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We appreciate your ongoing support and interest. At the moment, we are undergoing some transitions regarding our coverage of Venezuela and Latin America. We thank you for your patience while we reorganise our blog in accordance with other Amsterdam & Peroff interests. In the meantime, our main page continues as per the norm.
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The government is suspending electrical power for four hours every other day throughout Venezuela as a move that intensifies rationing amidst an energy shortage in the country. The presidents of the state electricity companies of Caracas, Zulia and Tachira states announced plans to ration four hours that will apply immediately. The head of the state-run company Electricity of Caracas, Javier Alvarado, told reporters that starting today the outages will last for four hours every two days, that they are seeking to address the "energy deficit of 12%" generated by failures in the Guri dam. Confronted with the risks that the Guri dam has begun facing, the government imposed a reduction in the hours of stores and shopping malls and obligated residential, commercial and industrial areas to reduce monthly energy consumption by 20 percent. The government has also closed some lines and cells of state-owned enterprises Aluminio del Caroni SA (Alcasa) Industria Venezolana de Aluminio CA (Venalum) and Siderurgica del Orinoco (Sidor), which are important in the local construction industry.
Caracas, Jan. 11 (El Mundo) .- Former Central Bank governor Domingo Maza Zavala estimated that inflation for 2010 could reach between 50 and 60% as a result of Friday's devaluation. To Maza Zavala, the parallel market "will remain of great importance in setting prices if officials maintain the current scheme of limitation and delay in the liquidation of official dollar settlement. "The parallel market will not disappear, because those who fail obtain official dollars will have to resort to barter to get dollars, especially if problems persist with Cadivi transactions," he said. Last year the sector faced delays of 180 days in the delivery of Cadivi dollars, which resulted in many people going to the parallel market. The result, according to Maza Zavala, was that the price of imported wholesale products increased 35.7%.
"If a good part of imports were bought at 2.15 and now will be priced at 4.30, it is inevitable that inflation will double," said Maza Zavala, and for that reason he estimates that prices this year will be between 50 and 60% higher than last year. He based his analysis on two fundamental facts: a fall in purchasing power of between 30 and 40% for Venezuelans - which will reduce consumption - and increased demand for parallel market dollars. "If with a floor of 2.15 bolivars to the dollar the alternate market reached values three times higher, the rise will be much greater with a floor of 4.30 bolivars to the dollar," he said. For products in stock, he believes people are trying to buy everything they can and that means depletion of inventories that will need to be replenished. "The problem is that without knowing what the replacement cost will be, prices will surely rise."
Original report accessible (in Spanish) here.
Judge Maria Lourdes Afiuni was taken in handcuffs and a bullet-proof vest from the National Institute of Feminine Orientation (INOF) to Control Court #50 of Caracas to notify her that she will remain in detention while the prosecution collects evidence for processing her for allegedly participating in a plan to allow the escape of banker Eligio Cedeño. According to testimony offered by her lawyer Sandy Guevara, Judge Afiuni was guarded by 17 National Guard soldiers. "Overall the doctor was calm, quiet, cheerful, with her head held high," Guevara said. Moreover, the director of the Human Rights Office of the Catholic University Andrés Bello (UCAB), Ligia Bolivar, reported yesterday that the Inter-American Commission on Human Rights (IACHR) issued an emergency protective measure for Afiuni which solicits the Venezuelan government to adopt the necessary measures to guarantee the life and physical integrity of the judge, to transfer her to a safe place and report on the proceedings of the case.
In keeping with the previously posted Venezuela edition, following are a few regional stories that came out during the holidays that are worth keeping in mind.
"I think and I hope this is the beginning of the end of a long process that began in 1983 with the return of democracy." - Gastón Chillier, director of the Buenos Aires-based Center for Legal and Social Studies, as told to the Washington Post's Juan Forero in a report on Argentina's Dirty War trials.
