MercoPress. South Atlantic News Agency

Oil-export fuelled Venezuela feeling the shortage of hard currency

Venezuela's economy grew at its slowest rate in five years during the first quarter, 0.3% (year to year) and the slowest since 2003 reported the Central Bank. Compared with the previous quarter the contraction was 16.4%.

With crude oil prices less than half their peak of around 147 USD a barrel seen last July, oil-export dependent Venezuela is suffering the full consequences.

Venezuela depends for more than 90% of its exports on oil and not only faces lower international prices but must also abide by OPEC, --of which it is a member--, and its reduced output to boost prices.

The first quarter saw a contraction of 4.8% in the oil sector and revenues from crude are down 56% so far this year, leading to a 3.5 billion USD current account deficit.

Central Bank data also showed that in the last two quarters imports totalled 25.6 billion US dollars and exports 20.4 billion with a trade deficit of 5.2 billion or a monthly average of 861 million US dollars, unprecedented in the last twelve years.

According to Caracas consultants quoted in the local press so far financial authorities have filled the gap with foreign exchange from the Central Bank international reserves, which at the end of May 18 had fallen 31%, totalling 29.352 billion US dollars.

Abelardo Daza, an economist and professor at the Institute of Higher Education in Business Administration (IESA), claims that “it is clear that the economic imbalance will lead to a fall in international reserves and to an eventual exchange rate correction, but this will not occur immediately. For example, in 1981, oil income fell and the devaluation came in 1983”.

According to the Central Bank imports, far from diminishing, climbed 6.4%, even though oil revenues are plummeting and the Foreign Exchange Administration Committee's authorizations to buy foreign currency have been cut by 32%.