U.S. job openings jump to record high in March US-USA-ECONOMY-JOBS

FILE PHOTO: Job seekers line up at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida/File Photo

WASHINGTON (Reuters) – U.S. job openings surged to a record high in March, suggesting that a recent slowdown in hiring was probably the result of employers having difficulties finding qualified workers.

Job openings, a measure of labor demand, increased by 472,000 to a seasonally adjusted 6.6 million, the Labor Department said on Tuesday in its monthly Job Openings and Labor Turnover Survey, or JOLTS.

March’s job openings were the highest since the data series started in December 2000 and pushed the job openings rate up three-tenths of a percentage point to 4.2 percent. Job growth slowed in March and April after an outsized gain in February.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. job growth picks up; unemployment rate drops to 3.9 percent

A help wanted sign is posted at a taco stand in Solana Beach, California, U.S., July 17, 2017. REUTERS/Mike Blake

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth increased less than expected in April and the unemployment rate dropped to near a 17-1/2-year low of 3.9 percent as some out-of-work Americans left the labor force.

The Labor Department’s closely watched employment report on Friday also showed wages barely rose last month, which may ease concerns that inflation pressures are rapidly building up, likely keeping the Federal Reserve on a gradual path of monetary policy tightening.

“Fed officials can rest easy that there is not any wage-based inflation on the horizon,” said Chris Rupkey, chief economist at MUFG in New York. “There is no need to speed up the path of interest rates because inflation isn’t heating up in a worrisome manner.”

Nonfarm payrolls increased by 164,000 jobs last month, the Labor Department reported. Data for March was revised up to show the economy adding 135,000 jobs instead of the previously reported 103,000. That was the fewest amount of jobs created in six months and followed an outsized gain of 324,000 in February.

While cold weather in March and April probably held back job growth, hiring is moderating as the labor market hits full employment. Employers, especially in the construction and manufacturing sectors, are increasingly reporting difficulties finding qualified workers.

The drop of two-tenths of a percentage point in the unemployment rate from 4.1 percent in March pushed it to a level last seen in December 2000 and within striking distance of the Fed’s forecast of 3.8 percent by the end of this year. It was the first time in six months that the jobless rate dropped.

But 236,000 people left the labor force in April, adding to the 158,000 who quit in March. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.8 percent last month from 62.9 percent in March. It was the second straight monthly drop in the participation rate.

Economists polled by Reuters had forecast payrolls to rise by 192,000 jobs in April and the unemployment rate to fall to 4.0 percent. Average hourly earnings rose 0.1 percent last month after a 0.2 percent gain in March. That left the annual increase in average hourly earnings at 2.6 percent.

The dollar shrugged off the employment data, rising to its highest level this year against a basket of currencies. Prices of U.S. Treasuries fell and U.S. stocks rose.

Sluggish wage growth and a slowdown in hiring threaten to undercut the Trump administration’s argument that its $1.5 trillion income tax cut package, which came into effect in January and is highlighted by a sharp drop in the corporate income tax rate, would boost wages and hiring.

Companies like Apple have used their tax windfall for share buybacks and dividends.

President Donald Trump cheered the drop in the unemployment rate on Friday.

“I thought the jobs report was very good. The big thing to me was cracking 4,” Trump told reporters. “That hasn’t been done in a long time … we’re at full employment. We’re doing great.”

Democrats, however, reiterated their criticism of the tax cuts, saying more than $390 billion in share buybacks had been announced since the passage of the tax bill.

“President Trump promised American families that they would see a $4,000 annual raise after the tax plan, so far, average weekly wages have increased $11.69,” Democratic Senator Martin Heinrich said.

‘SUSTAINABLE PACE’

But average hourly earnings could be understating wage inflation. The Employment Cost Index, widely viewed by policymakers and economists as one of the better measures of labor market slack, showed wages rising at their fastest pace in 11 years during the period.

Inflation is flirting with the Fed’s 2 percent target.

The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, was up 1.9 percent year-on-year in March after a 1.6 percent rise in February.

The U.S. central bank on Wednesday left interest rates unchanged and said it expected annual inflation to run close to its “symmetric” 2 percent target over the medium term.

Economists interpreted symmetric to mean policymakers would not be too concerned with inflation overshooting the target. The Fed hiked rates in March and has forecast at least two more increases for this year.

