MercoPress. South Atlantic News Agency

Cash short Venezuela negotiating loans from Brazil

Venezuelan President Hugo Chavez, whose administration is facing cash shortages as oil revenues plunge, is negotiating loans from Brazil's development bank to fund infrastructure projects, revealed the Brazilian newspaper Folha de Sao Paulo.

The investment projects, which involve the participation of large Brazilian companies, would allow Chavez to stimulate economic growth without having to tap Venezuela’s dwindling cash reserves, reported the Sao Paulo daily.

The Brazilian government owned Development bank, BNDES is the country’s biggest lender to companies and has played a pivotal role in helping Brazilian multinationals withstand the global financial crunch. The bank also finances Brazilian exports and investments.

Folha cited BNDES President Luciano Coutinho saying the bank could commit 4.3 billion US dollars to Venezuela. Coutinho visited Venezuela this week to negotiate the final details of the loan accord, which could be announced when Chavez visits Brazil on May 26, according to Folha

Paulo Braga, BNDES spokesperson said Friday the loan would be mainly for infrastructure and industries and involve 4.3 billion US dollars “if all projects discussed were put into practice”.

Some of the loans may involve trade finance deals and two credit facilities worth a total 723 million US dollars to expand the subway in the capital Caracas. Odebrecht SA, Brazil's largest construction group, is handling the expansion. Other Brazilian companies with projects in Venezuela include Braskem and builder Andrade Gutierrez.

However, a potential obstacle to the accord is a current limit on financing of exports to Venezuela, the newspaper said. The Brazilian Finance Ministry and a government council for exports might have to raise such limit for the loans to be made, pointed out Folha.

Speculation has been growing that Venezuela's oil dependent economy external and fiscal finances are quickly deteriorating. Standard & Poor said recently the government may be forced to devalue the currency, which is pegged to the dollar at a fixed rate, as falling oil prices cut revenues by at least 10 billion US dollars.