Emerging Markets, Frontier Markets

Venezuela’s Largest Brewery Halts Production As Economy Sinks Deeper Into The Abyss

Polar Venezuela2As the crisis in Venezuela deepens, its largest brew maker has suspended the production of beer and other malt beverages on Friday amid a spat with the government over the access to foreign currency.

Cervecería Polar, Venezuela’s largest private company and largest beer maker, with over 70 years in operation, had warned that it would end production as the socialist government was refusing to release dollars to import malted barley under strict exchange controls.

The halt in beer production from Polar highlights the grave situation in Venezuela and threatens further shortages in the nation that has already been hit by severe scarcities of food and other products as it grapples with an economic and political crisis.

Polar produces around 80 percent of the beer consumed in the nation.

The company issued an urgent press release on April 20, in hopes that the government would approve an international financial transaction, warning that they would be unable to restock inventory.

The press release explained the dire situation of the company as it needs barley and hops, crops that cannot be grown in Venezuela’s climate, in order to continue production.

The company has estimated that the production halt would impact around 10,000 workers directly, and over 300,000 employees working in franchising, transportation, customer service, and supplies.

President Nicolás Maduro’s government has often accused Polar of exaggerating its dollar needs and hoarding products as part of an “economic war”.

Earlier in the week, in an apparent reference to Polar, Maduro threatened to seize any private company plants that halt production and hand them over to workers.

“Any plant that is shut will be recovered, it is a serious crime against production,” he said.

Since Maduro took office the national currency, the bolivar, has lost some 90 percent of its value on the black market, according to Bloomberg.

Now the nation’s situation goes from bad to worse as its economic and political crisis is now coupled with a growing energy crisis, a three-pronged crisis that further underscores Venezuela’s tailspin.

Earlier in the year Maduro decreed a national “economic emergency” with associated “powers”, which was then followed by a national currency devaluation and a steep gas price hike, the shutdown of the entire country for a week during the Easter holiday, a timezone change, a four-day work week, which was then followed by a two-day work week.

In 2015, Venezuela’s “official” inflation surged to 180.9 percent and its economy plunged by 5.7 percent.

The IMF estimates that inflation in Venezuela — the world’s highest — will rocket to 720 percent and that its economy will contract for the third straight year in 2016.

Citizens in Venezuela now need to carry backpacks or duffle bags around town for even the most simple daily activities, such as going out for grocery shopping or to get a bite to eat at a restaurant.

Could you imagine if you needed to put a down payment on a car or house?  One would need a U-Haul truck.

As hyperinflation runs rampant, Venezuela must print more money, and its money printing operation has become so out of hand that its Central Bank can no longer maintain its money printing on the domestic front and was forced to outsource.

And outsource it has done. In February, thirty-six 747 cargo planes fully loaded with at least 5 billion Venezuelan bank notes landed at Simón Bolívar International Airport in Maiquetía, about 21 kilometers from downtown Caracas.

However, the nation was so broke that it was unable to pay for the worthless money that it had just asked the third-party vendor to print.

As the chaos in the nation spreads, there has been a growing outcry to depose Maduro from his Presidency.

Venezuela’s elections council on Tuesday agreed to allow opposition leaders to collect signatures from voters to try to force a recall referendum to remove the president from office halfway through his six-year term.

The opposition, which won control of the parliament during the December elections, has been collecting the nearly 200,000 signatures it needs to trigger the next stage towards the referendum.

Removing Maduro from office will not be easy. If the opposition were to collect 200,000 signatures, or 1 percent of the electorate, it would then need to garner 4 million signatures in a further petition for a referendum.

If the vote were held, the president would be removed only if the anti-Maduro votes exceeded the 7.6 million votes he received in the 2013 election.

Things have gotten so bad in Venezuela that the Colombian government has considered granting Maduro asylum, should he get pushed out of office.

Venezuela has seen its economy pushed to the brink of collapse as crude exports account for 95 percent of Venezuela’s revenues and as oil prices had fallen over 75 percent since mid-2014, slashing the nation’s income dramatically.

Despite its economic hardship, Venezuela still needs to make a $1 billion bond payment that is due in October, which most economists are skeptical that the nation will be able to achieve.

To make matters worse, Venezuela’s currency reserves have been continuously dwindling as the nation has exported large sums of gold to Switzerland (1, 2, 3, 4).

Although the price of oil has finally begun to recover, it is a little too late as Venezuela’s economy remains in shambles amid a three-pronged crisis that has unfolded.

What happens next remains to be seen.

Discussion

One thought on “Venezuela’s Largest Brewery Halts Production As Economy Sinks Deeper Into The Abyss

  1. Reblogged this on World Peace Forum.

    Like

    Posted by daveyone1 | April 30, 2016, 4:23 pm

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