(TODAY VENEZUELA) – “Venezuela does not look like defaulting in 2015,” said José Ignacio Guarino, a professor in the area of finances and securities market.
He explained that Venezuela has paid almost half of the outlays on account of principal and interest for debt maturity. “Bond 2015, which was for 1.3 billion euros, has been paid and, apparently, (state-run oil company) Pdvsa has saved between USD 2 billion and USD 6 billion. If so, officially, the coverage will be there to meet debt commitments this year,” Professor Guarino said.
Until 2019
The scholar said that from 2015 through 2019 the outlays on account of debt maturity amount to USD 52 billion.
“We have a very complicated economy, but there is still time to make the necessary corrections,” he stressed.
In his opinion, such corrections include the fact that the government should take on formal devaluation, with a fiscal impact. “I cannot settle 70% of imported goods at an exchange rate of VEB 6.30 per US dollar, when I have another exchange rate at VEB 200, because, at the end of the day, I will have fewer bolivars for the dollars that are not entering, which are fewer and fewer. All that we need to do is maximizing those dollars,” he elaborated.
Guarino recalled the proposal made in this regard by former Minister of Petroleum and Mining Rafael Ramírez to implement a dual exchange rate. To his mind, it is one of the options to correct economic distortions.
He also recommended disciplining public spending, although in an electoral year as this one it is expected to be high.
In his view, setting an exchange rate is rather complicated and, although the domestic economy is implicitly based on the US dollar at the black market exchange rate, he discourages the use of a foreign currency governing the Venezuelan economy. “We have a dollar-based economy to spend, but not in terms of income.”
As a whole, rather than a dollar-based economy, the expert suggested expanding the income of foreign currency. In addition, in the event of a dollar-based economy, the Central Bank of Venezuela could eventually lose its autonomy.
“There is much volatility in Venezuela, because (international) reserves change everyday; that is, they go down, whereas narrow money increases,” Guarino concluded.
Article originally appeared at Todayvenezuela.com
