Venezuela Runs Out Of French Fries As Default Fears Mount

With Venezuelan bonds re-collapsing as belief in a 30c recovery floor fades rapidly (and hyperinflating Venezuelan stocks soar - whether oil prices are rising or falling), the people of Maduro's socialist utopia have a new problem to contend with. After running out of toilet paper, and finding soap and shampoo hard to come by, AP reports Venezuela's more than 100 McDonald's franchises have run out of potatoes and are now serving alternatives like deep-fried arepa flatbreads or yuca, "because of the situation here; it's a total debacle."

 

Venezuelan bonds have further to fall...

 

But CNBC Venezuela (should such a monstrosity be allowed to exist) would be loving the hyperinflation...

 

As CDS soar to record highs. But, as AP reports, now it's getting serious...

Venezuela's more than 100 McDonald's franchises have run out of potatoes and are now serving alternatives like deep-fried arepa flatbreads or yuca, a starchy staple of traditional South American cooking.

 

McDonald's is blaming a contract dispute with West Coast dock workers for halting the export of frozen fries to the country. The dispute also caused several days of French fry rationing in Japan last month. But Sonia Ruseler, an Argentina-based spokeswoman for Arcos Dorados, which runs McDonald's restaurants in Latin America, declined to say Tuesday why Venezuela's neighbors are not suffering from similar scarcity.

 

Accustomed to shortages of their favorite foods, and equally in the habit of grumbling about the government as they walk away empty-handed, many Venezuelans assume the embattled socialist administration is to blame.

 

"It's because of the situation here; it's a total debacle," said Maria Guerreiro, who huffed out of a Caracas McDonald's with her family when she found out they were serving only fries made of yuca, which is also known as cassava. Her daughter won't eat the super-starchy root, she said, and they'd come for the sole purpose of treating the two-year-old to a Happy Meal.

 

Ruseler said the corporation is working to resolve the shortages, and in the meantime, "will continue to give our clients the McDonald's experience, offering 100 percent Venezuelan options."

 

...

 

Most of the shortages in Venezuela are driven in part by the country's tight currency controls, which make it hard to get dollars at a subsidized rate for imports while creating a thriving black market for currency.

 

As a result, the country either has the most expensive Happy Meal in the world ($27 the official exchange rate) or the cheapest (90 cents at the black market rate).

 

McDonald's has likely been grappling with shortages in Venezuela for a while, according to Alixa Sharkey, a researcher with the market research company Euromonitor International. And while other countries might be able to adjust to hiccups at the ports by finding alternate solutions like flying in frozen potatoes, the dysfunction in Venezuela makes these workarounds impossible.

 

"This situation probably has little to do with the U.S. port dispute and is mostly the result of Venezuela's very difficult economic situation," she said.

 

While McDonald's may be the ultimate symbol of U.S. capitalism, the socialist government seems acutely aware that Venezuelans relish their Happy Meals. A state-sponsored news website posted a story this week assuring the situation "has nothing at all to do" with government policy.

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But Venezuela has more problems, as Bloomberg reports, foreign companies working to develop some of Venezuela’s most prized oilfields are asking to be compensated with crude as a way to recover hundreds of millions of dollars in unpaid cash owed to them, a person with direct knowledge of the request said...

The money is owed by Venezuela’s state oil company to partners including Spain’s Repsol SA (REP) and India’s Oil & Natural Gas Corp., the person said, asking not to be named as the matter is private. One of the companies is owed $500 million, the person said. Output at the Carabobo and San Cristobal fields in the Orinoco heavy oil belt, meanwhile, is trailing targets.

 

The request to be reimbursed with oil is shining a light on the growing severity of Venezuela’s financial predicament. Boasting the world’s biggest oil reserves, the Latin American nation has seen its crude output slump since 2008 and imports of refined products surge as Petroleos de Venezuela SA revenue is diverted to social programs and fuel subsidies. Tumbling crude prices, dwindling foreign reserves and surging inflation made Venezuelan bonds the worst performers in emerging markets last year, with the implied probability of default over the next five years at 90 percent, the highest in the world.

 

“To the extent that PDVSA is being pulled in different directions and being used as a social financial arm, then it’s certainly an impediment to its ability to meet investment commitments,” Eurasia Group analyst Risa Grais-Targow said by telephone from Washington.

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Not good.

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