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    Venezuela – The debt in foreign currency has increased

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    [captionpix imgsrc=”https://thecostaricanews.com/wp-content/uploads/2011/10/Nelson-Merentes-presidente-del-Banco-Central-de-Venezuela.jpg” align=”left” captiontext=”Nelson Merentes, president of the Central Bank of Venezuela said the amount of debt in the foreign currency has increased by about 230% in the last five years.”]As per the reports by BCV or the Central Bank of Venezuela, the amount of debt in the foreign currency has increased by about 230% in the last five years. This increase had jumped from USD 25.67 billion to that of USD 84.72 billion in the very first of this year (2011) itself. In fact, in the first part of this month (October), Venezuelan government announced that it was going to sell USD 3 billion in bonds in the economic market.

    The bond issue and the debate

    Just as is being seen through the reports of the Venezuelan bond issue notifications, South America is contracting debt at a seriously increasing rate so as to finance Mission works like the Great Mission Agro Venezuela, the Great Mission Work, the Great Mission Housing and the Pdvsa’s investment plans.

    It is known that the Venezuelan banks are all the more obliged to designate 25% of the loans for the purpose of the agricultural projects and then 10% to the mortgages. In addition, this time, the increased oil prices have even helped in boosting the revenue. The Executive Office has mentioned that it will still have to increase the debt in order to finance in the same sector.

    However, Venezuela’s latest take on the $3bn of the bonds has extremely shocked the whole of the market and in addition has confirmed the suspicions on Hugo Chávez; that he actually intends to spend as much money as he deems necessary so as to win the presidential elections in next October. This offering actually pushes the total issuance this year to almost $15.2bn to $7.2bn from republic and also $8bn from the state oil firm of PDVSA.

    The economists are at a loss regarding the reason of such issue. Majority are unable to understand as to why Venezuela has issued so much in bonds during this time when the international market conditions have deteriorated so much. On summation, however, the market watchers are of the view that the this operation goes on to confirms that Venezuela government is perhaps planning a real large change and increase in the public expenditures for the coming 12 months which includes the presidential election. As has been said before, in order to maintain the elections, the government is ready to use money as much as possible. This again points out the fact that this step can be an attempt which is going to help in the distribution of the supply which is coming to international market on an even basis over a certain stretch of time and then leave the additional capacity into the local financial system for the coming months.

    These bonds are supposed to be sold off to the local investors and are supposed to mature in the year 2026.

    by R. Murphy for TheCostaRicaNews.com

    About the author
    R.Murphy is associated with the Creditmagic Community and making regular contributions as a member of the community. Not only that, he has also written articles for different financial websites.For help to build up credit visit:http://www.creditmagic.org/

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