Friday, May 27, 2016

FT Latam Report 27 May, 2016

FINANCIAL TIMES - Latam Viva: Your weekly briefing from the region
Thelma & Louise hit the tropics
By Andres Schipani 
May 27, 2016
This week, it has been a quarter of a century since Thelma & Louise sailed their battered convertible into the Grand Canyon, securing their place in Hollywood's pantheon of heroes. This week is another in the saga of the Venezuelan government's push on the gas pedal towards the approaching abyss.
But unlike Susan Sarandon and Geena Davis - and to many Venezuelans, the late Hugo Chávez - if President Nicolás Maduro and his acolytes finally jump off the cliff, they won't leave as heroes. In a prelude to a humanitarian crisis, the incidence of looting is soaring as Venezuelans become ever more desperate in their search for basic goods on barren supermarket shelves. "[It is] written in the Bible, people will kill each other for food,"  the voice of a woman can be heard on an amateur video of a looting.
Coca-Cola has halted production of sugary drinks due to a lack of sugar. Empresas Polar, the country's biggest food producer, which also bottles Pepsi products, may soon follow suit. More worrying, inventories of maize -the base ingredient for Venezuela's staple arepa- are running dangerously low.
Amid a lack of medicines, Oliver Sánchez, a cancer-stricken eight year old boy who once participated in a protest holding a sign reading "I want to cure myself", died this week. If "Lord of Misrule" Maduro tries to cling to power, for opposition leader Henrique Capriles, "that will be throwing petrol on to the fire.”
But things seem poised to get worse. Venezuela's government and state oil company PDVSA have decided to prioritise bondholders over its citizens and plans to continue to squeeze imports. Meanwhile, they are scraping every barrel, swapping gold and trying to restructure debts.
The recent oil price rebound, and a deal with its main financier, China, to extend oil-for-loans deadlines may give this ravaged economy a little bit of oxygen. However, somebody made it clear this week that "China is now diversifying away from the seething cauldron of risk that Caracas has become."
Despite being geographically closer to the Grand Canyon, Mexico City is far from Caracas' Thelma & Louise car sliding into the abyss. Yet endemic corruption, car fumes and a lack of running water are putting officials to test - while testing the nerves of my fellow correspondent there
One country that seems willing to change course is El Salvador, which last year took the baton from Honduras as the homicide capital of the world (Venezuela is also one of the most murderous.) Now the government has vowed to bring the gangs to their knees in a year. Decision, skill, and time will tell.
That applies to Venezuela too, where the crash is nigh but has not yet occurred. “The question is," someone said, "is it going to be a Thelma & Louise ending, where they drive off the cliff knowingly and deliberately, or will they just drive off the cliff? Their inability to change course, despite the obvious danger, is stunning."
Quote of the week
“We have to change the government to stop this bleeding”-  Brazil's former interim planning minister Romero Jucá caught on tape telling Sérgio Machado, former president of a subsidiary of the national oil company, Petrobras, that a change of government was needed to contain a sweeping corruption probe.
Chinese to desert Venezuela infrastructure
The week in review
‘Hot money’ flows into Argentine peso spook President Macri
Central bank restricts foreign investors from buying some local currency bonds as peso rises
Argentina set to tumble 22 places on global wealth list
Revision of figures from Fernández administration suggests 40% chasm in GDP per head
Venezuelans resort to looting as food shortages hit crisis point
Scarcity of basic goods threatens to worsen social unrest in recession-hit South American country
China takes long view on Latin American infrastructure investment
Appetite remains strong despite region’s political and economic woes, survey shows
Universal basic income: Money for nothing
Amid anxiety over technological disruption, is a guaranteed payment from the state the future of welfare?
Brazil: a lack of Temer-ity
New government faces intractable problems and shows few signs of implementing bold solutions
Venezuela sells gold reserves as economy worsens
State’s stock of the precious metal at record low
Corruption and car fumes clog up Mexico City
Notebook: Ninety minutes to drive 4km but still Mexicans use their cars, writes Jude Webber
WhatsApp ban ignites Brazil censorship fears
Judicial moves to temporarily block messaging service in Latin America’s biggest economy draw ire
Temer seeks Brazil spending cap after losing minister to scandal
Interim president announces ambitious budget measures a day after wiretap controversy
Brazil finds silver-lining in Petrobras probe
The political weather is changeable but institutions are holding firm, writes John Paul Rathbone
Trade pacts: Latin America’s new faultline
Despite talk of ‘convergence with diversity’, Pacific Alliance and Mercosur take different paths
Brazil’s Temer faces test as minister steps down over leaked tape
Romero Jucá allegedly plotted to stop Petrobras corruption probe
El Salvador declares bloody war on gangs
Police in world’s murder capital are accused of using violence ‘without limits’
Investors labour under delusion Brazil is a quick fix
Brazil’s structural problems will take steam out of rally in assets
Henrique Capriles rallies voter revolt in Venezuela
Opposition leader seeks recall referendum to remove president Maduro
Nicolás Maduro, Venezuela’s lord of misrule
The isolated president sits tight as his country slides deeper into chaos, writes John Paul Rathbone