Investment banks fear delay in adjustment of forex rate in Venezuela
Venezuelan Executive Vice-President Nicolás Maduro does not rule out changes in the forex rate. In the absence of President Hugo Chávez, the investment banks fear adjustments in the foreign exchange rate will be put off, thus deepening macroeconomic imbalances in the country
Uncertainty took hold in the investment banking upon a statement made by Venezuelan President Hugo Chávez, who informed on Saturday that he will undergo a new cancer operation and hinted the possibility of holding a new presidential vote. For investment banks, the expected adjustment of the foreign exchange rate may be put off under such a scenario.
During the second half, there have been high expectations about a likely fiscal adjustment by the Venezuelan government in the short run for balancing the accounts. Although the treasury has received greater contributions from the oil sector and tax collection, expenditure has been higher than income. To some extent, such gap has been filled with high indebtedness.
Though still manageable, Venezuela's debt is growing rapidly. This may force authorities to take actions such as devaluating and revising expenses to bridge the fiscal gap, estimated at 11% of the gross domestic product (GDP), according to some analysts.
Such actions may be postponed given the absence of the Venezuelan president. However, Executive Vice-President Nicolás Maduro, who is currently the acting president, said on Monday that there may be some improvements in the foreign exchange rate, yet he would not elaborate.
Similarly, some strategic decisions in the oil sector are expected to be postponed. In fact, analysts believe that if the political panorama is still unclear, macroeconomic imbalances may worsen.
Translated by Jhean Cabrera
Cristian Fonseca, a businessman in La Candelaria district downtown Caracas, was doing the accounts in his small shop office on Sunday December 21, 2008. The Christmas shopping season kept him working late hours into the night. It was around 11 p.m. and his phone rang. A friend broke the bad news to him over the telephone.