Economists expect the unemployment rate will drop to 3.5 percent by the end of the year. Monthly job gains have averaged about 200,000 this year, more than the roughly 120,000 needed to keep up with growth in the working-age population. Though the decline in the labor force accounted for the drop in the unemployment rate last month, labor market slack is diminishing.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 7.8 percent last month, the lowest level since July 2001, from 8.0 percent in March.

Construction payrolls rebounded by 17,000 jobs last month after recording their first drop in eight months in March. Manufacturing employment increased by 24,000 jobs in April after a gain of 22,000 positions in March.

Payrolls for temporary help, seen as a harbinger of future permanent hiring, rose by 10,300 after falling by 2,100 in March. There was a modest gain in leisure and hospitality employment while wholesale traders laid off workers.

Government payrolls fell 4,000 in April amid a decline in education employment at state governments.

“The moderation in job gains over the past two months may mark the beginning of the slow deceleration to a sustainable pace of job gains, which we estimate to be around or a little below 100,000 per month,” said Michael Feroli, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikani; Additional reporting by Roberta Rampton; Editing by Paul Simao)

Too many cancer drugs? Crowded market gives investors pause

FILE PHOTO: A scientist prepares protein samples for analysis in a lab at the Institute of Cancer Research in Sutton, July 15, 2013. REUTERS/Stefan Wermuth/File Photo

By Ben Hirschler

LONDON (Reuters) – In London’s world-famous Great Ormond Street children’s hospital, Dr. Karin Straathof is excited about a new cell-based medicine that offers hope for toddlers with incurable nerve tissue cancer.

Her progress with a handful of children for whom standard care does not work reveals the promise of modern cancer drugs, an increasingly crowded pharmaceuticals field from which investors must try to select future winners.

The new therapy using engineered white blood cells has shown anti-tumor activity in the hardest to treat neuroblastoma patients.

“The beauty is that it is very specific in targeting the cancer cells, while leaving healthy tissue unharmed,” Straathof told Reuters, after presenting her early findings at a science meeting in Chicago in April. “It’s an important step forward.”

Autolus – the small British biotech company developing the chimeric antigen receptor T-cell or CAR-T treatment – is equally excited, and is planning a potential IPO on Nasdaq.

But Autolus is far from alone in pursuing CAR-T therapy. In fact, CAR-T treatment – part of the wider field of cancer immunotherapy – is one of the hottest areas of drug research today, with multiple firms piling in.

The biotech dollars are flooding in not only in Europe and the United States but also in China which, with 162 clinical trials, now boasts more CAR-T studies than the United States, according to a Reuters analysis of the latest data.

With over 2,000 drugs in the cancer immunotherapy space, the competitive landscape has never been more crowded as each firm seeks its own proprietary version of often similar drugs.

Overall, researchers are working on more than 5,200 cancer drugs, up 7.6 percent from a year ago, according to the Pharmaprojects database. The sheer number is stretching the ability of scientists to find enough patients to test them on.

Cancer now makes up 34.1 percent of the total drug industry pipeline, up from 26.8 percent in 2010, as companies divert resources into a promising sector where new treatments can often fetch more than $100,000 a year.

‘MORE CIRCUMSPECT’

With the first two CAR-T treatments from Novartis and Gilead Sciences winning U.S. approval last year for rare blood cancers, the promise of such smart medicine is real and life-changing – especially if it can be made to work in solid tumors, as Straathof’s work suggests is possible.

However, the wholesale rush by pharmaceutical and biotech companies into the cancer area poses a dilemma for investors.

A flood of similar products makes it hard for investors to pick those companies that will achieve commercial success.

“More competition means you should be more circumspect,” said Nooman Haque, head of life sciences at Silicon Valley Bank in London, which provides financing for start-ups and venture capitalists.

“The traditional investment thesis in biotech is to have a differentiated medicine with not many competitors, which helps drive value. Here the problem is that even if there is a big patient benefit, there are questions as to how long your advantage lasts and what your commercial edge will be.”

Pharmaceutical executives are not blind to the issue, although each hopes to find a winning formula in immunotherapy – the fastest-growing part of the $100 billion-a-year cancer drug market, with sales expected to top $25 billion by 2021, according to analyst forecasts compiled by Thomson Reuters.

Roche <ROG.S> CEO Severin Schwan, head of the world’s top cancer company, says he expects “an enormous drop-out”, while Sanofi’s  outgoing research head Elias Zerhouni warned analysts last week that duplication of effort would shrink the time available for drugmakers to recoup their  investments.

