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Editorial Commentary
Veneconomy: On the brink of a crisis
Last week, the Central Bank of Venezuela gave the “good news” of a balance of payments surplus of $4.5 billion for the third quarter after two consecutive quarters with giant deficits of $7.2 billion and $5.2 billion.
But this “good news” is nothing more than a mirage. Two conventional arguments suggest that the country will face a balance of payments crisis sooner rather than later.
The first is that the country cannot continue to sustain its present high levels of imports, which came to $11.6 billion in the third quarter of 2007, up 36% on the same quarter last year.
The second is that the country will not be able to continue counting on ever-increasing oil prices. On the contrary, it is highly unlikely that oil prices will remain at their present levels for much longer. Besides, even with today’s prices, the fact is that PDVSA is producing fewer barrels daily.
Apart from that, there are two unconventional arguments that also indicate that the country is on the brink of a balance of payments crisis.
The first is that, according to the Central Bank, oil exports for the year to date come to $17.7 billion, which would be equivalent to 2.7 million barrels of oil a day at $68.61/barrel. If OPEC’s estimate of Venezuelan production is taken to be accurate, then Venezuela would be in the absurd situation of exporting 300,000 barrels a day more than it produces. Also based on OPEC’s figures, it would seem that oil exports were in the order of $12 billion in the third quarter, in other words the same as imports, which also suggests that the country is just a step away from a crisis.
The second unconventional argument is that the Central Bank’s international reserves (including the FEM) came to $30.8 billion on November 16, a reduction of $6.6 billion so far this year. If account is taken of the fact that these $6.6 billion were transferred to Fonden, it would seem that the accounts balance.
But there is another factor that needs to be considered: delays by Cadivi. There is no one who does not experience some kind of delay in obtaining foreign currency from Cadivi, from the people who complain of the thousand and one difficulties they face when sending money to their families in Bolivia, Ecuador, Colombia or Peru to businessmen of all kinds. While there are no reliable official figures, unofficial estimates put the delay at between $9 billion and $25 billion. If one takes the lesser of these figures, it would mean that the international reserves, excluding the transfer to Fonden, have fallen by between $9 billion and $10 billion so far this year, despite the fact that the average price of oil is 10% above the 2006 price.
On top of that, the State has acquired debt of more than $12 billion in 2007 to date and the swap dollar continues above the Bs.6,000:$ mark.
In short, the country is in hock and living beyond its means.
VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's note: This commentary was originally published by VenEconomy, on 11/21/2007. Petroleumworld reprint this article in the interest of our readers. Petroleumworld does not necessarily share these views.
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Petroleumworld News 11/22/07
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