* * *
"Would you rather destabilize small countries in the Caribbean or Mexico, which shares a 2,000-mile border with the U.S., is your third-biggest trading partner and has 100 million people?" - anonymous Mexican government official
The Wall Street Journal's David Luhnow discusses growing support for legalising marijuana as a measure to fight drug trafficking, Mexico's supplanting of Colombia as the locus of power for the business, price discovery mechanics and much much more:
The day before the application of economic measures announced by the government, hundreds of Venezuelans stood in long lines yesterday at appliance stores and supermarkets to buy food and products for fear that prices rise when it comes into force today devaluation announced by the President Hugo Chávez. Source: Diario 2001
By Luis, Diario de Guayana:
As part of the measures announced on Friday, President Chavez established a dual exchange rate system which provides a rate of 2.60 bolivars for essential imports and 4.30s bolivars for the rest of its external purchases. The latter is referred to as oil dollars, because starting today PDVSA will sell dollars to the Central Bank of Venezuela at that rate. This will increase by 100 percent the payment of royalties and income tax. To finance the budget this year, the oil contribution is expected to be 39.4 billion bolivars, assuming an oil price of $40 a barrel and output of 3.1 million barrels a day. In the estimation, the bolivar exchange rate was 2.15, but now the industry will be using the exchange rate of 4.30 bolivars. Therefore, the adjustment would allow the total contribution will be close to that provided at the beginning of 2009, which is more than Bs 70 billion.
Following the Venezuela-Russia-Cuba-China-Iran examination from Jaime Suchlicki last month, the Inter-American Dialogue's Michael Shifter drills down to the Iran-Venezuela aspect of this in the latest issue of Poder 360. This excerpt should give a decent idea:
The key question is whether the Venezuela-Iran relationship can best be understood as merely a political alliance -that is, a byproduct of self-interested jockeying and rapidly shifting poles of power in the world --or rather as something more sinister meriting an energetic response from the United States and other governments concerned about peace and security in the Americas. Apart from irritating Washington, what does Venezuela gain from the alliance? And what are the possible benefits for Iran in its global strategy?...
About 500 Cuban doctors have defected from Venezuela to the United States, most of them bribing officials with the payments of various amounts, from $300 to $2,000, according to sources from Cuban exile groups in Miami. The last case occurred on Wednesday when seven Cuban doctors managed to leave the Maiquetia airport in Caracas, after being held several hours and paying hundreds of dollars per person. "The Venezuelan and Cuban officials in Maiquetía subjected the doctors to strong psychological pressure until they finally paid a bribe," Cuban doctor Keiler Moreno, who left Caracas for five months, told EFE.
President Chavez this year will contemplate accelerating legal reforms that intend to regulate the financial system. Economy and Finance Minister Ali Rodriguez Araque notified Parliament's Finance Committee Chairman Ricardo Sanguino that in the upcoming session the General Banking and Capital Market Acts will have to be reviewed. The MP said there are "legal arrangements to prepare a different concept of banking, and evaluations that will determine the adjustments made." Parliament members will meet with the head of public finances to discuss the points to be changed. The president said in a speech that laws for public banks should be given a separate treatment since they are separate entities from private banks.
The National Assembly's agenda of 2009 resulted in 49 new laws of which 21 were incorporated into the legislative agenda "clandestinely" from direct orders of President Chávez said Carlos Vecchio, member and attorney of the People's Will Association. "The fact that 43% of laws passed obey direct orders of the president shows that there is no separation of powers and that the National Assembly is controlled by the president," he said. Vecchio accused Parliament of legislating against the dictates of the constitution, making laws such as the Federal Counsel for Government and Public Planning, which violate basic democratic principles such as decentralization.
Shoppers who did not know that new operating hours begin at 11 in the morning queued at several shopping malls around greater Caracas. Source: El Universal
The reform of the Supreme Court act, the administrative jurisdiction act, the justice system act and possibly the constitutional and electoral court acts, are several laws that come into effect this year, all related to the judiciary. One of the changes was renaming the plenary to be the Supreme Court Plenary, whose decisions could not be reviewed by the Constitutional Court as was the case of the generals who participated in the 2002 coup. The Supreme Court made several observations regarding that limitation of the court, which is now presided over by Luisa Estella Morales, and rejects the notion that analysis of plenary sentences is not permitted. MP Tulio Jiménez called incongruous the fact that decisions of a collegial body of 32 persons can be reviewed only by 7 judges. A draft of the reform published on the National Assembly's website considers the possibility that the Constitutional Court will review judgments of all courts making up the supreme court system and, furthermore, will resolve conflicts between them, as spelled out in paragraphs 11 and 12 of Article 26 of the text.
