In three years, Venezuela's foreign debt grew 90%
Legal reforms have created ways to increase indebtedness
In 2009, drop in oil prices led the Venezuelan government to borrow to cover the oil revenue gap and, although the barrel price recovered in the following years, the government has continued to issue further debt.
Laws have been reformed over the last three years with a view to endorsing increased borrowing, which corresponds not only to the central government, but also to official entities.
Bond issues and loans are evidenced in the balance of the foreign debt of the public sector, which grew 90% in 2008-2011.
Figures released by the Central Bank of Venezuela (BCV) show that foreign national debt was USD 50.7 billion at end-2008 and USD 96.4 at end-2011. This amount does not include domestic debt operations, which have also rocketed over recent years.
In March 2009, actions to increase borrowing level were started.
During that period, the National Assembly passed a reform of the Law of Public Sector Financial Administration so as to allow the government to take additional borrowing in contingency cases or when fiscal revenues decline.
Given the decrease in oil revenues, a Law on Additional Indebtedness for USD 5.8 billion was passed.
However, in April 2009, the Finance Ministry submitted a further reform of the Law on Financial Administration to authorize official entities to conduct debt operations. The law provides for that "entities authorized by the President of the Republic, may conduct public debt operations when necessary."
Further legal instruments aimed at increasing indebtedness were approved in the following fiscal years.
In 2010, the National Assembly authorized a reform of the Law of the Bank for Social and Economic Development of Venezuela (Bandes), in order to raise borrowing limit of the Bank to eight times its equity, instead of three times as it had been before.
This reform was intended to increase the capacity of the entity to administer Chinese loans, which amount to USD 28 billion.
Last year, based on 2009 reforms and claiming that the government's missions needed funds, the government issued additional debt for USD 10.4 billion.
Given the spending level, President Hugo Chávez Frías' administration created a further way to increase borrowing.
With the aim of guaranteeing operations of the Ezequiel Zamora Fund, which will receive the agricultural portfolio resources, the National Development Fund (Fonden) decree was reformed. Now, Fonden may issue guarantees and perform borrowing operations.
Translated by Álix Hernández
A group of some 60 Venezuelan economists from across the country and from different generations and backgrounds, has met regularly in the past couple of years and now has brought forth a document explaining the reasons of the current emergency and outlining specific proposals on how to address the serious economic crisis the country has plunged into over the last three years.