Plans to increase loans to government projects move ahead

On August 23, 2011, Venezuela's Hugo Chávez announced his decision to use the depositors' money to finance a series of projects implemented or backed by the government.

"The Venezuelan banking sector has deposits amounting to VEB 200 billion (USD 46.5 billion), which is virtually the same amount as the national budget," Hugo Chávez said.

In the past five years, a number of laws that force Venezuelan banks to grant loans to agriculture, manufacturing, tourism, construction, and micro-enterprises have been enacted. However, thus far the Venezuelan government lacked mechanisms to decide which company, cooperative or farmer receives funds.

Now, the government has devised a formula to have this decision-making power, only in the agriculture sector for now, without taking over financial institutions.

Financial engineering will allow the government to use more money from private banks. From now on and mandatorily, the banks will buy bonds issued by the government and the money will be deposited in a fund that will be managed by the Executive Office, which will allocate credits to farmers.

vsalmeron@eluniversal.com