Category: Бізнес

Analysts: Venezuela’s Failed Socialist Policies Could Make Market Reforms Easier

Oil-rich Venezuela’s near economic collapse may make it easier for U.S.-backed opposition leaders to reverse socialist policies instituted by late President Hugo Chavez, if they are able to oust his successor, Nicolas Maduro, according to analysts.

“I do think at the very beginning, because the Venezuelan people have suffered so much there, they’re going to be willing to give a lot of political capital to the new leadership to do all of these changes,” said Dany Bahar, an Israeli and Venezuelan economist with the Brookings Institution in Washington. 

Economic collapse

In the last five years, Venezuela’s economy has shrunk by nearly half. Nationalization of much of the private sector, including the oil industry, has driven away foreign investment. Hyperinflation, aggravated by the increasing fiscal deficit, is now close to 180 percent, with prices of goods tripling every month. More than 3 million people have fled the country to escape increasing poverty.

The government-subsidized assistance programs for the poor have been plagued by chronic food and medicine shortages, due in part to corruption and declining oil revenues that account for more than 95 percent of Venezuela’s export earnings.

Maduro has claimed the humanitarian crisis in his country is a “fabrication,” and blamed U.S. sanctions and capitalist sabotage for the economic shortfall. 

The United States, as well as most of Latin America and Europe, has recognized Juan Guaido, president of Venezuela’s National Assembly, as the country’s interim leader, and support opposition claims that Maduro’s reelection last year was illegitimate after he banned most opposition parties from running.

Market reforms

With the “Chavista” socialist model discredited, new Venezuelan leadership aligned with the United States would be expected to embrace strong market reforms that would entail an infusion of international aid and credit, privatizing state-controlled industries and cutting government subsidies.

“Market mechanisms have been completely destroyed. The government centralizes everything, decides who gets what, rations all sorts of goods, food, medication, everything. So, you have to get rid of that and just allow the market to reappear, which doesn’t really take very long if the situation on the ground is stable,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics in Washington.

Fighting inflation will likely be the top priority for any new government. Recommended fiscal controls would include introducing a new currency tied to international exchange rates, as was done by Brazil and Argentina in the past. Venezuela’s bolivar has lost most of its value, as the Maduro government reacted to inflation by printing more money while its oil revenues plummeted and its deficit grew.

“The moment you move from very high inflation to low inflation, the first thing that you see is a dramatic reduction in poverty rates. This is what happened in Argentina. This is what happened in Brazil, you know, at the time when they were fighting their own inflationary problems,” said de Bolle.

Privatizing oil industry

The International Monetary Fund would likely require Venezuela to lift price controls and privatize state-owned companies, including the oil and gas company Petróleos de Venezuela, S.A. (PDVSA), in exchange for billions of dollars in aid and loans. The reforms and influx of capital would help ease food and medicine shortages.

Venezuela has the world’s largest oil reserves, but production has fallen from three 3 million barrels per day (bpd) in 1997 to just over 1 million bpd in 2019. Maduro contributed to the decline by putting generals in charge of the company rather than industry professionals, and replacing qualified staff with thousands of political supporters.

“If we’re generous with the interpretation, they have also been doing social programs and things like that. If we’re not generous, it has become a vehicle of corruption for the regime. So, there’s going to need to be a deep restructuring of the oil company,” said Bahar.

A U.S.-aligned government in Caracas would likely seek to restructure its debts to creditors like China and Russia, two countries that continue to support the Maduro government. China has loaned Venezuela $20 billion in exchange for future oil shipments.

Ending Venezuela’s free oil shipments of an estimated 50,000 barrels per day to Cuba, another key Maduro ally, could redirect billions of dollars to support limited social programs at home. 

If Maduro is removed from office, Washington is expected to ease oil sanctions imposed this year that are estimated to cut Venezuela’s oil exports by two-thirds. Oil sales to the U.S. had provided nearly 90 percent of Venezuela’s hard currency before the sanctions were enacted. 

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Analysts: Venezuela’s Failed Socialist Policies Could Make Market Reforms Easier

Oil-rich Venezuela’s near economic collapse may make it easier for U.S.-backed opposition leaders to reverse socialist policies instituted by late President Hugo Chavez, if they are able to oust his successor, Nicolas Maduro, according to analysts.

“I do think at the very beginning, because the Venezuelan people have suffered so much there, they’re going to be willing to give a lot of political capital to the new leadership to do all of these changes,” said Dany Bahar, an Israeli and Venezuelan economist with the Brookings Institution in Washington. 

Economic collapse

In the last five years, Venezuela’s economy has shrunk by nearly half. Nationalization of much of the private sector, including the oil industry, has driven away foreign investment. Hyperinflation, aggravated by the increasing fiscal deficit, is now close to 180 percent, with prices of goods tripling every month. More than 3 million people have fled the country to escape increasing poverty.

