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The Great Beer Catastrophe: Venezuela's Economic Crisis Has Sobering Consequences

Just when it looked like things couldn’t get much worse for economically-ravaged Venezuela, residents may no longer be able to drown their sorrows. Empresas Polar SA, maker of 80 percent of the beer consumed in Venezuela, is shutting down its last plant this Friday.

The company said the shutdown will leave the country with only a week’s supply of beer.

The International Monetary Fund projects that the Venezuela economy, which has been hit hard by the collapse in oil prices, will contract by 8.0 percent this year.

Venezuelans who have already dealt with shortages of food and medicine are now facing even more sobering hardships.

“Without approval and a supply of [foreign] currency to the suppliers, the company doesn’t have a way to operate,” Polar CEO Lorenzo Mendoza told the Wall Street Journal.

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President Nicolas Maduro called the shutting down of the beer plants “a serious crime, very serious,” but Mendoza said Polar can’t go out and buy currency to pay suppliers because that is also against the law.

The Venezuelan government, which has already taken over 1,200 companies, could choose to step in and seize control of Polar.

So far this year the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: PCY), which is 3.0 percent comprised of Venezuelan bonds, is up 6.2 percent.

Disclosure: The author holds no position in the stocks mentioned.

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