“The cycle of innovation has been shortened significantly,” agrees Aiman Shalabi, chief medical officer at the non-profit Cancer Research Institute. “There is no doubt we are seeing fast follow-on and many identical agents hitting the same targets.”

The good news for society is that patients will find out much faster than in the past if new approaches work. But that means doctors can rapidly switch to alternatives, leading to increased product churn and uncertainty over future sales.

COMBINATION STUDIES

Twenty years ago, when Roche launched its state-of-the-art cancer drugs Herceptin and Rituxan, it enjoyed years without rivals. Today, there are multiple versions of new drugs targeting molecular pathways with acronyms such as PD-1/L1, PARP and CDK, as well as CAR-T.

“You’re either first or you’re best or you’re nowhere because it has become such a race,” said Paul Major, an investment manager at BB Healthcare Trust, who is cautious about investing in cancer immunotherapy.

Lydia Haueter at Pictet Asset Management is also wary, pointing out there are already five PD-1/L1 drugs on the market – from Merck, Bristol-Myers Squibb, Roche, AstraZeneca and Pfizer – and more are coming.

“It seems everybody has a PD-1, so we especially don’t go for those kind of cancer companies,” she said.

Some drugmakers like GlaxoSmithKline <GSK.L> and Novartis that missed the initial PD-1/L1 wave are trying to make a virtue of looking ahead to the next phase of cancer immunotherapy, particularly drug combinations.

Yet last month’s failure of a combination study using a next-generation drug from Incyte with Merck’s PD-1 Keytruda shows that adding a new agent is no slam dunk for expanding the reach of immune-boosting medicine.

At Great Ormond Street, Straathof is less concerned about doubling up on research and more focused on getting effective, affordable cures – and she hopes automated processes will eventually bring down today’s sky-high drug prices.

“I’m not too worried about duplication. It’s important to not ask the same question in two trials but I think there are a lot of questions to be addressed because there is a lot of nuance in the system.”

(Reporting by Ben Hirschler; Editing by Pravin Char)

Nasdaq surges at open after strong Amazon, Microsoft earnings

(Reuters) – The tech-heavy Nasdaq opened 1 percent higher on Friday after stellar results from Amazon, Microsoft and Intel, while a 3 percent drop in Exxon weighed on the Dow and S&P.

The Dow Jones Industrial Average rose 19.80 points, or 0.08 percent, at the open to 24,342.14. The S&P 500 opened higher by 8.53 points, or 0.32 percent, at 2,675.47. The Nasdaq Composite gained 76.84 points, or 1.08 percent, to 7,195.52 at the opening bell.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)

Russian companies will feel severe effect from U.S. sanctions: Fitch

National flags of Russia and the U.S. fly at Vnukovo International Airport in Moscow, Russia April 11, 2017. REUTERS/Maxim Shemetov

MOSCOW (Reuters) – The new round of U.S. sanctions against Russia will have a “severe effect” on targeted companies and will limit Russia’s potential economic growth, Fitch Ratings said on Friday.

The U.S. Treasury on April 6 announced sanctions on seven Russian oligarchs and 12 companies they own or control, saying they were profiting from a Russian state engaged in “malign activities” around the world.

“The sanctions are likely to have a profound effect on the designated companies, which would be unable to transact in U.S. dollars – the standard denomination currency in commodities trading and the main currency in counterparty transactions in international trading,” Fitch said.

The sanctions hit Russian markets hard, denting the rouble and sending shares in four publicly listed companies with links to those sanctioned plummeting both in Russia and elsewhere: Rusal , EN+ Group, GAZ group, GAZA. and Polyus.

Fitch said it stopped rating Rusal and EN+ Group, describing the latest round of sanctions as “the most significant affecting Russian corporates” since 2014 when the West first imposed sanctions against Russia for the annexation of Crimea and Moscow’s role in the Ukrainian crisis.

According to Reuters calculations, three Russian tycoons targeted by a new list of U.S. sanctions may have lost a combined $7.5 billion in less than a week since the list was announced.

Fitch noted Russia’s strong external balance sheet, saying it means Russia is well positioned to meet forex needs from other parts of the economy, while the free-floating rouble provides a shock absorber, something that was not available in 2014.

