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Sign of recession in Venezuela: decline in imports

Sign of recession in Venezuela: decline in imports

Posted by Dubraswka Aguilar on September 09, 2014

The Central Bank of Venezuela (BCV) has failed to publish the latest GDP figures; but there are growing signs that the country has fallen into recession -which technically occurs when the economy slows down for more than two consecutive quarters.

In its latest report about Venezuela, Bank of America explained that the decline in imports in the first half is similar to that recorded in times of severe economic adjustments in Venezuela.

The Venezuelan National Institute of Statistics (INE) reported that imports totaled USD 17.3 billion in the first half; this figure represents a 22% fall compared to the same period in 2013. Francisco Rodríguez, an analyst at Bank of America, explained that if imports keep their downward trend in 2014, they would decline by 35.5% compared to 2012. This would translate into the fourth biggest downturn in imports since 1946 in Venezuela.

The Venezuelan government has cut down supply of foreign currency amid imbalances in public accounts, leading to declining imports.

State-run oil company Petróleos de Venezuela (Pdvsa) has failed to increase output and sells crude oil to allied countries under preferential terms, and non-oil exports have virtually vanished. Against this backdrop, income in foreign currency is insufficient to meet the uncontrolled demand of US dollars resulting from high dependence on imports and an artificially-cheap foreign exchange rate at VEB 6.30 per US dollar.

In the first seven months of 2014, the National Center for Foreign Trade (Cencoex) allocated USD 9.57 billion for imports to several economic sectors, including the Latin American Integration Association (ALADI) and the United System of Regional Payment Compensation (Sucre). According to think tank Síntesis Financiera, that sum represents a 28% decline from the same period in 2012 (Venezuelan authorities have not disclosed the 2013 statistics.)

Including the foreign currency sold via the Ancillary Foreign Currency Administration System (Sicad) over the first seven months, supply of foreign currency to the Venezuelan private sector totals USD 13.20 billion. However, Síntesis Financiera estimates that such amount still accounts for a 27% fall in comparison with the USD 18.10 billion provided by the Foreign Exchange Administration Commission (Cadivi) and the Transaction System for Foreign Currency Denominated Securities (Sitme) over the same period in 2012.

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