Published On: Wed, Oct 2nd, 2013

Venezuela without foreign currency

No currencyCARACAS - This year Venezuela faces a severe shortage of dollars due to a drop in foreign exchange earnings, compared with an increase of expenses abroad.

The lack of greenbacks is reflected in the shortage and high prices of goods in the market, most of which are imported or made ​​on the basis of inputs and raw materials acquired abroad.

Figures from the Central Bank of Venezuela (BCV) show that in the first half of 2013 the total exports, which are the source of the nation's currency, fell 9.7 percent from the same period last year, from 49 thousand 442 million to 44 thousand 622 million.

The reason

The contraction responds to a drop in oil exports, which closed the first six months of the year in 42 thousand 940 million dollars, which represents a decrease of 9.3 percent compared to the same period of 2012, mainly due to the decline of 5.7 percent of the average price of domestic crude basket.

"The decline in the value of oil sales, along with credit facilities through agreements-as Petrocaribe energy, greatly reduces the flow of foreign exchange earnings of the Republic during the first half of the year, which limits dollar allocation by alternative routes and complicates the management of exchange rate policy, "warns a report from the firm Ecoanalítica.

But oil exports are not the only branch which fell; the non associated hydrocarbons stayed in the first semester at one thousand 682 million dollars, which is a contraction of 19.1 percent over the same period last year.

In the first six months of 2013 sales abroad by the public sector (chemicals, iron and steel) fell 38.8 percent, while private rose 9.9 percent.

The problem

To Ecoanalítica, the concern is that the drop in revenue coincides with an "unexpected increase" in imports, causing the drop in international reserves; the foreign exchange fund of the country.

"Neither the adjustment in the exchange rate (from 4.30 to 6.30 per dollar), the lowest currency flow or closure of dollars allocation mechanisms (SITME) is sufficient to lead to an adjustment in imports of assets, which stood at 27 thousand 519 million at the end of June, representing 2.7 percent more than in the same period of 2012. "

The explanation behind the unexpected increase in foreign purchases is in the 23.7 percent increase in public procurement of goods and services, which totaled 12 thousand 515 million at the end of the first half of the year and offset the contraction of 10.1 percent in private, which totaled 15 thousand 4 million.

The rise in imports is evident in the amount of international reserves, which are located in 22 thousand 722 million dollars, according to figures from the Central Bank, down from 29 thousand 750 million which were recorded in January.

More imports

As part of the shortage of 20 percent and 32.7 percent inflation facing the country, the government, last week, announced a package of measures to facilitate imports of priority goods, which it hopes will improve the availability of product in the market and lower the pressure on prices.

The price of foreign exchange in the parallel market soared as a result of the shortage.

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