CARACAS, Friday December 07, 2012 | Update

Pdvsa has borrowed USD 34.8 billion from central bank

Financial aid to the oil company dates back to 2010

Friday December 07, 2012  12:01 PM
Ramiro Molina, Head of the Center of Finance and Economics Studies, thinks that the Venezuelan economy "is not facing a foreign shock" so huge as to result in an adjustment program or package. Rather, he deems it feasible the implementation of a "more comprehensive currency management system, able to correct existent distortions, instead of linear devaluation."

In a forum sponsored by the Venezuelan-Argentinean Chamber of Commerce (Cavenarg) on the 2013 economic outlook, the expert stressed that both the Foreign Exchange Administration Committee (Cadivi) and the Transaction System for Foreign Currency Denominated Securities (Sitme) have allocated the foreign currency as slated this year.

He noted, though, "reallocation of foreign currency; the amounts in credit cards have increased threefold and remittances of relatives, students and special cases have risen fourfold."

"One wonders if the market is becoming insatiable concerning foreign currency," Molina reasoned.

"The country economy is not facing a foreign shock," like in 2003, with the oil strike or like in 2009, when oil prices fell down. Nevertheless, he argued that the fiscal deficit stands at 16% of the Gross Domestic Product (GDP), mainly thickened by the central government.

During his speech, the expert listed three "red lines." He explained that upon the approval of a set of laws in 2007, the Central Bank of Venezuela (BCV) is able to grant loans for state-run oil holding Petróleos de Venezuela (Pdvsa).

"For the first time in the history, the BCV created money by means of promissory notes and other instruments to lend Pdvsa, and from January 2010 to date, it has disbursed approximately USD 38 billion. This is unprecedented in our public finances, and in just one day last week, it injected USD 4.8 billion for payment of year-end bonuses."
The Central Bank of Venezuela lost USD 3.5 billion

More than USD 3.5 million of Central Bank of Venezuela (BCV) money were lost in their way to the Dominican Republic. Some Venezuelans are among the 5,000 victims of the bank's collapse. And not even the entity responsible for overseeing Venezuela's monetary policy was spared.

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