Venezuela issues $ 13 bn debt in the last 12 months

Oct 13, 2011 12:00 AM

On October 11, 2011 Hugo Chávez's government announced that it will sell $ 3 bn in bonds in the market.
Therefore, even though the price of Venezuelan oil stands at $ 99.5, the Ministry of Finance and state-run oil company Petróleos de Venezuela (PdVSA) will have issued $ 13.2 bn in debt in the past 12 months.

According to Venezuela's bond issue notifications, the South American country is contracting debt at a frantic pace to finance the Great Mission Agro Venezuela, the Great Mission Work, the Great Mission Housing and PdVSA’s investment plans.
Although Venezuelan banks are obliged to allocate 25 % of their loans to agriculture projects and 10 % to mortgages, and even though rising oil prices have considerably boosted revenues, the Executive Office has said that it needs to increase debt to finance plans in those sectors.

Jorge Giordani, the Minister of Finance, has expressed that public debt only represents 18 % of the GDP -which is a comfortable ratio. In fact, however, his calculations do not include all accounts payable, because he has not taken into account the loans with China that are part of the balance of the Venezuelan Bank for Economic and Social Development (Bandes).
Barclays Capital said that after including the total debt burden and using an average exchange rate, which takes into account the Transaction System for Foreign Currency Denominated Securities (Sitme) and the black market, Venezuelan debt ended at 43 % of GDP in 2010. Further, it will climb as high as 47 % this year, an amount that begins to ignite concern and represents a 14 percentage points increase compared to the end of 2006.

However, most analysts agree that the amount of the debt is not as alarming as the speed at which it grows even in a scenario of high oil revenues.
Note that according to the Central Bank of Venezuela (BCV), the debt in foreign currency increased by 230 % in five years, from $ 25.67 bn to $ 84.72 bn in the first half of 2011. In fact, economic research firm Ecoanalítica warned in a report that Venezuela's debt and its costs "has increased dangerously in recent years (...) due to the high risk perception".

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