Maduro's Price Slashing Could Hurt Ports' Container Throughput

President Nicolas Maduro's price cut on appliances poses a threat to Venezuela's port sector as shippers have already begun redirecting their shipments away from the country. We have previously forecast the country's ports of Puerto Cabello and La Guaira to experience robust growth in 2013. The government's populist measure, however, poses downside risk to these forecasts.

Importers of appliances in Venezuela have reacted negatively to the government's recent move to cut prices in stores. Some importers have begun ordering shipping companies to divert their cargo to destinations away from Venezuela. Logistics companies have confirmed reports that the latest government intervention has lead to a change of destination (COD) order by importers. Although a COD request in maritime transport is a regular operation in international trade, importers have reacted quickly to Maduro's populist measure, fearing a significant loss in revenues. The president also ordered the takeover of Daka, slashing product prices at the appliance store by as much as 25%.

The move is widely seen as an attempt to prop up an ailing domestic economy. It also comes ahead of municipal elections in December - Maduro's first electoral test since he narrowly defeated opposition leader Henrique Capriles in April 2013.

Maduro's Moves Could Derail Growth Outlook
Port of Puerto Cabello Container Throughput, 2008-2018 (TEUs & % chg y-o-y)

Maduro's Price Slashing Could Hurt Ports' Container Throughput

President Nicolas Maduro's price cut on appliances poses a threat to Venezuela's port sector as shippers have already begun redirecting their shipments away from the country. We have previously forecast the country's ports of Puerto Cabello and La Guaira to experience robust growth in 2013. The government's populist measure, however, poses downside risk to these forecasts.

Importers of appliances in Venezuela have reacted negatively to the government's recent move to cut prices in stores. Some importers have begun ordering shipping companies to divert their cargo to destinations away from Venezuela. Logistics companies have confirmed reports that the latest government intervention has lead to a change of destination (COD) order by importers. Although a COD request in maritime transport is a regular operation in international trade, importers have reacted quickly to Maduro's populist measure, fearing a significant loss in revenues. The president also ordered the takeover of Daka, slashing product prices at the appliance store by as much as 25%.

The move is widely seen as an attempt to prop up an ailing domestic economy. It also comes ahead of municipal elections in December - Maduro's first electoral test since he narrowly defeated opposition leader Henrique Capriles in April 2013.

Maduro's Moves Could Derail Growth Outlook
Port of Puerto Cabello Container Throughput, 2008-2018 (TEUs & % chg y-o-y)

Although popular with voters, the recent cut in prices of consumer goods will affect Venezuela's imports. The COD orders from importers will have a negative impact on container throughput at the country's ports. As such, BMI believes Maduro's latest move poses downside risk to our container throughput forecasts at the country's two main ports of Puerto Cabello and La Guaira.

In 2013 BMI forecasts strong growth at Venezuela's largest port by container throughput, Puerto Cabello, and the second largest, La Guaira. For Puerto Cabello we are forecasting 2013 growth of 8.0% year-on-year (y-o-y) to reach a container throughput level of 906,120TEUs; for La Guaira we project 7.0% y-o-y growth to reach 581,010TEUs in 2013.

Depending on how Maduro's price cuts of appliances plays out - specifically, how long it remains in place, and whether it will extend to other consumer goods sectors - we believe the government's intervention poses downside risk to our current 2013 forecast and our medium-term projections at the ports of Puerto Cabello and La Guaira.

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