VenEconomy // On the Slippery Slope

VenEconomy: On Tuesday, May 25, the Central Bank of Venezuela presented the results of the balance of payments and the economy for the first quarter of the year. Even at a time when the average price of the Venezuelan oil basket has reached $70.59/bbl, the balance of payments posted a deficit of $6.1 billion. Of that amount, $5 billion correspond to the illegal and absurd transfer of international reserves to Fonden

It is worth noting that, in 2009, when the price of the Venezuelan oil basket averaged $38.60/bbl, the balance of payments posted a deficit of $15.3 billion, $12.3 billion of which were transfers to Fonden.

The reason for this relative improvement could be that, in the first quarter of 2010, revenue from oil exports rose by $6.5 billion and spending on imports fell by $4.4 billion, which is why there is a recovery in the balance on the assets account of $10.9 billion from the $3.7 billion deficit posted in the first quarter of 2009, giving a surplus for the first quarter of 2010 of $7.2 billion.

There was little change on the capital and financial account, which reflects a deficit of $11.5 billion for the first three months of 2010, an increase in the deficit of $800 million compared to 2009.

If transfers to Fonden are excluded, the deficit on the balance of payments would be $1.1 billion in the first quarter, compared to $2.9 billion in 2009; in other words, an improvement of $1.8 billion. This improvement is due to the rise in oil prices, which saved the government's skin, but was not sufficient to provide the surplus it so badly needed. What VenEconomy cannot understand is how Venezuela's balance of payment is incapable of showing a surplus with the oil barrel at $70.59.

Unfortunately, the figures for the economy are even worse, showing a contraction of 5.8% according to the Central Bank, with a 5% contraction in the oil sector and a 4.9% contraction in the non-oil sector. The net tax on product account fell by 12.4%.

The Central Bank reports that the manufacturing sector fell by 9.9% and that imports shrank by 40%. This combination was reflected, in turn, in drops in transportation (15.9%), commerce (11.6%), and financial services (9.7%).

The picture revealed by these figures is consistent with the drop in overall consumption, which is estimated at 11%.

While the figures of the real country show such ominous results, the government is making intolerant strides towards a Castro-communism that forecasts hunger and desolation.