The Economist - USA (2019-12-21)

50 The Americas The EconomistDecember 21st 2019

2 kets in Caracas, nearly empty for much of

2017 and 2018, are again stocked with food.

It is not just the rich who can afford it. Per-

haps a third of Venezuelans have direct ac-

cess to remittances from relatives living

abroad. Since Mr Maduro took office in 2013

at least 4m people, 12% of the population,

have left the country. Venezuelans abroad

send back $4bn a year, roughly 3% of gdp,

according to Econoanalitica, a consultan-

cy. This supplements the government’s

distribution of food, disproportionately to

its supporters, and a discreet aid pro-

gramme managed by foreign ngos.

Dollars are elbowing aside Venezuela’s

bolívar, the world’s most inflation-prone

currency. Taxi drivers and cleaning ladies

quote prices in dollars, even if they accept

payment in bolívares. McDonald’s pays

burger-flippers in Caracas a bonus of $20 a

month, which is more than treble the mini-

mum wage of 300,000 bolívares ($6).

Prices at the Traki department store in cen-

tral Caracas are in dollars, though the dol-

lar sign itself does not appear on tags. Spa-

ghetti (from Egypt) costs 50 cents for a

400-gram (14-ounce) pack. Queues at the

tills suggest that ordinary shoppers can af-

ford it. The value of dollar notes in circula-

tion now exceeds that of bolívares. 

The Venezuelan currency itself, in

which most people are still paid, is not de-

preciating quite as fast as it was. The gov-

ernment has tightened banks’ reserve re-

quirements. According to the national

assembly, the annual inflation rate has

dropped from nearly 3m% at the beginning

of 2019 to 13,475% in November, which is

still the highest in the world by far.

“Things are a little better than they were

last year,” says Héctor Márquez, a mechan-

ic. Outside Caracas few Venezuelans would

agree. People continue to die needlessly in

hospitals that lack equipment and drugs.

The unestimates that 7m Venezuelans ur-

gently need humanitarian aid.

That has led to internal migration.

Many people are fleeing provincial cities

for Caracas, where traffic jams are back

after disappearing last year. El Chigüire Bi-

polar (the Bipolar Capybara), a satirical

website, has Mr Maduro declaring: “The

Republic of Caracas cannot continue re-

ceiving Venezuelan refugees.” 

Quiescence in Caracas is what Mr Ma-

duro most wants. A Venezuelan with access

to dollars is less likely to protest against the

government, points out Mr Oliveros. That

complicates the task of Mr Guaidó, who has

promised repeatedly that the Maduro re-

gime will fall “soon”. His main hope had

been that the armed forces would switch

sides, but there is little sign of that. Mr

Guaidó’s new focus is a push for reform of

the electoral authority, which the regime

counts on to help rig elections in its favour.

Its next opportunity will be in the na-

tional-assembly election, which is due in

December2020.The regimemayholdit

earlier.If theoppositionlosesthatvote,Mr

Madurowillcontrolallbranchesofgovern-

ment.“The conditionsfor anypolitical

changein 2020 aregettingevermorere-

mote,” saysJohn Magdaleno, a Caracas-

basedconsultant.

PubliclytheTrumpadministrationstill

backsMrGuaidóagainstthe“former”re-

gime.“We’renotoutofsanctions,”saidEl-

liottAbrams,Washington’spointmanfor

Venezuela,inOctober.

But recent reports by news agencies

suggestthatPresidentDonaldTrumpmay

belookingfornewideas.Oneistowork

withRussiatoputpressureonMrMaduro.

Anotheristotalkdirectlytotheregime.In

NovemberErik Prince,anardentTrump

supporterwhofoundedBlackwaterSecuri-

tyConsulting(nowcalledAcademi),dined

inCaracaswithDelcyRodríguez,Venezue-

la’svice-president.Thatpromptedspecu-

lationthatthetwogovernmentsaresetting

upa backchannel,whichwouldbypassMr

Guaidó.Thatwouldnotbehappeningif the

regimewereonitswayout. 7

C

olourful cans labelled Pink Kush,

Moon and Trail Blazer are arranged in-

vitingly in the glass-doored cooler at Supe-

rette, a cannabis store in the trendy West-

boro area of Ottawa. But they are just

models for marketing purposes. A sales

clerk, wearing a white Superette toque and

matching t-shirt, explains that cannabis-

infused drinks and edibles, like choco-

lates, biscuits and sweets, will probably

not go on sale until early January, even

though the government finished its review

process by December 16th. “Wheels of bu-

reaucracy,” the salesman explains.

In October 2018 Canada became the sec-

ond country in the world, after Uruguay, to

legalise cannabis for recreational use. But

it has proceeded with caution. Sales of the

plant, oils and seeds were legalised right

away. Drinks, edible confections and vap-

ing products followed a year later. This,

plus slow approvals of retail outlets by

some provinces, turned an expected bo-

nanza into a bit of a bust. The industry is

hoping that what it calls “Cannabis 2.0”

will revive its fortunes. It may not.

The government said that legalisation

would help keep cannabis out of the hands

of children and put criminals out of busi-

ness. Progress has been slower than it

wanted. Just 28% of consumers bought

only from legal sources in the third quarter

of 2019. The rest presumably are still buy-

ing on the black market, where prices are

lower. Many of those smokers are no doubt

under age. In the first year after legalisation

legitimate sales were a disappointing

C$907m ($690m).

That is partly because finding one of

Canada’s 407 legal pot shops is not easy. As

of July this year Ontario had 24 stores for its

14m residents—two fewer than Newfound-

land & Labrador, with a population of

530,000. In nine of the ten provinces distri-

bution from growers to retailers is a pro-

vincial monopoly. The distributor’s extra

paperwork is what slowed Superette down.

Such problems have sobered Canadian

firms, which had heady dreams of leading a

growing global industry. The share price of

Canopy Growth, the largest Canadian can-

nabis firm by market value, dropped from

C$57 on the eve of legalisation to C$27 this

week. That of Cronos Group, the second-

biggest, has fallen from C$12 to C$7.

These companies are counting on

drinks and edibles to improve their for-

tunes. So are some big international booze

firms such as Constellation Brands, which

has invested in Canopy Growth, and Mol-

son Coors, which has a joint venture with

Hexo, a smaller cannabis firm. In American

states where cannabis is legal, edibles ac-

counted for 11% of the market in 2018, ac-

cording to Deloitte, a consultancy. It esti-

mates that edibles and drinkables could

add C$2.1bn to sales in Canada.

They could also draw in multinational

consumer-goods companies that have so

far stayed out of the market. Cannabis-in-

fused beverages and biscuits are not so dif-

ferent from products they know how to

make and sell. The big brands might push

Pink Kush out of the cooler. 7

OTTAWA

A cautious legalisation has left

investors glum

Cannabis in Canada

Down from a high

Coming to a cooler near you