The government-subsidized assistance programs for the poor have been plagued by chronic food and medicine shortages, due in part to corruption and declining oil revenues that account for more than 95 percent of Venezuela’s export earnings.

Maduro has claimed the humanitarian crisis in his country is a “fabrication,” and blamed U.S. sanctions and capitalist sabotage for the economic shortfall. 

The United States, as well as most of Latin America and Europe, has recognized Juan Guaido, president of Venezuela’s National Assembly, as the country’s interim leader, and support opposition claims that Maduro’s reelection last year was illegitimate after he banned most opposition parties from running.

Market reforms

With the “Chavista” socialist model discredited, new Venezuelan leadership aligned with the United States would be expected to embrace strong market reforms that would entail an infusion of international aid and credit, privatizing state-controlled industries and cutting government subsidies.

“Market mechanisms have been completely destroyed. The government centralizes everything, decides who gets what, rations all sorts of goods, food, medication, everything. So, you have to get rid of that and just allow the market to reappear, which doesn’t really take very long if the situation on the ground is stable,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics in Washington.

Fighting inflation will likely be the top priority for any new government. Recommended fiscal controls would include introducing a new currency tied to international exchange rates, as was done by Brazil and Argentina in the past. Venezuela’s bolivar has lost most of its value, as the Maduro government reacted to inflation by printing more money while its oil revenues plummeted and its deficit grew.

“The moment you move from very high inflation to low inflation, the first thing that you see is a dramatic reduction in poverty rates. This is what happened in Argentina. This is what happened in Brazil, you know, at the time when they were fighting their own inflationary problems,” said de Bolle.

Privatizing oil industry

The International Monetary Fund would likely require Venezuela to lift price controls and privatize state-owned companies, including the oil and gas company Petróleos de Venezuela, S.A. (PDVSA), in exchange for billions of dollars in aid and loans. The reforms and influx of capital would help ease food and medicine shortages.

Venezuela has the world’s largest oil reserves, but production has fallen from three 3 million barrels per day (bpd) in 1997 to just over 1 million bpd in 2019. Maduro contributed to the decline by putting generals in charge of the company rather than industry professionals, and replacing qualified staff with thousands of political supporters.

“If we’re generous with the interpretation, they have also been doing social programs and things like that. If we’re not generous, it has become a vehicle of corruption for the regime. So, there’s going to need to be a deep restructuring of the oil company,” said Bahar.

A U.S.-aligned government in Caracas would likely seek to restructure its debts to creditors like China and Russia, two countries that continue to support the Maduro government. China has loaned Venezuela $20 billion in exchange for future oil shipments.

Ending Venezuela’s free oil shipments of an estimated 50,000 barrels per day to Cuba, another key Maduro ally, could redirect billions of dollars to support limited social programs at home. 

If Maduro is removed from office, Washington is expected to ease oil sanctions imposed this year that are estimated to cut Venezuela’s oil exports by two-thirds. Oil sales to the U.S. had provided nearly 90 percent of Venezuela’s hard currency before the sanctions were enacted. 

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Millers: Zimbabwe to Run Out of Bread in One Week

Zimbabwe could run out of bread in a week after flour stocks dwindled due to the country’s failure to pay for imported wheat, according to a confidential letter written to bakers by the country’s grain millers’ group on Monday.

The southern African nation is in the grip of a severe shortage of U.S. dollars that has sapped supplies of fuel and drugs, as President Emmerson Mnangagwa struggles to live up to pre-election promises to quickly revive the troubled economy.

Zimbabwe imports wheat, which it blends with its local crop to make flour for bread, the country’s second major staple after maize meal.

The Grain Millers Association (GMAZ) general manager Lynette Veremu wrote to the National Bakers Association of Zimbabwe (NBAZ) to tell them the country not pay for 55,000 tons of wheat in bonded warehouses in Mozambique and Harare.

“We regret to advise that the current stocks for foreign wheat for bread flour have depleted to 5,800 tonnes and… we are left with less than eight days of national bread flour supplies,” the letter said.

GMAZ spokesman Garikai Chaunza confirmed the letter, saying “this is the situation we are faced with.”

Ngoni Mazango, the president of the bakers’ group, was not immediately available to comment.

The central bank lists wheat among priority imports like fuel and drugs, but has struggled to pay suppliers in the past.

GMAZ said in December it owed foreign suppliers $80 million for past wheat imports.

Reserve Bank of Zimbabwe governor John Mangudya did not answer calls to his mobile phone.

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Millers: Zimbabwe to Run Out of Bread in One Week

Zimbabwe could run out of bread in a week after flour stocks dwindled due to the country’s failure to pay for imported wheat, according to a confidential letter written to bakers by the country’s grain millers’ group on Monday.