“However, uncertainty stemming from the sanctions and their possible extension could deter investment and thereby undermine potential economic growth,” Fitch said.

This year, the economy is on track to grow by up to two percent, the central bank forecast, after expanding by 1.5 percent in 2017.

Fitch revised Russia’s sovereign rating outlook to positive from stable in September and said the rating itself would be one notch higher than its current BBB- level if not the U.S. sanctions.

(Reporting by Andrey Ostroukh; Editing by Richard Balmforth)

Russian retailers warned of price increase after ruble tumbles

MOSCOW (Reuters) – European electronic and household goods manufacturers have warned Russian retailers of a possible 5 to 10 percent rise in prices after the ruble tumbled this week due to U.S. sanctions, retailers said on Tuesday.

Eldorado, which operates over 400 stores in Russia, said the hikes may mean it has to adjust its retail prices.

“Suppliers have already started warning of a possible 5-10 percent adjustment in prices,” a spokesperson for Eldorado told Reuters, adding that the warnings had primarily come from European manufacturers that do not produce goods in Russia.

A spokesperson for M.Video <MVID.MM>, which operates a network of 424 stores, also said that some of its suppliers had told them of plans to raise prices by between 5 and 10 percent.

The ruble <RUB=> fell sharply on Monday as investors took fright after a new round of U.S. sanctions against Moscow, targeting officials and businessmen around Russian President Vladimir Putin.

The ruble extended its losses on Tuesday, shedding over 3 percent of its value against the dollar, as investors continued a sell-off of assets fueled by fears that Washington could impose more sanctions and a realization that Russian credit and market risks had substantially increased.

(Reporting by Olga Sichkar; Editing by Adrian Croft)

‘Russia in the doldrums?’: new U.S. sanctions to weigh on recovery

By Jack Stubbs and Polina Nikolskaya

MOSCOW (Reuters) – An escalation in U.S. sanctions against Moscow risks derailing a fragile recovery in Russia’s economy, which had just begun to take hold after the Kremlin’s last confrontation with the West in 2014, analysts and investors said on Monday.

The United States imposed major new sanctions against Russia on Friday, striking at senior Russian officials and some of the country’s biggest companies in one of Washington’s most aggressive moves to punish Moscow for its alleged meddling in the 2016 U.S. election and other “malign activity”.

“One gets the impression that since 2014 we have been convinced that sanctions are painless for our economy,” said Kirill Tremasov, head of research at Loko-Invest and former director of the Russian Economy Ministry’s forecasting department.

“This is completely groundless. What happened on Friday opens a new stage in relations with Western countries. We have found ourselves in a new reality. And it is very, very serious.”

Analysts and investors in Moscow said the sanctions could consign Russia to years of low growth, frustrating government efforts to stimulate a rebound from a two-year downturn brought on by low oil prices and Western sanctions over Moscow’s role in the Ukraine crisis.

Putin was re-elected for his fourth presidential term in March with a huge majority, but is under increasing pressure to meet voters’ expectations of better growth and assuage concerns about falling living standards.

SLOW-GROWTH ENVIRONMENT

After two years of contraction, Russian GDP returned to growth of 1.5 percent last year on the back of higher oil prices, still short of a government target of 2 percent.

Chris Weafer, a senior partner at economic and political consultancy Macro Advisory, said he still saw Russia’s economy growing by 1.8 percent this year, with oil prices above $60 a barrel.

“But the big question, of course, is ‘How long does Russia stay in this low-growth environment?’ That’s where the impact of sanctions happens,” he said.

“We all know that the economy needs to grow at a faster pace over the course of the next (presidential) term, it needs to get stronger – and sanctions and the impact on foreign direct investment, that’s where it comes in,” he said. “2018 is the year of Russia in the doldrums.”

The latest round of U.S. sanctions represents the biggest escalation in Western action against Russia since Washington and the European Union first targeted oligarchs close to Putin and their businesses over the Ukraine crisis in 2014.

Investors said the inclusion of people who are not traditionally seen as part of Putin’s inner circle showed that any Russian company or business leader could now be targeted.

Russia’s rouble suffered its biggest daily fall in over three years on Monday and stocks in major Russian companies also slid, as investors reacted to the new sanctions. State-owned Sberbank, often seen as a barometer of the wider economy, fell 17 percent in Moscow and aluminum giant Rusal <0486.HK> lost over half its value in Hong Kong after its main owner Oleg Deripaska was named on the sanctions list.

