Thursday, June 30, 2005

Venezuela notes 

A couple of quick notes from Venezulea:

First, unemployment continues its downward trajectory. It fell to 12.6% in May 2005 versus 15.8% in May 2004 for a decrease of 3.2% (economic statistics in Venezuela are generally measured year over year to eliminate seasonal fluctuations). With this reduction the government is on target to reduce unemployment to single digits by year end which is its stated goal. It should be recalled that during the opposition sabatoge of 02/03 unemployment shot up to over 20%.

Second, Venezuela served as the host of a recently concluded Caribean energy summit. Venezuela used this summit to offer oil at a significant discount to Caribean countries. Venezuela itself benefits tremendously from high oil prices and has had a multi-billion dollar windfall from recent high prices. However, it does have to be recognized that these high prices impose a burden on other low income countries lacking their own oil supply.

To help countries with this the accord just signed provides for reduced prices and special financing. When oil goes over $40 per barrel Venezuela will agree to finance 30% of the cost and when it goes over $50 per barrel 40% of the cost will be financed. The financing allows for payment to be diferred from 2 to up to 17 years. Further the bills can be paid in goods and services thereby allowing countries to get oil without using scarce hard currency. These measures should help the countries of the Caribean weather the current high oil prices.


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