Monday, December 15, 2014

Defiant Maduro vows no change as oil falls

Venezuela President Nicolás Maduro.

Amid increasing pressure, Venezuelan president refuses to raise gas prices, says Petrocaribe will expand

CARACAS — Amid rising pressure prompted by tumbling oil prices worldwide, Venezuela’s defiant President Nicolás Maduro vowed not to backtrack on two key policies of his Socialist government yesterday, promising to expand his nation’s key Petrocaribe programme and maintain the world’s cheapest petrol prices.

Speaking in Cuba at a summit of the left-leaning ALBA bloc of nine countries from Latin America and the Caribbean, Maduro did not mention the impact of a 46 percent decline in oil prices since June, instead talking about how he would expand the 18-nation Petrocaribe programme, even as it struggles to keep up with demand. Shipments fell 11 percent in 2013 to the lowest level since 2007, forcing beneficiaries to turn to other sources. With a struggling economy, Caracas has also taken to cashing in debts at a lower rate.

“Petrocaribe, what it must do at this stage, is consolidate, strengthen, grow and deploy itself with even more strength,” Maduro said from Cuba — seven of the nine ALBA countries are Petrocaribe members.

Former Venezuelan President Hugo Chávez created the programme in 2005 to help politically-aligned neighbours cope with rising energy costs, letting them finance up to 60 percent of their purchases. But Venezuela’s capacity to serve as benefactor has suffered as its economy has faced hard times and the price of oil has fallen.

Maduro’s government is currently considering a plan to raise cash by selling billion of dollars of Petrocaribe debt owed to it for 40 cents on the dollar or less, according to a Wall Street analyst with knowledge of the deal. Venezuela would sell US$7-billion worth of debt from the Dominican Republican and Jamaica to Wall Street for US$2 billion to US$3 billion in cash up front, converting outstanding invoices for oil shipped into bonds.

‘No rush’ on gas prices

In Venezuela meanwhile, the former bus-driver said in a pre-recorded interview yesterday that there was “no rush” to hike gasoline prices, suggesting the president has shied away from implementing the risky domestic reform amid the nation’s ongoing economic crisis.

“I’ve considered, as head of state, that the moment has not arrived,” Maduro said in an interview broadcast on the Televen channel yesterday. “The moment will come, maybe in 2015, (but) there’s no rush, we’re not going to throw more gasoline on the fire that already exists with speculation and induced inflation.”

Venezuela’s economy is flailing under the weight of an annual inflation rate touching 60 percent, an apparent recession, strict currency controls, and falling oil prices. Maduro has appeared reluctant to make unpopular economic adjustments, such as hiking gasoline prices for the first time in two decades or unifying the country’s complex system of exchange rates, though he hinted the currency exchange may be up for debate.

“The price of gas is a delicate issue for Venezuelans,” Maduro said.

Subsidizing the world’s cheapest gasoline costs the South American OPEC member about US$12.5 billion a year, according to the government. But raising prices is a hot-button issue in the country with the world’s largest crude reserves — a price hike in 1989 triggered massive riots and left hundreds dead. A hike now would likely also further fan the inflation rate and especially hurt the poor, the government’s traditional base of support.

Separately, Maduro reiterated that his government is working on an “adjustment” to the “Sicad II” foreign exchange auction scheme, but did not offer specific details.

‘Financial blockade’

Maduro blames the economic crisis on an “economic offensive” waged by right-wing foes seeking to topple him by spreading rumours of impending default, as well as smuggling and hoarding price-fixed goods.

“There’s a blockade against Venezuela in the capitalist world,” Maduro told interviewer José Vicente Rangel, a leftist politician and former vice-president during Chávez’s government in an interview.

Venezuelan sovereign bond prices have plunged and the cost to insure the debt against a default has surged as slumping oil prices worsen the country’s cash flow problems. Maduro reiterated that Venezuela is “solvent” and said the market ignores that the country has paid its debt consistently since the late Chávez came to office in 1999.

“Next week they’re going to try to mount a little campaign saying Venezuela is going to default,” added Maduro, who was elected last year to replace Chávez.

The president also said that the government is planning to reform the forex Sicad II system and admitted that the market “hasn’t worked like we planned it.”

“We are going to make adjustment, will announce it once it’s ready, “ he said and blamed an international conspiracy against the Venezuelan peso for a “shortage of dollars.”

He also accused credit rating agencies of preventing Venezuela from receiving credit. “With China, we have a credit line that has surpassed US$60 billion,” he said defiantly.

Speaking in Cuba, Maduro made a number of allegations against his “enemies,” claiming a plot had been discovered which intended to kill him when he attended a recent Unasur summit in Ecuador.

Maduro has also lashed out in recent days at former Spanish prime minister José María Aznar, saying he was responsible for the deaths of 1.2 million people after supporting the US-led Iraq War. The Spanish government called in Venezuela’s ambassador for a dressing down over Maduro’s remarks.

Herald with AP, Reuters