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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.
Speaker 1: I'm Katherine Cowdery. The side market pulled back in the
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Speaker 1: the down. Industrial leverage fell eight points to close out
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Speaker 1: and P five thundered down four points to tenths of
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Speaker 1: of a percent to forty eight eleven. It's about gold
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Speaker 1: the ten treasury of one three second with the yield
Speaker 1: of one. That's a Bloomberg business flash. This is taking
Speaker 1: stock with Bim Box and Kathleen Hayes on Bloomberg Radio.
Speaker 1: This is taking stock on Bloomberg. I'm Kathleen Hayes. We
Speaker 1: are broadcasting live from the b n Y mel And
Speaker 1: Asset Servicing Conference in Tucson, Arizona. Let's turn our attention
Speaker 1: nowt to Coca Cola. Get this, there is not enough
Speaker 1: sugar in Venezuela to keep the bottling system running. Here
Speaker 1: to tell us more. Nathan Crooks, Carraccos, Bureau chief for Bloomberg.
Speaker 1: All right, Nathan, so what is is? I thought that
Speaker 1: sugar supplies is one of the basic things in Venezuela.
Speaker 1: For example, Venezuela used to be very famous for making rum.
Speaker 1: You're not gonna make that without sugar, you think. And
Speaker 1: we saw news today though that Coca Cola said that
Speaker 1: their suppliers have are starting to rint out and that
Speaker 1: they're not going to be able to keep making uh
Speaker 1: sugar drink stuetened with sugar. So, uh, you know this
Speaker 1: is happening in a time of Venezuela when we're seeing
Speaker 1: shortages of many things. Last last month, for example, they
Speaker 1: are one of the biggest companies in the country, said
Speaker 1: that they didn't have enough hops to make beer. So, uh,
Speaker 1: you know, we're starting to see Venezuela running out of
Speaker 1: a lot of things, and not just sugar. So this
Speaker 1: is this a problem for Coca Cola that's confined to Venezuela,
Speaker 1: and if they they have, they have operations all over
Speaker 1: the world. So how how significant is it is this
Speaker 1: something that stands beyond Venezuela in any any way, shape
Speaker 1: or form. Uh, it'll probably be more of a problem
Speaker 1: for Venezuelans who who like Coca Cola and other sweetened drinks. Uh,
Speaker 1: many of because of the strict currency controls here that
Speaker 1: we've had now for for the past decade, and it's
Speaker 1: gotten increasingly worse over the past two or three years. So, um, well,
Speaker 1: Venezuela used to be a large part of many companies
Speaker 1: operating operations. Because of continued currency devaluations, we've seen uh,
Speaker 1: Venezuelan segments become less and less important on their balance sheets. Um,
Speaker 1: so you know, it's kind of the latest thing in
Speaker 1: Venezuela that we're not going to be able to find here, uh,
Speaker 1: you know. And and some of these companies that are
Speaker 1: having problems with with production, a lot of them have
Speaker 1: have already deconsolidated the country from their balance sheets. So
Speaker 1: I would imagine it's it's more of a local headache
Speaker 1: for them. Nathan speak if you can about state monopolies
Speaker 1: when it comes to granting dollars six dollars two companies
Speaker 1: inside of Venezuela in order to import things, in this
Speaker 1: case sugar. But is that a general issue that is
Speaker 1: hurting the economy. Yes, and it's one of the you know,
Speaker 1: the main problems that are It's it's kind of the
Speaker 1: currency in Venezuela and the state controls. It's kind of
Speaker 1: the fundamental current that you see kind of at the
Speaker 1: base of many of the different problems here. At the moment.
Speaker 1: For instance, we have an official exchange of ten bull
Speaker 1: of ours per dollar, and then we have a secondary
Speaker 1: exchange rate of about now almost five hundred bull of
Speaker 1: ours for the dollar, and then there's a black market
Speaker 1: which is illegal to to publish that information. But um,
Speaker 1: it's far above even the alternative rates. So if you
Speaker 1: just look at the two legal rates of ten and
Speaker 1: five hundred. The difference is just so so big and
Speaker 1: and you know, and you mix that with price controls.
Speaker 1: For instance, sugar is a basic good, so it's it's
Speaker 1: one of the goods that the government sets the price on. Uh. So,
Speaker 1: so the only people that would want to import sugar,
Speaker 1: they're only going to want to do that if they
Speaker 1: can get the preferential rate of ten bull of ours
Speaker 1: per dollar, because because it's price controlled, so uh And
Speaker 1: then you have this all happening in the context with
Speaker 1: falling oil prices, and which is Venezuela's main product, and
Speaker 1: so they have less money to import what they need.
Speaker 1: So it's kind of a perfect storm for Venezuela. You
Speaker 1: have these currency controls and they don't have as much
Speaker 1: money as they used to have to be able to
Speaker 1: import things at these preferential rates. So what about the
Speaker 1: people of Venezuela. At what point does this, uh, this
Speaker 1: broad problem lead to some some you know, protests, um
Speaker 1: political change. Where where's Venezuela's doing that cycle? Well, it's
Speaker 1: definitely you know, these are tough days for Venezuela. If
Speaker 1: you come to Caracas, it's very normal. Just driving around
Speaker 1: outside of all the grocery stores, you see you see
Speaker 1: lines everywhere, you know, thousands of people. Uh. You're only
Speaker 1: allowed to buy certain items, the regulated items on certain days,
Speaker 1: depending on the digits and your national Identity card number.
Speaker 1: Uh And and we have inflation now, which the I
Speaker 1: m F Thinks is going to be about this year. Uh.
Speaker 1: So you know, Venezuelans are going through a really tough time.
Speaker 1: And uh. You know that they might have trouble finding
Speaker 1: Coca cola, but it's a lot of the bigger problem
Speaker 1: them is uh there's real problems with people getting medicine
Speaker 1: that they need and and basic food. Uh And and
Speaker 1: you know we were starting to see uh there are
Speaker 1: agencies that track kind of civil unrest uh and and
Speaker 1: they're putting out reports saying instances of looting are increasing.
Speaker 1: Uh And then on a political front, we have an
Speaker 1: opposition who late last year they got control of the
Speaker 1: National Assembly, but they've seen the Supreme Court kind of
Speaker 1: overturn everything they're trying to do. Right now, they're calling
Speaker 1: for a recall referendum on President Nicholas Maduro. Uh And
Speaker 1: so far they're accusing the government of kind of dragging
Speaker 1: their feet in terms of validating the signatures that they
Speaker 1: need to call that. So, so this is all happening
Speaker 1: kind of a a tense political environment as well. Like
Speaker 1: I said, it's it's the perfect storm of an economic problems,
Speaker 1: currency controls, and and political and social unrest. And this
Speaker 1: is not the only company that is responding to this
Speaker 1: situation in a sense Colacola. But I know that, for example,
Speaker 1: the tire maker Bridge Stone, they're selling their business in
Speaker 1: Venezuela after doing business there for sixty years. Yeah, for instance.
Speaker 1: And then the list goes on and on and on,
Speaker 1: and we said, you know, airlines have stopped flying here.
Speaker 1: Uh We saw Clorox pull out a couple of years
Speaker 1: ago and just say, you know, we're we're leaving. Uh.
Speaker 1: So it is definitely giving companies that operate here a
Speaker 1: lot of challenges. Thank you very much for joining us.
Speaker 1: Nathan Crooks, Caracas bureau chief for Bloomberg News. I want
Speaker 1: to thank all the people at ben Why Melon. You're
Speaker 1: live at Tucson, Arizona at the b n Y Melan
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