Pdvsa transfers to central bank only half of oil revenue in 2012
The new year begins with a volatile foreign exchange market
Oil revenue last year totaled USD 92.23 billion -an amount large enough to keep fiscal accounts balanced. However, both the financial architecture designed by the government of Hugo Chávez and the unbalances stemming from overvaluation are putting pressure on public accounts.
Official figures show that only half of petrodollars, namely USD 46 billion, were transferred to the Central Bank of Venezuela (BCV). The rest of oil revenue was deposited in funds the government manages in a discretionary manner, such as the National Development Fund (Fonden).
With the petrodollars it receives from state-run oil giant Pdvsa, the central bank feeds the international reserves, which in turn are sold to importers through the Foreign Exchange Administration Board (Cadivi).
Therefore, Cadivi was unable to meet the private sector's demand for US dollars, while the skyrocketing government spending pushed consumption up.
Another factor to consider is that although Venezuela has the highest inflation in Latin America and price are constantly on the rise, the government has keep the official exchange rate at VEB 4.30 per US dollar unchanged for two years.
As a result, after fuel, the US dollars sold by Cadivi are the cheapest items in the Venezuelan economy and therefore forex demand grows rapidly.
Devaluation is latent. Apart from curbing the rise in demand for US dollars, another incentive for the government to devalue is the fact that after it triggered public spending in 2012, the gap between income and expenditure in the public accounts exceeds 10% of GDP.
Devaluation would translate into more bolivars for petrodollars, which would be useful to meet a part of expenses.
But if amid the political instability generated by the health condition of President Hugo Chávez the economic cabinet decides to keep the official exchange rate unchanged, analysts do not rule out an increase in the price of the dollar in the Transaction System for Foreign Currency Denominated Securities (Sitme), a central bank-administered system where companies that do not import food or medicines buy foreign exchange at VEB 5.30 per dollar through bonds.
Simultaneously, Pdvsa would sell central bank bonds for the Sitme to increase forex supply, which in December plummeted from an average of USD 40 million a day to USD 18 million per day.
President Nicolás Maduro is not only the heir to the throne, but also to an economic crisis which demanded urgent measures to rectify the course. The crisis showed up in two aspects: a 50% inflation estimate, and shortage of staples ranging between 70% and 98%. These issues might hit the President's poor popularity; considering his feeble electoral victory of 1% over his challenger.