MAYELA ARMAS
EL UNIVERSAL

The Venezuelan Central Bank (BCV) will go into technical bankruptcy in the event of continuing delivering assets to the Government with no valuable consideration, BCV Economic Research ex manager José Guerra cautioned.

"Delivery of USD 6 billion in reserves last year, along with large indebtedness eroded the bank assets, and weakened its capital and source of earnings, i.e. international reserves," he added.

In his opinion, BCV will face subsequent years of losses that can be covered only by an accounting method of assets appraisement to record earnings instead of actual losses.

President Hugo Chávez requested BCV to deliver USD 4 billion of reserves considered as excess. The bank is checking if the action is in the legal context. The BCV Law established a single delivery of USD 6 billion in reserves to the National Development Fund (Fonden) within the second half of 2005. However, it also provides for setting a top in reserves.

"Additional apportionment of USD 4 billion would be a breach of the law. The legal framework sets forth contribution on one single occasion. There is no reference to successive deliveries to Fonden. It is established that following this funding, the Fund will get remaining foreign currency from oil exports. Therefore, BCV is free from making a new contribution of reserves," the official explained.

The BCV manager pointed out that in the event of an appropriate level of reserves, the law does not establish that the excess should be delivered to the Treasury. "In any case, if the purpose was the transfer of this amount to the National Executive, why was it not expressly stated in the law? What would happen in the event of the appropriate level being under the level kept at BCV? Would the Government make any contribution for BCV to complete the appropriate level of reserves?

In any case, "the experience shows that once the Government receives a partial amount of reserves, it immediately asks for another portion. In this way, international reserves will deplete gradually and monetary steadiness will be undermined. The only alternative is to reform again the BCV Law. There is a serious threat of technical bankruptcy at BCV."

Estimates
BCV Finance ex manager Jesús Rojas added that Venezuela's foreign reserves are about USD 1,077 per inhabitant, as compared to USD 1,075 in Chile. "The government in that country does not speak about excess."

In his opinion, if the Government claims excess, why does it keep exchange control? And how can they speak of exceeding reserves when endorsement of legal tender has drastically shrunk?

Translated by Conchita Delgado