Financial News and Economical Crisis

Economy of Venezuela on the verge of collapse: the country”s record inflation of 27% and a sharp drop in GDP against a background of low energy prices. All this threatens the regime of Hugo Chavez, as more likely to win the next election pro-US opposition. In this case, serious problems arise in Russia”s business in Venezuela.

Venezuelan President Hugo Chavez has decided to cease in Caracas four-hour trips of light imposed throughout the country to save electricity, reports AFP. That gave a glimmer of hope to the people of the country, forced to sit without light. The cause of the energy crisis in Venezuela has become unusually dry rainy season, which runs from May to November. Due to lack of precipitation has been compromised work Guri hydropower plant, which produces about 73% of all electricity in the country.

Also under the reforms initiated Hugo Chavez dismissed the Minister of Energy Angel Rodriguez, who worked at the post less than a month. According to Chavez, the Minister had admitted many of the “technical error”. During the power cuts were not working hospitals, clinics, schools. On the roads because of the non-working traffic lights there were numerous accidents. The President explained that the decision to dismiss the minister suggests the government”s ability “to recognize their mistakes and correct them.”

But finally the country”s energy problems are not solved. Rather, it is a temporary, cosmetic measure associated with the holidays. Guri is still the main source of electricity, and there is no alternative to it. “We had to invest money that Chavez is sprayed to the aid of leftist regimes, the construction of new power plants” - cautions lead researcher of the Institute of Latin American Sciences Viktor Semenov. It does not become stronger than the already weak economy of the country.

Based on data from CMA DataVision, the probability of default of the economy of Venezuela is estimated at 57,7%. Venezuela”s inflation rate reached almost 27% last year, is the highest among the 78 economies, the situation in which the tracks Bloomberg.

According to the Central Bank of Venezuela, the country”s GDP for the third quarter of 2009 compared with last year fell by 9,5%. In the second quarter with the removed seasonal decline was 2.4%, while the third - 3,5%. This indicates that despite the improved performance in virtually all countries of the world situation in the Venezuelan economy is getting worse. “The pace of the slowdown in the Venezuelan GDP became apparent even before the global crisis.

explanation is simple: Chavez leads the country in spite of the laws of economics “- said Semyonov. The President of Venezuela takes the money directly from the central bank, transmits to the government fund the development of the nation and uses them as he wishes.” Even in Venezuela”s largest oil corporations are a number of non-core divisions . A lot of money goes to support leftist regimes such as Cuba and Bolivia, Nicaragua”s election campaign “- angry Semenov.

not add positive economy, mainly consisting of oil and gas revenues, falling prices for hydrocarbons. “Crude oil - the main source of revenue for the country - has fallen compared to the 90-mi and a half times over the years. In Venezuela itself has no money for development and production. And foreign companies are leaving the country because of unfavorable conditions,” - said Semyonov.

To increase revenues from the sale of Venezuelan oil, the leader of the Socialist Republic adopted a decision on the devaluation of the national currency - Bolivar. Fall bolivar is from 17% to 50%: there are two different courses in relation to the dollar. One - for deals on essential commodities, the second - for other types of transactions. If the pre-reform rate was 2.15 bolivar for $ 1, now grace the course is at level 2,6 Bolivar for $ 1 and applies to imports of food, medicine and technology designed to enhance the competitiveness of the Venezuelan economy. For all other products that are not considered basic, set a course 4,3 Bolivar for $ 1. “It (devaluation) to improve the performance of the economy, reduction in import of goods is not essential and stimulating exports - Chavez said, commenting on the reform on state television, reports Bloomberg. - We must stop being a country that only exports oil. With the devaluation of Hugo Chavez is trying to stem the outflow of dollars from the country and reduce the budget deficit. These measures, analysts said RBS, will reduce the budget deficit in half. In their view, the devaluation will reduce the budget deficit in 2010 to 3,2% of GDP in contrast to 7,4%.

However, the practice of the devaluation of the bolivar has the opposite effect. In 1983 Venezuela had devalued the bolivar, which later called “Black Friday”. Then introduced a multilevel system of exchange rate bolivar has led to inflation in the country rose to 40% in 1987 to 7% in 1983. In 1989, the multilevel system, causing economic and political crisis in the country, was canceled. The last time the government devalued the bolivar in March 2005, when he has fallen in price by about 11%. According to Finance Minister Ali Rodriguez, the devaluation may accelerate the pace of inflation in 2010 to 3-5%. Earlier, the Venezuelan Government has stated that this year inflation will be 20-22%. Measures to reduce the cost of the national currency of Venezuela is already resonating with the Venezuelans. According to Bloomberg, last weekend in Caracas citizens queuing for imported televisions, refrigerators and DVD-players, fearing a rise in prices as a result of new government measures.

Despite the economic downturn in Venezuela and the greater likelihood of a recession, the presence of Russia”s business in this country, experts say, is justified.

If before Russia”s exports to Venezuela has been minimal - about $ 100 million a year, now he has grown exponentially and is about $ 1 billion a year. First of all, this was due to the arms trade. All these years Russia could gain by selling almost $ 4.5 billion

“This is our net income. But while the last two years we gave Venezuela a credit for two new weapons worth $ 3.4 billion, I think that this money, despite all the problems in the economy of Venezuela, a country can give, - Semyonov said. - Chavez after cleverly done. transfer the proceeds of oil sales at a rate twice, and the repayment of external loans money Venezuela is likely to be enough. Now the Venezuelan oil at $ 75 per 1 barrel, and when such revenues Venezuela, even with problematic economies will be able to return the loans. On the hand, and Russia are playing bad, Venezuela”s relations with the United States. “As soon as the States refused, for example, supplying parts for F-16 fighter as soon as we emerged from the” Drying “and” MIGami. “But even the oil project” Junín-6 “for us to be very profitable. In 2009, LUKoil and Gazprom a stake in the project. There is a benefit for us and in a project to develop a uranium ore. In addition, an agreement to build a nuclear reactor. Venezuela agrees to buy from us even the “Okay” - Chavez expels Ford and Japanese manufacturers” - reminds Semenov.

Venezuela has traditionally supported Russia. A striking example is the fact that the regime of Chavez”s stated on the recognition of independence of Abkhazia and South Ossetia. “While for us in relations with Venezuela, things work well. But the risks are, and they are growing. Chavez, who runs the economy is clearly losing popularity, and his victory at the next election is not obvious,” - said Semyonov. All decide to parliamentary elections in September. According to the expert, the election could win the opposition, which was trained in the States. Accordingly, the policy can be pro-American. And then Russia”s business in Venezuela will be serious problems, summarizes Semenov.

Gleb Klimentyev, Andrey Kovalevsky,

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