Central Bank to grant USD 698 million to the agricultural sector

Venezuela's President Hugo Chávez announced that the Central Bank of Venezuela (BCV) will grant VEB 3 billion (USD 698 million) to the agricultural sector, in an operation that could increase inflationary pressures.

There is indications that the loans will be granted through the creation of money by the BCV, thanks to a legal reform adopted in 2010 which allows the central bank to use the "direct credit method" in the case of "programs that are viewed as a priority by the Executive Office and which are related to the agricultural, manufacturing, building, agri-food sectors and projects with an export potential."

Unlike private and state-run bank entities, the central bank does not hold deposits from individuals and companies, but has the capacity to print money that multiplies in the economy by the intermediation of financial institutions.

Analysts claim that an increasing amount of money in circulation boosts consumption, and creates a higher imbalance between supply and demand. As a result, inflation speeds up.

Money printed by the Central Bank of Venezuela (BCV) increased by 49% in two months.

The Central Bank has granted loans to the agricultural sector in the past.

In 2009, President Hugo Chávez announced that the BCV granted USD 116 million to agriculture companies in the northwestern Venezuelan state of Portuguesa.

vsalmeron@eluniversal.com