As soon as the "virus" that is weakening the economy of Europe and the United States broke out, the Venezuelan government said that the South American country would not catch the disease that is shaking the foundations of capitalism. However, everything suggests otherwise.

While the main engines of global growth are out of order, energy demand is weakening and oil, a commodity that provides both USD 94 of every USD 100 of Venezuelan revenues and half of the government's income, is losing market value.

At the same time, a spectacular fall of Venezuelan bonds is boosting the cost of credit, thus hampering the possibility of curbing the rise of the US dollar in the unofficial exchange market, which in turn is resulting in growing inflation. 
 
Venezuelan crude oil dropped 35.3 percent in the last thirteen weeks, from USD 126.46 on July 18 to USD 81.78 at the end of last Friday session.

Traditionally, Venezuelan authorities have responded to declining oil prices with devaluation, which increases the amount of bolivars received for petrodollars. 

How far is Venezuela from an economic crisis? Private analysts believe that if the Venezuelan oil price declines from USD 100 to USD 70, Venezuela fails to receive USD 1 billion a month.

With the oil revenues obtained so far this year, this year the Venezuelan finances are secured, but in 2009 the outlook is uncertain.

Lackluster public accounts leave no room for accuracy, but the audited financial statement of Venezuelan Treasury at the end of June 30 shows that a number of government agencies, such as the National Development Fund (Fonden) and Venezuelan state-owned development bank Bandes, have deposits amounting to some USD 18.73 billion in foreign banks.

Out this amount, approximately USD 2 billion is inverted in bonds and structured notes that have lost part of their value amidst crumbling markets, and therefore they are hard to cash to cover expenses. 

These accounts include, for instance, structured notes of Lehman Brothers, a bank that went bankrupt last month, and papers issued by Ecuador and Bolivia.

Therefore, if oil prices stabilize at around USD 70, Venezuelan financial authorities might use approximately USD 16 billion to cover expenses and could keep expenses at the same level, at least nominally.

If the exchange rate remains at VEB 2.15 per US dollar, the government in 2009 could have the same amount of bolivars it had in 2008 from petrodollars. The problem is that the Consumer Price Index has shown a 36 percent increase in the last twelve months. In other words, the purchasing power of the Venezuelan bolivar has weakened and, therefore, expenses would be lower, in real terms. 

Translated by Gerardo Cárdenas