<$BlogRSDURL$>

Monday, May 09, 2005

What to do with all the money - that is the question 

Also in Panorama today there was an article about it being proposed that some of Venezuela's large amount of foriegn reserves be used to pay down the foriegn debt and/or fund capital projects.

A little background. Venezuela, like most all countries, especially developing countries, maintains reservers of foreign currencies. The purpose of these reservers are essentially to cover the country in case of emergency and allow it to still import items and pay foriegn debt even if there is an economic crises.

Venezuela currently has very large foriegn reserves - almost $28 billion dollars. At one point during the opposition led strike they fell as low as $14 billion but with the recovery in oil production and the high oil prices they have grown significantly. To the point that the country has more reserves than it really needs. So it is now being proposed that a portion of these monies be used to pay down the foriegn debt or fund capital projects.

Here is a portion of the article:

“El BCV tiene un gran patrimonio, producto de la capitalización de las utilidades cambiarias que no ha entregado al Fisco”, aseguró Tobías Nóbrega. Dijo que los ahorros excedentarios deben usarse en el pago de la Deuda Pública Externa. Rodrigo Cabezas aseguró que para 2006 las acreencias foráneas bajarían.

Una de las nuevas rutas que se propone para la utilización de las reservas excedentarias es que la estatal Petróleos de Venezuela (Pdvsa) ingrese un monto determinado a un Fondo Nacional de Desarrollo antes de vender sus dólares al Banco Central de Venezuela (BCV), afirmó el presidente de la Comisión de Finanzas, Rodrigo Cabezas.

“Este fondo contaría con unos 4 o 6 millardos de dólares al año, que se dedicarían al pago de la deuda externa y a la promoción de inversiones de corto y largo plazo. Pero para solucionar el problema ya, es decir este año, lo más probable es que se apruebe una norma o se modifique el artículo 113 de la Ley del BCV, de manera que la estatal petrolera pueda destinar, en el lapso de julio-octubre un monto cercano a los 5 millardos de dólares”.



This policy is very good an logical because foriegn reserves don't really bring any additional value to the country. On the other hand if the foriegn debt is paid down the country has that much less debt to pay and realizes significant savings by avoiding having to pay the high interest that goes with the debt. So in my view this is another very intelligent policy being pursued by the Chavez administration. And that Venezuela is even in a position to do something like this is attributable to the excellent economic stewardship by the government since the opposition strike/sabotage of 02/03.

|

This page is powered by Blogger. Isn't yours?