Monday, 19 January 2009

Venezuela's Chavez Seizes $12 Billion From Reserves to Bolster Spending. Cuento de Nunca Acabar ...

This thing will never end. President Hugo Chavez announced that he would seize $12 billion from international reserves that will be funneled into the nation's sovereign wealth fund (Fonden) for new and existing spending plans. That leaves international reserves above $31 billion -- near the optimum level of about $30 billion for the indicator, according to the Chavista foreign-exchange currency policy-making manual. This is the fourth year in a row that Chavez, invoking the need to use oil wealth for Venezuelans (you wonder whether his Venezuelans are only those how wear red shirts in the streets,) takes money from the central bank to beef up the Fonden, the piggy bank of his Bolivarian Revolution.

Following this move, it would be reasonable to expect that Venezuela, errr sorry, Chavez, has a cushion of about $70 billion to fight the impact of the global recession. The money is comprised of international reserves of $31 billion, plus Fonden's total assets under management worth $25 billion, plus a minimum $15 billion in tax and royalty payments and contributions that PDVSA will have to make -- no matter what its financial situation is. For sure, a devaluation and an increase in domestic fuel prices remain on the table as last resort moves, although it is highly unlikely he tries either or both them if things get uglier. Chavez, seeking to win a Feb. 15 referendum on the end of presidential term limits and hide the grave situation of food shortages and reduced dollar supply his country faces, will for sure avert such policies. One wonders the size of the budget shortfall that the Chavez administration has been accumulating for years ...
For some reason, the bolivar fuerte is trading in the black market at almost 6 to the dollar -- almost three times the official quotation of 2.15 bolivares fuertes to the dollar.

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