Venezuela tightens grip on fuel stations after subsidy reform

Cars are parked in line near a gas station with subsidized fuel in Caracas. (Reuters)
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Updated 29 June 2020

Venezuela tightens grip on fuel stations after subsidy reform

  • Removal of licenses will likely allow the state to take the benefit of higher pump prices

CARACAS: Venezuelan state oil firm PDVSA has told independent gas station operators it can revoke their licenses “at any time,” only weeks after it cut generous fuel subsidies and as widespread shortages take hold, a notification PDVSA sent to the operators showed.

PDVSA has a monopoly over the wholesale fuel distribution market and owns almost all of the country’s 1,200 service stations, although most are operated by private companies through commercial licenses.

Many are suffering the effects of years of price freezes that prevented fuel sales income from keeping up with the costs of maintaining their stations.

The industry had hoped the subsidy reforms and resulting price rises could revive their businesses, but the removal of licenses could allow the state to take the benefit of higher pump prices.

The notification document says PDVSA “will be able to rescind the contract unilaterally and at any time.” A person familiar with the process, who asked not to be named, said so far 12 gas stations in Caracas had received the notification.

The shift is a new sign of the desperation of President Nicolas Maduro’s government for hard currency as the COVID-19 pandemic and US sanctions have reduced Venezuela’s capacity to earn export revenue from
oil shipments.


Analysts urge Canada to focus on boosting the economy

Updated 06 July 2020

Analysts urge Canada to focus on boosting the economy

  • Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time

TORONTO: Canada should focus on boosting economic growth after getting pummeled by the COVID-19 crisis, analysts say, even as concerns about the sustainability of its debt are growing, with Fitch downgrading the nation’s rating just over a week ago.

Canadian Finance Minister Bill Morneau will deliver a “fiscal snapshot” on Wednesday that will outline the current balance sheet and may give an idea of the money the government is setting aside for the future.

As the economy recovers, some fiscal support measures, which are expected to boost the budget deficit sharply, could be wound down and replaced by incentives meant to get people back to work and measures to boost economic growth, economists said.

“The only solution to these large deficits is growth, so we need a transition to a pro-growth agenda,” said Craig Wright, chief economist at Royal Bank of Canada. The IMF expects Canada’s economy to contract by 8.4 percent this year. Ottawa is already rolling out more than C$150 billion in direct economic aid, including payments to workers impacted by COVID-19.

Further stimulus measures could include a green growth strategy, as well as spending on infrastructure, including smart infrastructure, economists said. Smart infrastructure makes use of digital technology.

“We have to make sure that government spending is calibrated to the economy of the future rather than the economy of the past,” Wright said.

Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time, citing the billions of dollars in emergency aid Ottawa has spent to help bridge the downturn caused by COVID-19 shutdowns.

Standard & Poor’s, Moody’s and DBRS still give Canadian debt the highest rating. At DBRS, Michael Heydt, the lead sovereign analyst on Canada, says his concern is about potential structural damage to the economy if the slowdown lingers too long.

Fiscal policymakers “need to be confident that there is a recovery underway before they start talking about (debt) consolidation,” Heydt said.

Fitch expects Canada’s total government debt will rise to 115.1 percent of GDP in 2020 from 88.3 percent in 2019.

Royce Mendes, a senior economist at CIBC Capital Markets, said the economy still needs more support.

“Turning too quickly toward austerity would be a clear mistake,” he said.