Following the dreadful performance at Venezuela's second largest port of La Guaira in 2013 when box and tonnage throughput fell 25.00% and 3.14% respectively 2014 will represent something of a recovery. In container terms, the port is set to see year-on-year (y-o-y) growth of 2.50% to reach 417,431 twenty-foot equivalent units (TEUs). Tonnage throughput is set to register a negligible gain of 0.30%.
We believe Venezuelan's President Nicolás Maduro's intervention ordering merchants to cut prices of home appliances poses downside risk to our current 2014 forecast and our medium-term projections (to 2018) at the ports of Puerto Cabello and La Guaira.
This slow growth would be insufficient to recoup lost tonnage volumes in 2013. In 2010 587,000 tonnes were handled at La Guaira, before volumes dropped by 26.6% in 2011. The lower growth rates of 2013 and 2014 reflect our concerns about the February 2013 devaluation of the bolívar, which will have a hard impact on imports of consumer goods.
The overvaluation of the currency had previously been generating a surge in imports in late 2012, and therefore activity at ports, as it had become cheaper to import goods than to buy domestically produced products. This contributed to the strong growth seen in 2012. While we had envisaged this devaluation, and had written it into our forecasts, the outcome remains somewhat uncertain.
Downside pressure is also coming from the highly tense social and political environment following the death of Hugo Chávez and the narrow victory of Maduro, his endorsed successor, in the presidential election. At this moment, we do not rule out a widespread political crisis in the near term, given the highly polarised electorate, emerging disunity within the ruling party and potential for the armed forces to step in if instability continues to heighten.
A political crisis would most likely see both consumer and business confidence plummet, and potentially result in a contraction in real private consumption. Fixed investment would also be likely to come in below our forecast, which could generate recessionary economic conditions in Venezuela; all of which would reduce throughput at the country's ports.
There are also concerns about corruption at La Guaira after the port's head of customs was arrested, along with three accomplices, and found to be holding VEF4mn in cash in his apartment. Management at the port's customs operations have said that the arrest was an 'isolated incident' and that operations at the port will continue as normal.