Monday, January 18, 2016

Venezuela declares economic emergency (Jan. 18, 2016)

Venezuelan President Nicolás Maduro declared a two-month economic emergency on Friday. The measure grants the executive branch sweeping control over the national budget to finance and implement policies to stimulate the economy.

The order also calls for businesses to increase domestic production of basic goods and seeks greater control of distribution networks, reports the Wall Street Journal.

The move shows the depth of the recession in Venezuela, according to Reuters.
On Friday the Central Bank reported the economy contracted 7.1 percent and annual inflation hit 141.5 percent through September, the world's highest. It was the first data released by the bank in the past two years.

The decree does not list specific policy changes, but seeks to give Maduro the power to bypass the National Assembly on spending matters, explains the New York Times.

But the decree will be reviewed by lawmakers in the opposition-dominated National Assembly this week, who can accept or reject it. Opposition leader and National Assembly President Henry Ramos Allup said members of the president's economic team would be called to Congress.

If the National Assembly doesn't support the decree, Maduro could appeal to the chavista-packed Supreme Court, notes the BBC.

Analysts suggest the National Assembly won't support the decree, which could give Maduro the excuse to blame the body for the coming economic meltdown, writes WOLA expert David Smilde at Venezuelan Politics and Human Rights.

In his Friday state of the union speech before Congress Maduro acknowledged the need for some changes, including raising domestic fuel prices for the first time in 20 years and reform the tax regime. But he affirmed the continuity of the country's statist economic model despite notable difficulties, which he blamed on lower oil revenues and capitalist speculation. He didn't mention any other specific measures to target the economic crisis that has caused widespread shortages across the country.

Venezuela, which depends on oil for 95 percent of its foreign currency, saw its income drop more than 62 percent due to the sharp downturn in oil prices, Maduro said.

The speech ranged from defiant to conciliatory, reports the Guardian. At one point Maduro dared the opposition to privatize public housing, saying they would have to topple him first, but later he called for "national unity" to face the economic crisis.

In a sign of the changed political scene after December's midterm elections in which the opposition won by a landslide, Maduro's three-hour speech was followed by half-hour rebuttal by Ramos Allup, who said the country’s problems were the result of government mismanagement, rather than the so-called economic war the government says is being waged by its opponents.

"President, the model has been wrong, the model is erroneous, and there are the results," he said pointing to the Central Bank figures.

The live broadcast of Ramos Allup's speech was unprecedented media access for an opponent of the country's socialist revolution, reports the Associated Press.

That the speech happened at all, after a potential institutional crisis was averted last week (see last Thursday's post) is noteworthy, even if Maduro's words are not, according to WOLA expert David Smilde at Venezuelan Politics and Human Rights. That, along with Ramos Allup's response is a victory for Venezuelan democracy, he wrote.

Smilde emphasizes certain aspects of Maduro's speech that are worth taking notice of, especially a proposal to create a National Justice, Truth and Peace Commission to investigate the 2014 protests and push forward a peace process. 

He also notes the deep race and class divisions that underly the political conflict in Venezuela, represented by Ramos Allup's rejection of a "mixed race" representation of national hero Simón Bolivar.

Today the government launched the National Council of the Productive Economy includes Vice President Aristobulo Isturiz and economic vice president Luis Salas, reports TeleSur. The council will work on finding ways to generate foreign currency income in the face of falling oil prices Maduro said on Friday. He called for structures that would allow varies stages and parts of the industrial and productive processes that currently or previously depended on imports, to be substituted.

The New York Times' new correspondent in Venezuela, Nicholas Casey, has a blog on his first month in Caracas, which gives interesting perspective of life on the ground.

News Briefs

  • Oil pipeline thefts are increasingly common in Mexico. Last year the incidence of the phenomenon rose by 52 percent, reaching a rate of 15 illegal taps per day across the country. Rural residents either perforate the pipelines themselves or take advantage of taps created by professional thieves, reports the Associated Press. But the makeshift pools of diesel they create have the potential to cause fires that have already burned dozens of people across the country. Originally such theft was used by villagers themselves, but there is increasing evidence that the fuel is being resold now. It's an example of "enforcement swamping," explains Alejandro Hope at El Daily Post. In a policy-wonky post he recommends a "dynamic deterrence strategy" and concludes that "Once whole communities are involved in a specific crime (fuel theft in this instance), the government cannot arrest its way out of the problem."
  • Sean Penn regrets that his Rolling Stone piece on a visit to then-fugitive Sinaloa Cartel leader Joaquín "El Chapo" Guzmán has not spurred a national debate on the "war on drugs," reports the New York Times.
  • Residents of the Mexican Sierra Madre communities near El Chapo's hideout in October said Marines -- in what seemed to be vengeance for the drug kingpin's near escape, went on shooting sprees that terrorized families who fled into the forrest, set fire to their vehicles and looted their property, reports the Washington Post.
  • Guzmán's improvised and failed attempt to escape recapture by authorities earlier this month included stealing a vehicle from a passing female motorist, but his top lieutenant politely handed the woman her purse before driving off, notes the New York Times.
  • Former Mexican state governor and PRI leader Humberto Moreira was detained in Spain after failing to explain to authorities the source of almost €200,000 he received from Mexico while living in Barcelona, reports the Wall Street Journal
  • Haiti's runoff presidential election will take place this Sunday, despite a boycott by the opposition candidate who is facing off against the government backed candidate. The two names are on the ballot said the electoral council's leader and the deadline for Jude Célestin, who is questioning the integrity of the electoral process, has passed, he told Reuters.
  • Brazilian mining firm Samarco was alerted to "severe" structural problems in one of its dams a year before its collapse released an avalanche of mud that became one of the country's worst environmental disasters, reports the Wall Street Journal.
  • Brazilian President Dilma Rousseff said a bailout for state-run oil giant Petrobras can't be ruled out. The company is in financial troubles due to world-wide low oil prices and the impact of a sweeping corruption scandal that has involved former executives and suppliers, reports theWall Street Journal
  • The U.S. Patent and Trademark Office granted the Cuban government the trademark for Havana Club rum in the U.S. The move will cause tension with the Bacardi Ltd. corporation that sold Havana Club branded rum in the U.S. since acquiring the rights from the Havana Club’s founding family, who fled Cuba around 1960 after the brand was seized by the government. Outside of the U.S. the brand is sold by Pernod Ricard SA in joint venture with the Cuban government, explains the Wall Street Journal. The decision doesn't have immediate impact because of the U.S. trade embargo with Cuba which does not permit the sale of Cuban produced rum in the U.S.
  • The Argentine government's attempts to settle a decade-old dispute with holdout creditors has already run into trouble: creditors have asked for a non-disclosure agreement for the negotiations. The Argentine government has refused, saying the talks must be transparent, reports the Wall Street Journal.
  • Argentina's central bank will announce a financing agreement worth as much as $6 billion with a group of banks this week, reports Bloomberg. The loan, which was first mentioned publicly in December, will be backed by dollar-denominated bonds held by the central bank.
  • Keiko Fujimori, the daughter of disgraced ex-president Alberto Fujimori, is leading polls for April's presidential election in Peru, reports Reuters.
  • The spread of mosquito-born virus Zika across Latin America highlights the hemisphere’s growing vulnerability to mosquito-borne diseases, reports the New York Times.
  • Temperatures are rising in Central America, forcing many farmers to replace coffee crops with cocoa, reports Reuters.

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