The Red Ink in Caracas
11:31 AM, Mar 5, 2010 • By JAIME DAREMBLUM
Back in December, CMA DataVision announced that Venezuela’s debt had become the riskiest in the world. In 2009 alone, the total outstanding debt of PDVSA, the country’s state-owned oil firm, grew by 42 percent, reaching $21.4 billion. At the start of 2010, Venezuelan president Hugo Chávez significantly devalued the national currency with the hope of mitigating his financial problems. But this heightened inflation fears: As Reuters noted, economists are predicting that Venezuela’s annual inflation rate for 2010 could be anywhere from 30 percent to 60 percent, or perhaps even higher. (Venezuela already has the highest inflation rate in Latin America.) In late February, Erich Arispe of Fitch Ratings said that Venezuela’s currency regime “has not only failed to either prevent capital flight or increase macroeconomic stability, but it has also deepened macroeconomic distortions and increased the vulnerability of the economy to the dynamics of international oil prices.”
Earlier this week, Carlos Henrique Blohm, president of the Venezuela-U.S. Chamber of Commerce, offered further evidence of Venezuela’s fiscal woes. In an interview with Bloomberg News, Blohm reported that, thanks to asset seizures by the Chávez regime, Venezuela currently owes $12 billion to chamber member companies. Some 28 member companies -- nine of which have done oil-service work for PDVSA -- have had their assets nationalized by Chávez, and “22 have received no response from the government to their requests for compensation.” Chamber members “are also owed about $7 billion in delayed dollar sales at the official exchange rates.”
Yet another reminder that the Bolivarian Revolution has been an economic disaster.
Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.
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