Sunday, May 22, 2005

Venezuela To Pay Oil Royalties In Local Currency

Hyperinflation alert: In a near-certain sign the government intends to make the bolivar worthless, the Venezuelan government has decided to pay oil firms in the local currency rather than dollars, as was done previously.
Now, companies will have to register with a state-run currency agency, known as Cadivi, to convert local currency into dollars. The central bank pays Cadivi directly for currency transactions.

During the first quarter of 2005, Ramirez said PDVSA paid out US$890 million (euro705.17 million) to companies working under the operating contracts.

Cadivi is notoriously slow in processing dollar requests and demands excessive paperwork, prompting many companies to buy dollars at a more expensive rate on a booming black market. The official exchange rate is 2,150 bolivars per dollar, but one greenback fetches around 2,600 bolivars on the black market.

Update: Two more Venezuela-related items: first, from the Seattle Times, a story about how activist Maria Corina Machado is on trial for treason thanks to a $31,000 grant:
The act of treason Machado allegedly committed? Her human-rights organization accepted $31,000 from the U.S. National Endowment for Democracy for voter-education workshops ahead of the divisive August recall referendum.
This in the context of deteriorating relations between Venezuela and the US. Second, this Houston Chronicle piece by Douglas MacKinnon indicating Venezuela and the "mad mullahs" of Iran are having talks about nuclear arms development. I give this kind of talk little credibility as yet, but the possibility remains sensible and so I don't dismiss it entirely.