PDVSA jet fuel sales expose Venezuela's embrace of dollar

oilprice

Venezuela's state-owned PDVSA (PdV) is increasingly embracing the US dollar as its preferred financial instrument for domestic transactions.

By Argus

CARACAS
Petroleumworld 11 19 2019

In the latest sign of the dollar's hegemony in the Venezuelan market, PdV's marketing department sent a fuel pricing directive to all private airports last week mandating that from 13 November all aircraft at private domestic airports will be charged international prices for jet-A1 and av-gas supply.

The new pricing rule applies to all private aircraft, including those registered in other countries, the oil ministry said. Private aircraft fueling at commercial airports have been paying international fuel prices since 2017, but private airports had been exempted unofficially until this month.

The new pricing measure for private aircraft is intended to tamp down on tax evasion and reduce consumption of scarce jet fuel that PdV's refineries no longer produce and which US sanctions have made difficult to import, an oil ministry official said.

While Venezuelan jet fuel supply has been dollarized, motor fuel is still seen as politically untouchable because of the risk of a popular backlash. But as motor fuel has dwindled across Venezuela, PdV's giveaway pump prices have been replaced by payment in hard currency or barter for food or medicine. Service station employees and managers divide the goods and hard currency they collect from drivers and do not transfer the cash to PdV "because there are no fiscal or accounting controls in place to prevent these abuses," a senior official with the federation of national service station operators (Fenegas) tells Argus.

Maduro has described the US dollar as an "imperialist currency" used to destabilize Venezuela's socialist revolution. But over the weekend he told the pro-government Televen television station that "dollarization could benefit the economy's recovery and deployment of the country's productive forces."

"All the world's economies are dollarized and now in Venezuela there is a sector of the economy that conducts transactions in dollars and other convertible currencies besides the bolivar," Maduro said.

Dollarization "is an escape valve, and thank God it exists," he said.

Central bank economists estimate that up to 40pc of all domestic economic transactions in Venezuela are now conducted in dollars or euros. Hard currency remittances to Venezuelan families from relatives living abroad may total about $3bn annually, the bank estimates. But bank economists also warn of widespread money laundering through black-market transactions.

Story from Argus Media.

argusmedia.com / 11 18 2019

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