WEBVTT - Bloomberg's Crooks: Coca-Cola Halting Ops in Venezuela (Audio)

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<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

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<v Speaker 1>the down. Industrial leverage fell eight points to close out

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<v Speaker 1>of a percent to forty eight eleven. It's about gold

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<v Speaker 1>down three dollars thirty cents announce at twelve sixty and

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<v Speaker 1>the ten treasury of one three second with the yield

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<v Speaker 1>of one. That's a Bloomberg business flash. This is taking

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<v Speaker 1>stock with Bim Box and Kathleen Hayes on Bloomberg Radio.

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<v Speaker 1>This is taking stock on Bloomberg. I'm Kathleen Hayes. We

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<v Speaker 1>are broadcasting live from the b n Y mel And

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<v Speaker 1>Asset Servicing Conference in Tucson, Arizona. Let's turn our attention

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<v Speaker 1>nowt to Coca Cola. Get this, there is not enough

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<v Speaker 1>sugar in Venezuela to keep the bottling system running. Here

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<v Speaker 1>to tell us more. Nathan Crooks, Carraccos, Bureau chief for Bloomberg.

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<v Speaker 1>All right, Nathan, so what is is? I thought that

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<v Speaker 1>sugar supplies is one of the basic things in Venezuela.

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<v Speaker 1>For example, Venezuela used to be very famous for making rum.

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<v Speaker 1>You're not gonna make that without sugar, you think. And

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<v Speaker 1>we saw news today though that Coca Cola said that

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<v Speaker 1>their suppliers have are starting to rint out and that

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<v Speaker 1>they're not going to be able to keep making uh

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<v Speaker 1>sugar drink stuetened with sugar. So, uh, you know this

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<v Speaker 1>is happening in a time of Venezuela when we're seeing

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<v Speaker 1>shortages of many things. Last last month, for example, they

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<v Speaker 1>are one of the biggest companies in the country, said

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<v Speaker 1>that they didn't have enough hops to make beer. So, uh,

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<v Speaker 1>you know, we're starting to see Venezuela running out of

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<v Speaker 1>a lot of things, and not just sugar. So this

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<v Speaker 1>is this a problem for Coca Cola that's confined to Venezuela,

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<v Speaker 1>and if they they have, they have operations all over

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<v Speaker 1>the world. So how how significant is it is this

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<v Speaker 1>something that stands beyond Venezuela in any any way, shape

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<v Speaker 1>or form. Uh, it'll probably be more of a problem

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<v Speaker 1>for Venezuelans who who like Coca Cola and other sweetened drinks. Uh,

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<v Speaker 1>many of because of the strict currency controls here that

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<v Speaker 1>we've had now for for the past decade, and it's

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<v Speaker 1>gotten increasingly worse over the past two or three years. So, um, well,

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<v Speaker 1>Venezuela used to be a large part of many companies

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<v Speaker 1>operating operations. Because of continued currency devaluations, we've seen uh,

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<v Speaker 1>Venezuelan segments become less and less important on their balance sheets. Um,

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<v Speaker 1>so you know, it's kind of the latest thing in

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<v Speaker 1>Venezuela that we're not going to be able to find here, uh,

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<v Speaker 1>you know. And and some of these companies that are

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<v Speaker 1>having problems with with production, a lot of them have

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<v Speaker 1>have already deconsolidated the country from their balance sheets. So

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<v Speaker 1>I would imagine it's it's more of a local headache

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<v Speaker 1>for them. Nathan speak if you can about state monopolies

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<v Speaker 1>when it comes to granting dollars six dollars two companies

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<v Speaker 1>inside of Venezuela in order to import things, in this

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<v Speaker 1>case sugar. But is that a general issue that is

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<v Speaker 1>hurting the economy. Yes, and it's one of the you know,

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<v Speaker 1>the main problems that are It's it's kind of the

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<v Speaker 1>currency in Venezuela and the state controls. It's kind of

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<v Speaker 1>the fundamental current that you see kind of at the

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<v Speaker 1>base of many of the different problems here. At the moment.

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<v Speaker 1>For instance, we have an official exchange of ten bull

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<v Speaker 1>of ours per dollar, and then we have a secondary

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<v Speaker 1>exchange rate of about now almost five hundred bull of

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<v Speaker 1>ours for the dollar, and then there's a black market

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<v Speaker 1>which is illegal to to publish that information. But um,

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<v Speaker 1>it's far above even the alternative rates. So if you

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<v Speaker 1>just look at the two legal rates of ten and

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<v Speaker 1>five hundred. The difference is just so so big and

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<v Speaker 1>and you know, and you mix that with price controls.

