"Sowing the Oil" in the Venezuelan


Attract investors and negotiate with the opposition

With the budget deficit the government has stepped up efforts to attract foreign capital. Negotiating with international financial institutions. The government hopes to attract to the country of foreign direct and portfolio investment in commodities and infrastructure industries.

However, the level of confidence of international business to the economic policy of Venezuela still rather low. Planned measures, given the high oil prices may lead to short-term stabilization of the country. But in 2003, are coming Venezuela increased amortization payments on the national debt.

One of the sources to cover the budget deficit could be proceeds from the sale of Venezuelan assets abroad. In particular, we plan to sell the British company British Petroleum-owned PDVSA stake (50%) of an oil refinery Rurh Oel, located in the south of Germany.

Due to the low confidence in the Venezuelan Securities placing on foreign and domestic markets is sluggish. It is estimated that the domestic market could place by July, only 43% of the issued bonds. It is obvious that the government can not do without the refinancing of domestic debt, and it offered the banks to increase the maturity of the issued securities of them to the tune of 600 billion bolivars.

Since the implementation of many of the Government's measures to get the economy out of the recession requires time, the burden is borne by the crisis. Increase in consumer prices for the first half of the year is estimated at 12.8% (according to the most sensitive paper, food and beverage industry - by 14.8%) and for the year could reach 30%, which is conducted in May override the salary increase of 20%. This is exacerbated by the fact that many businesses are completely closed. According to official figures, unemployment reached by mid-year of 16%. Of course, in terms of rising inflation and unemployment, the government is easier to pay off with the hired staff. In addition, the rapid devaluation of the bolivar (the rate fell by early July than in February by about 70%) reduced the government's domestic debt in dollar terms.

The government in the face of rising export earnings can quickly reduce the budget deficit through payment obligations depreciating Bolivar. Apparently, this way, as well as the refinancing of domestic debt will help the government to stay afloat in the short term. But this path leads to the rapid growth of social tension. Clearly, the authorities take possible measures to reduce it. In particular, in April 2002, the Government issued a decree providing for the prohibition of dismissal of hired staff. However, implementation of such measures and the program as a whole will have only a modest positive impact on the situation in Venezuela and in the case of, if not stop the opposition of the Government and the opposition. Among the still rare examples of fruitful contacts between the government and the business sector can be attributed reached in July 2002, of an agreement to revive production in the country, as well as to promote businesses that create new jobs.