Venezuelan President Nicolas Maduro on Wednesday said that the South American OPEC member would avoid more borrowing on international markets because of rising costs as a result of worsening credit risk perceptions.
“We are not going to use or ask for credit, in those conditions the global capitalist banks want to impose,” Maduro said in a speech on state television. “We’re not going to do it. We have other [financing] sources, fortunately.”
Maduro, who said there was a “sort of financial, credit, international blockade” on the socialist-run nation, repeated earlier statements that Venezuela was prepared for volatility on global energy markets.
Venezuela, which receives 96 percent of its foreign currency revenues from oil, has called for an emergency OPEC meeting to halt a slide in oil prices.
Maduro said he hoped prices “bounce back and return to where they really should be.”
The recent plunge in prices, which have hit a four-year low, is bad news for a government already running a deficit of 15 percent of GDP.
That might force Maduro to rethink cut-rate oil sales to the nations of Petrocaribe, the club of 18 Latin American and Caribbean allies which pay about half-price for Venezuelan oil.
Some analysts estimate the price tag for Petrocaribe is up to US$10 billion a year for Maduro — and that is rising as crude rates fall.
“This is a situation in which energy agreements may have to be changed, so the decline in revenue is smaller, and it may be time for a more aggressive currency rate adjustment,” said economist Asdrubal Oliveros, who heads the consultancy Ecoanalitica.
Last week, the price of oil slipped to US$77.65 a barrel, the lowest since November 2010.
It was the sixth consecutive week of falling prices.
Venezuela’s economy is distorted by a rigid exchange rate system that pumps up the bolivar’s official value, and government subsidies that keep gasoline cheaper than water — but which are offset by runaway inflation and chronic shortages of basic goods.
According to Oliveros, oil would have to be at US$135 a barrel for the government to continue on its current spending path — an unlikely scenario.
The nation’s push to hold an emergency meeting has so far appeared to fall on deaf ears. However, Maduro said that Venezuela was mulling a response to falling oil prices with allied nations.
“There will soon be surprises with friendly OPEC countries,” he said, adding Venezuela’s alliances with Russia, China and some other members were growing stronger.
The nation’s bond yields are currently the highest of any emerging market economy.
Its debt on average pays 17.6 percentage points more than comparable US Treasury bills, according to the JPMorgan Emerging Market Index.
Bonds have dropped 12.8 percent so far this year, driven by investors’ concerns about its capacity to pay.
The overall index of emerging market bonds has risen 9.3 percent during the same period.
Additional reporting by AFP
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