Economist 1/19/16

  1. A global oil boom, which provided Hugo Chávez, Mr Maduro’s populist predecessor, money to lavish on Venezuela’s once neglected poor, is over. Mr Maduro has failed to persuade voters that he is a worthy heir. In a parliamentary election on December 6th 2015 the opposition Democratic Unity alliance (MUD) won two-thirds of the seats, the first time it has won a national election since Chávez came to power in 1999. Mr Maduro’s approval rating is not much above 20%. The new National Assembly is now engaged in a power struggle with the regime.The price of oil, which provides 95% of Venezuela’s foreign-exchange earnings, has long dictated the popularity of its leaders. The government’s income from oil in the year to November 2015 was two-thirds lower than during the same period the year before. Price controls—along with the shortage of foreign exchange—have led to acute shortages of basic goods, forcing people to queue for hours to buy necessities. Inflation is officially running at 141% as of September last year.
  2. The government has tried to hold down prices with a Rube Goldberg system of exchange controls. Venezuela has three legal exchange rates, including one that values the bolívar at 6.35/$. Venezuelans with connections in the government can obtain dollars at this ridiculously cheap rate, a major source of corruption. But in the unofficial market the bolívar is worth around 130 times less.To date, Venezuela has given priority to paying its foreign debts. The government has apparently decided that default, however tempting, would be too costly. Many of Venezuela’s assets outside the country (including refineries and oil tankers) could be seized by creditors.The IMF estimates that Venezuela’s GDP shrank by about 10% in 2015, making it the world’s worst performing economy. The government stopped publishing comprehensive crime statistics in 2005, though it does admit there is a problem. The attorney-general has said that Venezuela’s murder rate last year was 62 per 100,000 people, ten times the global average. The Venezuelan Violence Observatory, an independent research institute, says the rate is higher.Chávez began the process of shutting down the free press; Mr Maduro has continued it. Only one national newspaper is relatively independent.
  3. To protect against current stockpiles falling into the wrong hands, or better yet, to ensure countries have nothing to steal by eliminating their stocks altogether. This has been the purpose of the international nuclear security summits that have been held every two years since 2010, the last of which will be held in Washington, DC, in March 2016. On these measures, Iran does not fare well. Of the 24 countries that had nuclear stockpiles of at least 1kg in 2015, Iran is second-worst in the world at securing these from theft, according to an index from the Nuclear Threat Initiative.A dozen countries have eliminated their stockpiles, but only Uzbekistan has done so since the 2014 index. Several countries have increased their stockpiles in that time, including India, Japan, the Netherlands, North Korea, Pakistan, and Britain.
  4. Lithium accounts for only about 5% of the materials in some car batteries, and for less than 10% of their cost. Worldwide sales of lithium salts are only about $1 billion a year. But the element is a vital component of batteries that power everything from cars to smartphones, laptops and power tools.SQM is part of a global scramble to secure supplies of lithium by the world’s largest battery producers, and by end-users such as carmakers. That has made it the world’s hottest commodity. The price of 99%-pure lithium carbonate imported to China more than doubled in the two months to the end of December, to $13,000 a tonne.China gets much lithium from spodumene rock in Australia, an alternative to South American brine.The industry is fairly concentrated, which adds to the worry. Last year Albermarle, the world’s biggest lithium producer, bought Rockwood, owner of Chile’s second-biggest lithium deposit. It and three other companies—SQM, FMC of America and Tianqi—account for most of the world supply of lithium salts. At the moment, the main lithium-ion battery-makers are Samsung and LG of South Korea, Panasonic and Sony of Japan, and ATL of Hong Kong. But China also has many battery-makers.
  5. Bigger carmakers also have a growing appetite for lithium. In a recent shift, Toyota has begun offering lithium-ion batteries instead of heavier nickel-metal hydride ones.Another big source of demand may be for electricity storage. The holy grail of renewable electricity is batteries cheap and capacious enough to overcome the intermittency of solar and wind power—for example, to store enough power from solar panels to keep the lights on all night.Power utilities will increasingly use giant battery packs, charging them at times of low demand and tapping them to provide short bursts of electricity at peak times, an alternative to building a fossil-fuel plant that will sit idle the rest of the time
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