Economy
Although the price of the Venezuelan oil basket, which is the source that provides USD 95 out of each USD 100 that enter the country, has risen and it has currently reached USD 60, more than twofold the price of Venezuelan crude oil last December, President Hugo Chávez's Administration has implemented an extensive borrowing plan to expand government funds and increase expenditures.

The Ministry of Finance is planning the sale of a huge amount of bonds that would total USD 17.21 billion. The impact of the issuance will be so huge that even subtracting the amount that the country will pay for notes sold in the past, at the end of this year, the burden of domestic debt will increase by 103 percent and will be about USD 28.83 billion.

At the same time, Pdvsa, a Venezuelan key company, which controls oil production, has sold in the bond market USD 3 billion to pay outstanding debts while the Venezuelan Guayana Corporation (CVG) is getting ready to issue bonds for USD 4 billion.

In terms of the size of the economy, Venezuela's domestic and foreign debt is manageable. In fact, the debt does not exceed 22 percent of the GDP, the lowest ratio in Latin America and the impact on the budget is not meaningful. However, José Manuel Puente, an economist and professor at the Caracas-based Institute of Higher Studies in Business Administration (IESA), warns that there are some elements to be considered.

"In the future, this policy may compromise the country's fiscal health. Today's debt is tomorrow's taxes. Additionally, as debt increases, its burden on the budget grows and it absorbs a greater amount of funds which, for instance, could be allocated to health or education."

According to estimates from Barclays Capital, nationalizations will cost about USD 14.9 billion, or 50 percent of Venezuela's international reserves.

vsalmeron@eluniversal.com

Victor Salmeron
EL UNIVERSAL