TIGHTER MONEY

The increased uncertainty and risk will make it harder for Russian companies to borrow abroad and reduce the amount of inward investment, said Tim Ash at BlueBay Asset Management.

“Unless there is a move to de-escalation, you have to assume that financing conditions around Russia will get even tighter,” he said. “Long-term, that’s going to be bad for growth and mean even more stagnation in the Russian economy.”

Natalia Orlova, head economist at Alfa Bank, said the central bank might now take more time over interest rate cuts that could boost growth: “Based on economic logic … it seems to me that it is dangerous to hurry with a rate cut in such uncertain conditions.”

Loko-Invest’s Kirill Tremasov said the biggest danger of the new sanctions might be in scaring foreign investors off Russian OFZ treasury bonds, popular in the West because of their high yields.

The yield on the benchmark 10-year OFZ rose as high as 7.32 percent on Monday as the price of the bond fell. It had stood at around 7.05 percent last week.

Foreigners’ holdings of OFZ bonds stood at nearly $40 billion, or 33.9 percent of all OFZ bonds as of Feb. 1, the last period for which data was available.

“For foreign investors, this is a very, very serious signal … and now there could be some OFZ outflows,” Tremasov said. “This will be reflected in the growth of interest rates in the economy.”

(Additional reporting by Andrey Ostroukh; Writing by Jack Stubbs; Editing by Kevin Liffey)

Trump signs budget deal after raising government shutdown threat

U.S. President Donald Trump speaks, as he stands next to Congress' $1.3 trillion spending bill, during a signing ceremony, in the Diplomatic Room of the White House in Washington, D.C., U.S., March 23, 2018. REUTERS/Kevin Lamarque

By Steve Holland and Richard Cowan

WASHINGTON (Reuters) – U.S. President Donald Trump signed Congress’ newly passed $1.3 trillion budget bill on Friday, ending several hours of confusion spurred by a tweeted veto threat that raised the specter of a government shutdown.

Trump said he had signed the bill, despite his qualms on some issues, because a $60 billion increase in military spending had convinced him it was a worthwhile compromise.

“But I say to Congress I will never sign another bill like this again,” he told reporters. “I’m not going to do it again.”

White House and Capitol Hill aides had been left scrambling earlier in the day after Trump criticized the six-month spending bill, despite prior assurances from the administration that he would sign it ahead of a looming midnight deadline.

“I am considering a VETO of the Omnibus Spending Bill based on the fact that the 800,000 plus DACA recipients have been totally abandoned by the Democrats (not even mentioned in Bill) and the BORDER WALL, which is desperately needed for our National Defense, is not fully funded,” Trump wrote on Twitter at 9 a.m. EDT.

But by early afternoon, he appeared before reporters in the Diplomatic Reception Room of the White House to announce he had signed the measure.

“There are a lot of things I’m unhappy about in this bill,” he said, patting the more than 2,000 pages of the legislation stacked on a purple box beside him.

It was unclear how seriously Republican leaders took Trump’s shutdown threat. Neither Speaker Paul Ryan nor Senate Leader Mitch McConnell commented publicly on it.

Lawmakers in the Republican-dominated Senate and House of Representatives had already left Washington for a scheduled two-week spring recess, and Trump himself was scheduled on Friday to fly to Florida for a weekend at his private resort.

IMMIGRATION CONCERNS

Trump has been frustrated that Congress has not turned over funding to make good on his campaign promise to build a wall along the U.S.-Mexico border. The bill includes $1.6 billion for six month’s of work on the project but he had sought $25 billion for it.

Trump also has been at odds with Democrats in Congress over the fate of Dreamer immigrants – those brought to the United States illegally when they were children.

Trump canceled the Deferred Action for Childhood Arrivals (DACA) program that gives work permits to the Dreamers and protects them from deportation. The decision is currently tied up in court cases.

He offered to extend the protections, tied to a sweeping set of changes to immigration laws, but subsequently rejected bipartisan offers from lawmakers.

As the six-month spending budget deal was coming together, there had been reports Trump had balked at the bill and had to be persuaded by Ryan to support it.

The conservative wing of Trump’s party had panned the bill because of its spending increases and some deficit hawks cheered Trump’s Friday morning threat to veto it.