The southern African nation is in the grip of a severe shortage of U.S. dollars that has sapped supplies of fuel and drugs, as President Emmerson Mnangagwa struggles to live up to pre-election promises to quickly revive the troubled economy.

Zimbabwe imports wheat, which it blends with its local crop to make flour for bread, the country’s second major staple after maize meal.

The Grain Millers Association (GMAZ) general manager Lynette Veremu wrote to the National Bakers Association of Zimbabwe (NBAZ) to tell them the country not pay for 55,000 tons of wheat in bonded warehouses in Mozambique and Harare.

“We regret to advise that the current stocks for foreign wheat for bread flour have depleted to 5,800 tonnes and… we are left with less than eight days of national bread flour supplies,” the letter said.

GMAZ spokesman Garikai Chaunza confirmed the letter, saying “this is the situation we are faced with.”

Ngoni Mazango, the president of the bakers’ group, was not immediately available to comment.

The central bank lists wheat among priority imports like fuel and drugs, but has struggled to pay suppliers in the past.

GMAZ said in December it owed foreign suppliers $80 million for past wheat imports.

Reserve Bank of Zimbabwe governor John Mangudya did not answer calls to his mobile phone.

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Germany, France Push to Create European Industrial Policy

Germany and France on Tuesday launched a drive to overhaul the European Union’s competition rules to facilitate the creation of world-leading companies. They pushed forward a project to create a car battery consortium aimed at catching up with Asian rivals.

A German-French “manifesto for a European industrial policy fit for the 21st century” agreed on by the countries’ economy ministers reflects worries that the continent risks falling far behind in the development of new technologies such as artificial intelligence and electric mobility.

It also reflects anger in Berlin and Paris after EU antitrust authorities blocked the creation of a rail giant that could compete with China.

Speaking at a separate event earlier Tuesday, German Chancellor Angela Merkel said that the EU’s stance on competition “leaves me in doubt about whether we can really produce global players this way.”

The German-French manifesto states that “the choice is simple when it comes to industrial policy: unite our forces or allow our industrial base and capacity to gradually disappear.” It advocates a European strategy for technology funding and calls for becoming “world leaders” on artificial intelligence.

After the EU blocked the merger of the rail businesses of Germany’s Siemens and France’s Alstom, Germany and France are suggesting that EU guidelines be updated to take greater account of global competition. They also advocate discussing whether the European Council — which brings together EU members’ governments — should be given a right to appeal against and override decisions on mergers by the EU’s executive Commission.

As a first step toward a European industrial policy, Germany plans to invest 1 billion euros ($1.13 billion) and France another 700 million euros in backing a drive to set up a European car battery manufacturing operation.

German Economy Minister Peter Altmaier and French counterpart Bruno Le Maire said it would be led by their two countries but open to other EU countries that want to join. They said it would benefit both Germany and France, but it’s too early to say where factories might be built.

Altmaier said there are no plans at present for either state to take a direct stake, and both ministers said companies are interested — but wouldn’t name them, citing ongoing talks.

“China and South Korea have taken a big lead on electric batteries,” Le Maire said. “The question that arises is whether we want to be sovereign or not.”

He added that, if Europe abandons two “critical technologies” — batteries and self-driving cars — “you abandon your auto industry, because you depend on your foreign supplies who can increase prices or deprive you of this technology.”

“Germany and France created the automobile,” Le Maire said.

The two countries are seeking decisions in the coming weeks on setting up the consortium and whether government aid is allowed.

 

 

 

 

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Germany, France Push to Create European Industrial Policy

Germany and France on Tuesday launched a drive to overhaul the European Union’s competition rules to facilitate the creation of world-leading companies. They pushed forward a project to create a car battery consortium aimed at catching up with Asian rivals.

A German-French “manifesto for a European industrial policy fit for the 21st century” agreed on by the countries’ economy ministers reflects worries that the continent risks falling far behind in the development of new technologies such as artificial intelligence and electric mobility.

It also reflects anger in Berlin and Paris after EU antitrust authorities blocked the creation of a rail giant that could compete with China.

Speaking at a separate event earlier Tuesday, German Chancellor Angela Merkel said that the EU’s stance on competition “leaves me in doubt about whether we can really produce global players this way.”

The German-French manifesto states that “the choice is simple when it comes to industrial policy: unite our forces or allow our industrial base and capacity to gradually disappear.” It advocates a European strategy for technology funding and calls for becoming “world leaders” on artificial intelligence.

After the EU blocked the merger of the rail businesses of Germany’s Siemens and France’s Alstom, Germany and France are suggesting that EU guidelines be updated to take greater account of global competition. They also advocate discussing whether the European Council — which brings together EU members’ governments — should be given a right to appeal against and override decisions on mergers by the EU’s executive Commission.