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<v Speaker 1>For instance, sugar is a basic good, so it's it's

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<v Speaker 1>one of the goods that the government sets the price on. Uh. So,

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<v Speaker 1>so the only people that would want to import sugar,

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<v Speaker 1>they're only going to want to do that if they

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<v Speaker 1>can get the preferential rate of ten bull of ours

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<v Speaker 1>per dollar, because because it's price controlled, so uh And

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<v Speaker 1>then you have this all happening in the context with

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<v Speaker 1>falling oil prices, and which is Venezuela's main product, and

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<v Speaker 1>so they have less money to import what they need.

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<v Speaker 1>So it's kind of a perfect storm for Venezuela. You

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<v Speaker 1>have these currency controls and they don't have as much

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<v Speaker 1>money as they used to have to be able to

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<v Speaker 1>import things at these preferential rates. So what about the

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<v Speaker 1>people of Venezuela. At what point does this, uh, this

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<v Speaker 1>broad problem lead to some some you know, protests, um

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<v Speaker 1>political change. Where where's Venezuela's doing that cycle? Well, it's

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<v Speaker 1>definitely you know, these are tough days for Venezuela. If

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<v Speaker 1>you come to Caracas, it's very normal. Just driving around

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<v Speaker 1>outside of all the grocery stores, you see you see

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<v Speaker 1>lines everywhere, you know, thousands of people. Uh. You're only

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<v Speaker 1>allowed to buy certain items, the regulated items on certain days,

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<v Speaker 1>depending on the digits and your national Identity card number.

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<v Speaker 1>Uh And and we have inflation now, which the I

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<v Speaker 1>m F Thinks is going to be about this year. Uh.

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<v Speaker 1>So you know, Venezuelans are going through a really tough time.

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<v Speaker 1>And uh. You know that they might have trouble finding

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<v Speaker 1>Coca cola, but it's a lot of the bigger problem

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<v Speaker 1>them is uh there's real problems with people getting medicine

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<v Speaker 1>that they need and and basic food. Uh And and

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<v Speaker 1>you know we were starting to see uh there are

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<v Speaker 1>agencies that track kind of civil unrest uh and and

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<v Speaker 1>they're putting out reports saying instances of looting are increasing.

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<v Speaker 1>Uh And then on a political front, we have an

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<v Speaker 1>opposition who late last year they got control of the

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<v Speaker 1>National Assembly, but they've seen the Supreme Court kind of

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<v Speaker 1>overturn everything they're trying to do. Right now, they're calling

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<v Speaker 1>for a recall referendum on President Nicholas Maduro. Uh And

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<v Speaker 1>so far they're accusing the government of kind of dragging

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<v Speaker 1>their feet in terms of validating the signatures that they

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<v Speaker 1>need to call that. So, so this is all happening

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<v Speaker 1>kind of a a tense political environment as well. Like

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<v Speaker 1>I said, it's it's the perfect storm of an economic problems,

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<v Speaker 1>currency controls, and and political and social unrest. And this

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<v Speaker 1>is not the only company that is responding to this

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<v Speaker 1>situation in a sense Colacola. But I know that, for example,

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<v Speaker 1>the tire maker Bridge Stone, they're selling their business in

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<v Speaker 1>Venezuela after doing business there for sixty years. Yeah, for instance.

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<v Speaker 1>And then the list goes on and on and on,

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<v Speaker 1>and we said, you know, airlines have stopped flying here.

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<v Speaker 1>Uh We saw Clorox pull out a couple of years

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<v Speaker 1>ago and just say, you know, we're we're leaving. Uh.

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<v Speaker 1>So it is definitely giving companies that operate here a

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<v Speaker 1>lot of challenges. Thank you very much for joining us.

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<v Speaker 1>Nathan Crooks, Caracas bureau chief for Bloomberg News. I want

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<v Speaker 1>to thank all the people at ben Why Melon. You're

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<v Speaker 1>live at Tucson, Arizona at the b n Y Melan

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<v Speaker 1>Assets Servicing Client Conference. This is Bloomberg Radio coming up,

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