By sheer coincidence, Susan Kaufman Purcell, director of the Center for Hemispheric Policy at the University of Miami, has an op-ed in today's Wall Street Journal on the very topic we took up last week in the Huffington Post, namely, the implications of Brazil's increasingly more prominent space on the world stage:
On a number of important political and security issues, Washington and Brasilia recently have not seen eye to eye. Nor has Brazil shown much leadership in tackling the important political and security challenges facing the region.
One example is Brazil's role in UNASUR (Union of South American Nations). At a September meeting in Quito focused on regional security issues, topics not discussed included the multibillion-dollar arms race in the region, the granting of sanctuary and other forms of aid by Venezuela to the Revolutionary Armed Forces of Colombia (FARC), a Colombian narco-guerrilla group, and the growing nuclear cooperation between Iran and Venezuela. Instead, Brazil joined UNASUR in criticizing Colombia for having agreed to allow the U.S. to use seven of its military bases for counterterrorist and counter narcotics activities inside Colombia.
Almost slipped by my radar...Chile has been invited to join the OECD. Not a small feat by any means. Dow Jones has the story:
Chile received an official invitation Tuesday to become a member of the Organization for Economic Cooperation and Development, Finance Minister Andres Velasco said in Paris.
To join the OECD, Chile had to modify its legislation in areas such as the exchange of tax information, corporate governance and legal responsibility in bribery cases.
"We humbly and proudly receive this invitation," Velasco said in a statement. He noted that the 30 OECD members voted unanimously to invite Chile to join.
Chile is the second OECD member in Latin American, after Mexico.
Once again, the LAHT's Jeremy Morgan files a story too loaded with detail to effectively summarise it here but suffice it to say, there is less joy in Mudville by the day:
The retired dockers, the port workers, the people at the collective, the aspirant homebuilders of Cabimas, the toyless folk at the fair, and the money-less ladies trying to look after the kids all have two things in common. In one way or another, they're cast in roles close to the Chavez cause, but they claim they're not be treated properly -- and all this is taking place against a background of a slack economy and signs of growing unrest on the labor front.
I highly recommend taking a few minutes to read this in its entirety.
Do I have your attention? Believe it or not, "bullish" is a word that really did come out of his mouth during a presentation last evening at the Council of the Americas. He spoke obviously on the world economy at large and the U.S., but given the venue of the speech, he also integrated a focus on Latin America. And most of it frankly was not much of a shocker to anyone who follows Roubini and co. with any sort of regularity. But I will say that over the past five or so years that I've been paying attention to him, he definitely sounds more bullish than ever before. And for those of you new to this, Roubini being "more bullish than ever before" means that his new favourite words are "anemic" (as in, "anemic growth"), "caveats" (as in, main caveats to his emerging markets bullishness) and "fiscal" (as in, "fiscal slippage", "fiscal discipline", "fiscal train wreck").
From what I understand, the webcast showing the talk last night is still not permanently embedded into the COA website, but the council's Carin Zissis in the meantime managed to get Roubini on the record for some extra Q&A here. Of particular interest here to me is this question:
I finally got to watching the webcast of the Council of the Americas' annual Latin America Predictors Forum, held on December 4 in Miami. The webcast is not embeddable but can be accessed here with some patience (written summary is here, which honestly doesn't do justice to the session).
And I would urge anyone with a knee jerk toward lamenting doomsday for Venezuela to have that patience. The entire session is worth listening to if you have an interest in regional economic affairs, particularly from the standpoint of equity market commentary and sovereign debt. Otherwise, if you're just after Venezuela-related things, skip straight to 78:00 into the session, actually the second-to-last question of the Q&A session, during which Bulltick's Kathryn Rooney and S&P's Roberto Sifon Arevalo speak to a question on the outlook for Venezuela and Bolivia.
