VHeadline Venezuela News reports: Spanish bankers are concerned over reports that Venezuela's President Hugo Chavez is unable to close a nationalization / purchase deal announced in July for the takeover of Banco de Venezuela.Venezuela has reportedly told the Spanish Banco Santander Group that it can not find the cash to complete the purchase, despite Central Bank of Venezuela (BCV) claims that it has some US$39 billion in foreign reserves.
La Vanguardia (Spain) reporter Joaquim Ibarz has quoted giant multi-national Santander as saying it will continue to manage Banco de Venezuela until the Chavez government finds its checkbook and the check clears.
Ibarz says that anyone arriving in Venezuela might think that these are prosperous times but he cites "waste of public money that President Chavez is using in a bid to win the regional elections this Sunday, the largest propaganda splurge the country has ever seen ... no one speaks of crisis or any perception of austerity just now ... people close to the government go to populous neighborhoods giving away washing machines and domestic appliances. The whole city is militarized by the National Guard."
"They are spending like there's no tomorrow. Yes, Venezuela still has resources thanks to the sales of crude oil futures months back, when prices were high but the current price of Venezuelan oil barely exceeds $40 -- less than a third of what it reached in July. In a few weeks, earnings will be drastically reduced, so they will have to be cut the give-aways, grants and social programs, and that generate discontent."
"The momentum of public spending has led to increased demand for goods and services in the expectancy of economic expansion on high oil prices and even ifDomingo Maza Zavala, a former director of the Central Bank of Venezuela (BCV) told La Vanguardia's Ibarz that increasing demand for goods and services has been driven by government public spending from oil revenues but with falling production as a result of problems with (international) oil companies and the government (Petroleos de Venezuela) unable to meet the supply demand, it has had to resort to imports in unprecedented quantities and Venezuela now has the highest inflation in Latin America (more than 30%).
Venezuela will still mark 5% growth in 2008, economists predict that the
situation will change radically in 2009."
Maza Zavala also said that Venezuela has spent US$40,000,000,000 on imports ... equivalent to the country's oil revenues ... and if the current oil price stays put in 2009, Venezuela will NOT have funds to pay some $60,000,000 in interest on external debt. Meanwhile operational reserves are estimated at about $39,000,000,000 and will serve only a few months imports.
Ibarz says that Chavez shoots off his mouth saying that he has billions of dollars in reserves to deal with the crisis. But analysts say the reality is quite different. La Vanguardia notes that much of the reserves were converted to debt in 2008 and the lack of liquidity has prevented the Venezuelan government from negotiating more than eight billion euros in payments to multi-national corporations for forced 'nationalizations' in recent months.
Besides not having closed the deal with Grupo Santander (where they should have paid 1,000,000,000 euros for Banco de Venezuela), the Venezuelan government already owes over a billion US$ to the Mexican Cemex cement group and a further 1,300,000,000 euros to Argentinean Ternium for the seizure of the Siderurgical del Orinoco (Sidor). Neither has Venezuela paid over $5,000,000,000 to ExxonMobil or Conoco Phillips the expropriation of oil fields and yet Chavez runs up trillions of debts to acquire weapons from Russia.
All the while he refuses to cut oil aid to Cuba (100,000 barrels per day). Admittedly opposition-allied analyst Marta Colomina says that "the Chavez regime's economic support of the Castro regime has a higher priority than any social project in Venezuela."
Over the Chavez government's 10 years in power it has had about 250,000,000,000 euros from oil exports .... the money was spent on populist policies, without creating or promoting infrastructures of production, but rather to attract ideologically closer governments ... but when oil prices collapse, Venezuela's earnings barely cover imports, which in themselves are increasingly required because of the drop in production of crude.
VHeadline Venzuela News
vheadline@gmail.com
Venezuela is facing the most difficult period of its history with honest reporters crippled by sectarianism on top of rampant corruption within the administration and beyond, aided and abetted by criminal forces in the US and Spanish governments which cannot accept the sovereignty of the Venezuelan people to decide over their own future.Footnote: President Chavez has said that he expects government income
from oil this year to be about US$75 billion, although this may drop
to perhaps $70 billion because of the recent fall in oil prices.____________________________________
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