s Hugo Chávez says his Bolivarian Revolution needs more time to produce its utopian fruits. “We barely have 10 years here,” he told a crowd of supporters in Caracas last week. “We will take it to 10 more and 10 more and 10 more to construct the new social virtues.” In that time, Mr. Chávez pledged, “we will deepen the socialist revolution: socialism, socialism and more socialism. We have to deepen the struggle and defeat the vices of the past that still persists among us: violence, insecurity, corruption, selfishness, individualism.”Considering that the human condition hasn’t changed much since we got kicked out of the garden, a 40-year plan to conquer vice seems pretty ambitious. But Mr. Chávez has never suffered a lack of self-confidence. Of course being an individual is hardly a vice. On the other hand, notably absent from his list was another perennial transgression that has yet to be defeated in Venezuela: the central bank’s sinful practice of printing money to finance the government.

Celac: “giant” born in another’s shadow, The Financial Times

“A giant has been born,” declared Hugo Chávez in his usual understated style at the founding of the latest Latin American regional body, Celac, which was formed over the weekend in Caracas. The 33 member body pointedly excludes the US and Canada – which raises the question: is it a non-American or anti-American alliance? (Conservative Latin countries such as Mexico, Colombia and Chile would probably suggest the former; the likes of Venezuela and Cuba the latter). More pointedly, if it is a giant as Chávez suggested, for the moment it looks like a blind and one-legged colossus, with one arm tied behind its back. As noted here and here the body lacks a secretariat, a building, a funding structure, or even rules on how to reach its anyway non-binding decisions. Rather than tackling such meat and potato issues, which are presumably central to any functioning multilateral body, the meeting ended instead with a fiesta and a bland communiqué about the desire for more regional cooperation. Still, the summit did give Chávez the chance to flaunt his “recovery” from cancer.

Venezuela: paying the Chávez price, The Financial Times

Christmas has come early for many Venezuelans this year. Around the country, state-subsidised “fairs” have been springing up where imported Chinese “white goods” are being sold at bargain basement prices. In a country where annual inflation is running at 27.6 per cent, people have been leaping at the opportunity to buy cheap Haier fridges at what Venezuela’s bountiful president has called “the Chávez price”. Massive queues have been appearing out of nowhere as consumers try to ease the deleterious effects of inflation – prices rose by 2.2 per cent in November alone according to central bank figures released on Tuesday. According to the government, the items on sale are going for as much as 55 per cent less than what they would cost in a privately-owned store. There’s one very good reason for that: the government can afford to charge much less as it has unlimited access to foreign currency at the cheap official exchange rate.

Venezuela central bank: Private investment down 43% in 2007-2010, El Universal

After two years of recession, soaring oil prices have created momentum for the Venezuelan economy to resume growth. However, economic imbalances, such as the collapse of private investments, represent a major stumbling block. The Central Bank of Venezuela (BCV) reported that between 2007 and 2010, the private sector’s investment in machines, equipments, and buildings that are used to increase production declined 43.6% to the lowest level in the last seven years. The BCV has not yet published specific data on private investment in 2011 and only releases the public sector’s statistics. Nevertheless, everything suggests that there has been no change in the mood of the business sector.

Venezuela November CPI Rises 2.2% Vs 1.8% In October, The Wall Street Journal

Venezuela’s chronically high inflation rate picked up last month, with the consumer price index climbing in November by 2.2% from the previous month and registering a 12-month rise of 27.6%, the central bank reported Tuesday. The figures show prices rising in key categories like housing services and food as President Hugo Chavez’s government aims to increase housing construction and embark on measures to regulate consumer prices in a bid to curb one of the world’s fastest inflation rates. Expectations for increased spending on social programs ahead of next year’s presidential elections are also seen exacerbating the jump in inflation. The oil-rich South American country had posted a 1.8% rise in the national consumer price index in October and a 1.5% jump in November of 2010.

Chavez: Venezuela willing to talk with Exxon Mobil, Bloomberg Businessweek via The Associated Press

Venezuelan President Hugo Chavez says his government would be open to negotiating with Exxon Mobil Corp. in a dispute over the nationalization of an oil project in the country. Venezuelan officials have previously said Exxon Mobil’s compensation demands are excessive. The Irving, Texas-based oil company turned to international arbitration after refusing to accept the terms of the nationalization in 2007. Chavez says he would be willing to “sit down with them and seek a friendly settlement, but that’s up to them and not to us.” Exxon Mobil declined to comment. Chavez said during a news conference Tuesday that his government has always sought agreements in such cases when possible.

Opposition pre-candidates: Impunity needs to be uprooted, El Universal

When asked about personal insecurity, the five opposition presidential pre-candidates agreed on the need to end impunity, and to make in-depth changes in the Judiciary, the Attorney General Office, and police corps in order to secure law enforcement. Presidential hopeful Henrique Capriles Radonski that said more than 100,000 Venezuelans have been killed over the last decade. He added that dignified employment and quality education are of the essence to break the vicious circle of violence.

Putin continues to court Venezuela, The Financial Times

It’s not hard to see why Vladimir Putin saw fit to take precious time out today in the aftermath of Russia’s controversial parliamentary elections last Sunday to meet with Venezuela’s vice-president, Elias Jaua. Much to the discomfort of Washington, the two countries are developing an ever cosier bilateral relationship and Russia’s state-run oil giant Rosneft announced a $2.6bn deal today to develop Venezuela’s extra-heavy crude oil reserves in the Orinoco. The idea is for Rosneft to have a 40 per cent stake in the Carabobo 2 block in a joint venture with Venezuela’s state oil company, PDVSA, which will control the remaining 60 per cent. Carabobo 2 has estimated reserves of 40bn barrels of oil, and potential production capacity of more than 400,000 barrels per day. For the privilege, Rosneft must pay an initial $440m on approval of the project by the Venezuelan authorities, and a further $660m after the final investment decision. Rosneft has also agreed to lend $1.5bn to PDVSA, though no more than $300m a year.