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Spanish – “Venezuela has the currencies, the dollars, the Euros that it needs for the functioning and development of the entire economy, and I say more; we have dollars left over for the economy.” That was Nicolas Maduro in 2013. Today, his reality is different, says Henkel García, director of Econométrica, in an interview with the PanAm Post.
The regime’s coffers are in the red, and this lack of liquidity leads to needless measures such as mandating the payment of a 2% tax on those who transact in American currency through local banks, the finance specialist says.”This tax is not necessary as such, but what they are looking for is to increase their collection, which has reached rock bottom due to the informality of the economy as a result of dollarization.”
But that is not the only reason that triggers the measures of the dictatorship, according to Garcia: “the economy that has become quite small” has also affected Maduro’s austerity.
He assures that the objective behind the measure is “to try to discourage the use of the dollar. However, this purpose is far from successful when “there is already an advanced dollar process, and under the current conditions, there are already benefits that would be manifesting themselves.”
An obstacle in sight
The implementation of foreign currency in the South American country, with the United States closely monitoring Maduro’s actions and its environment, prevents it from considering its formalization in the market, says Henkel Garcia.
“I don’t see formal dollarization. It would be very difficult with the sanctions. That is a big obstacle. There is little progress to be made,” he says.
Without Washington’s support, “the matter is not simple,” but “the banks can move forward” toward financial dollarization that “would facilitate the billing and operation of businesses, companies, and citizens.”
Reaching that scenario would require a greater effort from the regime if it also intends to stabilize the price of the currency, points out Garcia because “adopting the dollar as a legal tender that could coexist with the Bolivar is in the midst of a great set of policies that could lead to stabilization. It is not that I accept the dollar and stabilize the currency.”
The economic and political analyst, Tomás Socías López agrees with García questioning the actions of Chavismo, which, in his opinion, “instead of calming down before the floating of the change, which is something normal in the countries of the world where the control of change is eliminated, it returns to use controls, regulations, attitudes of an intervening state that must watch over absolutely everything when that is not its role,” reports Extra Venezuela.
The expert warns that the tax will make the foreign currency more expensive, will precipitate inflation without achieving its objective, and “hopefully it will not bring a brake of greater consequences.”
A precarious bank
Opening up the financial system to dollarization leaves it clear that, although “the Venezuelan banking system has demonstrated its ability to stay afloat amid an economy devastated by hyperinflation and seven continuous years of recession, the crisis has turned it into a dwarf that manages an insignificant volume of credit, closes agencies and cuts the number of workers,” RunRunes assures.
According to the official exchange rate, the total of credits reported by the Superintendence of Banks at the end of July of this year is equivalent to 169 million dollars, “a tiny figure that speaks of a pulverized financial system.”
In 2013, when Maduro was boasting of its abundance, and “before the economy began to slide, the credit portfolio of the entire bank was equivalent to 45,691 million dollars and Del Sur, a small financial entity that only controlled 0.4% of the market, managed credits for 186 million dollars, a credit portfolio superior to that of the entire bank at this moment,” the portal points out.
A multifactorial crisis
On a regional scale, “it is also clear that the Venezuelan banking sector is very poor when compared to the Dominican Republic, which has less than half of the population of Venezuela and only one of its financial entities, Banco Popular, manages credits for $5.9 billion, a magnitude that exceeds 35 times the credits of the 29 Venezuelan banks,” says RunRunes.
The Banco de Loja in Ecuador, a financial entity that controls 1.1% of the credit market in the country, has a loan portfolio for 318 million dollars that also surpasses that of all Venezuelan banks.
“Hyperinflation generates the destruction of the currency. The population relinquishes any type of savings and is rapidly impoverished. An economy in depression that is 80 percent smaller than seven years ago, with companies that produce at a minimum .and authorities with a restrictive policy regarding credit.” is, according to Asdrubal Oliveros, director of Ecoanalítica, the cause of the debacle of the bank that now faces the challenge of dollarization.
“In most Latin American countries, credit represents 30% of the GDP, but in Venezuela, it does not reach half a point of the GDP, so the Venezuelan banking system has practically no effect on variables such as consumption or investment,” he pointed out.
A New Year without hope
“Venezuela is a country that had a deep contraction, and that is not going to change substantially,” also predicts Asdrubal Oliveros. Before this reality, he considers that both companies and traders must have a vision of “market niches.”
“Being a smaller economy, producers must understand that they must aim their efforts towards market niches, with objective clients and not necessarily with massive consumption because that is something that no longer exists in Venezuela.”
He points out that “the problem is not price control, but that people are no longer spending as they used to” and considers that the time when companies could set the prices of their products at a rate that allowed them to have a considerable profit margin is over.
“The population is changing and is not able to adapt to price changes as easily as it could in the past. In this sense, he recognizes as “essential that there is an adaptation of the business models.”
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