As a first step toward a European industrial policy, Germany plans to invest 1 billion euros ($1.13 billion) and France another 700 million euros in backing a drive to set up a European car battery manufacturing operation.

German Economy Minister Peter Altmaier and French counterpart Bruno Le Maire said it would be led by their two countries but open to other EU countries that want to join. They said it would benefit both Germany and France, but it’s too early to say where factories might be built.

Altmaier said there are no plans at present for either state to take a direct stake, and both ministers said companies are interested — but wouldn’t name them, citing ongoing talks.

“China and South Korea have taken a big lead on electric batteries,” Le Maire said. “The question that arises is whether we want to be sovereign or not.”

He added that, if Europe abandons two “critical technologies” — batteries and self-driving cars — “you abandon your auto industry, because you depend on your foreign supplies who can increase prices or deprive you of this technology.”

“Germany and France created the automobile,” Le Maire said.

The two countries are seeking decisions in the coming weeks on setting up the consortium and whether government aid is allowed.

 

 

 

 

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Exec: India’s Thermal Coal Imports Could Rise 10 Percent This Year

India’s thermal coal imports could rise by about 10 percent in 2019 due to rail transport problems and other logistical bottlenecks, an executive at the country’s largest coal trader Adani Enterprises said on Tuesday.

Thermal coal imports rose in 2018 after two years of decline, despite moves by Prime Minister Narendra Modi’s government to cut the country’s imports in a bid to reduce the trade deficit.

Rajendra Singh, chief operating officer for coal trading at Adani Enterprises, said thermal coal imports this year could total 174 million-177 million tons.

“We expect a 10 percent increase in imported coal because of an immediate gap in supply from Coal India and power demand and demand from other sectors,” Singh said at the Coaltrans conference.

Coal is among the top five commodities imported by India, and over three-fifths of its thermal coal imports come from Indonesia, while over a fifth is imported from South Africa.

India’s 2018 thermal coal imports rose at the fastest pace in four years, adding to India’s trade deficit and hurting the valuation of the rupee, the worst performing major Asian currency in 2018.

The Adani Group, which handles about a third of India’s imported coal, expects “rail transportation challenges” to lead to a “reasonable rise in imports” until fiscal year 2021 when they will stabilize.

Singh said he expects small and medium scale industries such as the sponge iron industry, tile manufacturers, cement producers and textiles to contribute to higher demand for seaborne coal, adding that an industrial shift from petcoke to coal was fueling higher imports.

Petcoke, or petroleum coke, is a refinery byproduct which is a dirtier alternative to coal. Its usage has been banned in some parts of the country, and policy flip-flops over its usage have led to a fall in demand for the fuel.

State-run Coal India Ltd, which accounts for four-fifths of India’s coal production, supplies largely to power plants rather than small and medium-scale industries.

Smaller scale industries have used imported coal in a big way, and while higher coal imports may be bad news for India’s trade deficit, they are a boon for international miners and global commodity merchants.

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Exec: India’s Thermal Coal Imports Could Rise 10 Percent This Year

India’s thermal coal imports could rise by about 10 percent in 2019 due to rail transport problems and other logistical bottlenecks, an executive at the country’s largest coal trader Adani Enterprises said on Tuesday.

Thermal coal imports rose in 2018 after two years of decline, despite moves by Prime Minister Narendra Modi’s government to cut the country’s imports in a bid to reduce the trade deficit.

Rajendra Singh, chief operating officer for coal trading at Adani Enterprises, said thermal coal imports this year could total 174 million-177 million tons.

“We expect a 10 percent increase in imported coal because of an immediate gap in supply from Coal India and power demand and demand from other sectors,” Singh said at the Coaltrans conference.

Coal is among the top five commodities imported by India, and over three-fifths of its thermal coal imports come from Indonesia, while over a fifth is imported from South Africa.

India’s 2018 thermal coal imports rose at the fastest pace in four years, adding to India’s trade deficit and hurting the valuation of the rupee, the worst performing major Asian currency in 2018.

The Adani Group, which handles about a third of India’s imported coal, expects “rail transportation challenges” to lead to a “reasonable rise in imports” until fiscal year 2021 when they will stabilize.

Singh said he expects small and medium scale industries such as the sponge iron industry, tile manufacturers, cement producers and textiles to contribute to higher demand for seaborne coal, adding that an industrial shift from petcoke to coal was fueling higher imports.

Petcoke, or petroleum coke, is a refinery byproduct which is a dirtier alternative to coal. Its usage has been banned in some parts of the country, and policy flip-flops over its usage have led to a fall in demand for the fuel.

State-run Coal India Ltd, which accounts for four-fifths of India’s coal production, supplies largely to power plants rather than small and medium-scale industries.

Smaller scale industries have used imported coal in a big way, and while higher coal imports may be bad news for India’s trade deficit, they are a boon for international miners and global commodity merchants.

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