Ever seen "Weekend at Bernie's"? Go check it
out. Meanwhile now that Chavez' death is a formality how do
you play Venezuelan markets, and what has truly changed?
[caption id="attachment_60098" align="alignright" width="300"
caption="Caracas, the capital and largest city of Venezuela"]
Well looking for an opportunity is not easy given Chavez' demise
has been well known for months (see "Weekend at Bernie's"), and the
local market is +400% since last June and +600% in the last 18
Meanwhile knowing what to do with the currency (VEF) is your
main issue (see recent 46% devaluation). As for real reform,
current VP Nicolas Maduro is not necessarily whistling "Yankee
Doodle Dandy", and was hand chosen by Chavez as a successor so
don't expect a turn from "Chavista" style ruling if elected.
Elections must be held within 30 days and there are opposition
players (Cabello, Capirles) who may share some power(+ve).
Note that financially, Venezuela is a mess and the devaluation
and recent oil windfall taxes were an effort to bring more VEF to
the Treasury. Chavez, at least, had a debt repayment history
that bondholders could get their arms around (sort of). Right
now the bond market has priced in Chavez's death as a bond friendly
Trading Venezuela should be approached by trading the region and
who benefits. The Global X FTSE Colombia 20 ETF (
) is the largest regional trading partner.
The next obvious place is to review is the oil and gas space
where many have been working to get access to this massive amount
of reserves. Columbia's collection of world class oil and gas
players, again, are best positioned.
), Petro Rubiales (
) and Petrominerales(
) all trade in the US or Canada and are world class players.
Houston based Harvest Natural Resources (
) is being picked over as we speak and should move higher in
today's action. Other obvious regional resource companies are
) and Petrobras Brazil (
) but each of these companies has their own problems that should
overpower the Vene pop.
Also look in the consumer space where U.S. multinationals have
been gaining major growth from the space but might be more
concerned with the downside of the currency volatility and
devaluation prospects, on top of the recent deviation discussed
above. Colgate (
) is a great company but expensive and trading at 52 week highs,
with 31% exposure to Latin America. Venezuela is one of their
biggest sources of Latin America revenue. Kimberly Clark (
) has already warned that the impact from the currency devaluation
will hit earnings 1-2%.