(Reporting by Richard Cowan and Steve Holland; additional reporting by Roberta Rampton, Amanda Becker, Susan Heavey and Patricia Zengerle; Editing by Bill Trott)

South Africa’s Cape Town faces severe economic troubles over drought

Sand blows across a normally submerged area at Theewaterskloof dam near Cape Town, South Africa, January 21, 2018. REUTERS/Mike Hutchings

JOHANNESBURG (Reuters) – Rating’s agency Moody’s warned on Monday the water crisis affecting Cape Town would cause the city’s borrowing to rise sharply and the provincial economy to shrink the longer the situation lasted.

A severe drought afflicting South Africa’s Western Cape province is expected to cut agricultural output by 20 percent in 2018, decimating the wheat crop and reducing apple, grape and pear exports to Europe, according to national government.

The City is bracing for “Day Zero” in late August when its taps could run dry.

Moody’s said in a report that one of the most direct impacts would be on Cape Town’s operating revenues, as 10 percent of them are from water charges.

The ratings agency estimates capital expenditure related to water and sanitation infrastructure could be as much as 12.7 billion rand ($1 billion) over the next five years.

“The long-term solutions are likely to require significant capital and operating expenditure,” Daniel Mazibuko, an analyst at Moody’s said.

The drought also threatens to slow South Africa’s economic rebound which has been fueled by a surge in agricultural production. Cape town generated nearly 10 percent of the country’s total gross domestic product in 2016.

Last Tuesday, Statistics South Africa said the economy grew 3.1 percent in October-December, the highest rate since the second quarter of 2016, after expanding by a revised 2.3 percent in the third quarter. Agriculture showed a 37.5 percent expansion after growing 41.1 percent in the previous quarter.

Government has declared drought a national disaster after its southern and western regions including Cape Town got hit hard by the drought, freeing extra funds to tackle the crisis.

(Reporting by Mfuneko Toyana; Editing by James Macharia)

For poor Venezuelans, a box of food may sway vote for Maduro

Osiris (L), daughter of Viviana Colmenares (C), feeds her sister Ornella in a community diner at the slum of Petare in Caracas, Venezuela February 22, 2018. Picture taken February 22, 2018. REUTERS/Marco Bello

By Andreina Aponte and Ana Isabel Martinez

CARACAS (Reuters) – A bag of rice on a hungry family’s kitchen table could be the key to Nicolas Maduro retaining the support of poor Venezuelans in May’s presidential election.

For millions of Venezuelans suffering an unprecedented economic crisis, a monthly handout of a box of heavily-subsidized basic food supplies by Maduro’s unpopular government has offered a tenuous lifeline in their once-prosperous OPEC nation.

The 55-year-old successor to Hugo Chavez introduced the so-called CLAP boxes in 2016 in a signature policy of his rule, continuing the socialist government’s strategy of seeking public support with cash bonuses and other giveaways.

Now, running for re-election on May 20, Maduro says the CLAPs are his “most powerful weapon” to combat an “economic war” being waged by Washington, which brands him a “dictator” and has imposed sanctions.

Mariana, a single mother who lives in the poor hillside neighborhood of Petare in the capital Caracas, says the handouts will decide her vote.

“I and other women I know are going to vote for Maduro because he’s promising to keep giving CLAPs, which at least help fix some problems,” said the 30-year-old cook, who asked not to give her surname for fear of losing the benefit.

“When you earn minimum wage, which doesn’t cover exorbitant prices, the box helps.”

Maduro’s rule since 2013 has coincided with a deep recession caused by a plunge in global oil prices and failed state-led economic policies.

Yet the worse the economy gets, the more dependent some poor Venezuelans become on the state.

Life in the South American country’s poor ‘barrios’ revolves around the CLAP boxes. According to the government, six million families receive the benefit, from a population of around 30 million people.

Venezuelans, many of whom are undernourished, anxiously wait for their monthly delivery, and a thriving black market has sprung up to sell CLAP products.

The government sources almost all the CLAP goods from abroad, especially from Mexico, since Venezuela’s food production has shriveled and currency controls restrict private imports.

Critics, including Maduro’s main challenger for the May 20 vote, Henri Falcon, say the CLAPs are a cynical form of political patronage and are rife with corruption.

Erratic supply and control of distribution by government-affiliated groups have sown resentment among others.

“I can’t count on it. Sometimes it comes, sometimes not,” said Viviana Colmenares, 24, an unemployed mother of six struggling to get by in Petare.

The contents of a CLAP box, a Venezuelan government handout of basic food supplies, is pictured at Viviana Colmenares' house in the slum of Petare in Caracas, Venezuela February 23, 2018. Picture taken February 23, 2018. REUTERS/Marco Bello

The contents of a CLAP box, a Venezuelan government handout of basic food supplies, is pictured at Viviana Colmenares’ house in the slum of Petare in Caracas, Venezuela February 23, 2018. Picture taken February 23, 2018. REUTERS/Marco Bello

“INSTRUMENT OF THE REVOLUTION”

Stamped with the faces of Maduro and Chavez, the CLAP boxes usually contain rice, pasta, grains, cooking oil, powdered milk, canned tuna and other basic goods. Recipients pay 25,000 bolivars per box, or about $0.12 at the black market rate.

That is a godsend in a country where the minimum monthly wage is less than $2 at that rate – and would be swallowed up by two boxes of eggs or a small tin of powdered milk.

Inflation, at more than 4,000 percent annually according to opposition data, is pulverizing household income.

The administration of the CLAP – the Local Supply and Production Committees – does not hide its political motivation.

“The CLAPs are here to stay. They are an instrument of the revolution,” said Freddy Bernal, CLAP chief administrator.

“It has helped us stop a social explosion and enabled us to win elections and to keep winning them,” he told Reuters, referring to government victories in 2017 local polls.

Sometimes, though, the tactic backfires, as it did when promised free pork failed to arrive over Christmas, prompting street protests.

Maduro’s inability to halt rising hunger has jarred with the experience of many under Chavez, who won the presidency in 1998 and improved Venezuela’s social indicators with oil-fueled welfare policies.

Even though Maduro’s approval rating is only around 26 percent, according to one recent poll, his re-election looks likely as Venezuela’s opposition coalition is boycotting the vote on accusations it is rigged.

His most popular rivals are banned from standing and the election board favors the government.

Former state governor Falcon has broken with the coalition to stand. One survey by pollster Datanalisis in February showed that in a two-way race, he would defeat Maduro by 45.8 percent to 32.2 percent of likely voters.

Falcon’s critics counter that those numbers mean nothing in the face of electoral irregularities that could arbitrarily tip the balance in favor of Maduro.

Several other minor figures have registered for the single-round election, but have little chance of making an impact.

‘CAN’T DEPEND ON THE BOX’

Juan Luis Hernandez, a food specialist at the Central University of Venezuela, estimates the country generates just 44 percent of the basic food supplies it produced in 2008.

Meanwhile, food imports fell 67 percent between the start of 2016 and the end of 2017 as the crisis bit, he said.

Almost two-thirds of Venezuelans surveyed in a university study published in February said they had lost on average 11 kilograms (24 lbs) in body weight last year. Eighty-seven percent were assessed to live in poverty.

The same study found that seven out of 10 Venezuelans had received CLAPs.

“They (the government) don’t care about the food issue, just about getting people something to eat while they get through the elections,” said Susana Raffalli, a consultant with charity Caritas.

Some Venezuelans fear they would be found out should they vote against Maduro and be punished by no longer receiving food bags.

Already handouts are far from guaranteed.

A dozen recipients told Reuters that often they arrived half-full and would only come every few months. Outside of the capital Caracas, delivery was even more sporadic.

“I can’t depend on the box, otherwise I would die from hunger,” said Yuni Perez, a 48-year-old rubbish collector and mother of three.

Perez, who lives in a ramshackle house made from breeze blocks and corrugated steel at the top of Petare, said a CLAP box provided her family with food for a week. Often they would receive one every two months.

When her family is short of food, she hunts for leftovers dumped on the side of Petare’s winding streets. She said she had found several newborn babies discarded in the gutter, which she attributed to mothers unable to face providing food for another child.

Another Petare resident, mother-of-three Yaneidy Guzman said she dropped from 68kg to 48kg last year, despite receiving the CLAP.

“At least for 10 days you don’t have to think about finding food,” the 32-year-old said of the handouts, her cheekbones protruding from her face.

(Additional reporting by Vivian Sequera, Deisy Buitrago in Caracas; Anggy Polanco in San Cristobal; Writing by Angus Berwick; Editing by Andrew Cawthorne, Daniel Flynn and Rosalba O’Brien)