Venezuelan Oil Diplomacy Curbed By Economic Crisis
"It's a lot easier to reduce foreign aid than cut wages or fire workers," said Francisco Rodriguez, an economist in New York for Bank of America-Merrill Lynch.
The country most hurt by the pullback is Nicaragua, which receives $600 million in annual transfers from Caracas. Starting next year, former guerrilla leader Daniel Ortega's government will begin funding monthly $30 "socialist" cash transfers to poor Nicaraguans that until now have been paid for by Venezuela. Construction of Central America's largest oil refinery has also stalled as Venezuelan investment has dried up.
Analysts said Venezuelans are now feeling the financial stresses that worsened seven months ago, after Maduro defeated Gov. Henrique Capriles by a razor-thin margin to succeed Chavez following his death from cancer. Faced with growing spending demands spurred by 54 percent inflation, the state agency that administers the nation's dollars has been restricting access to hard currency to pay suppliers overseas. That's pushed the value of the dollar in the black market to 10 times its official rate and led to record shortages of everything from toilet paper to cooking oil.
Maduro blames it on his opponents in Venezuela and the U.S., saying they're conspiring to sabotage the economy.
Trading partners grew more concerned after the government proposed paying for imports with bonds issued by state-run oil company PDVSA. In October, Brazilian Trade Minister Fernando Pimentel met with Maduro to discuss the unpaid bills, according to a Brazilian official who insisted on speaking anonymously because the talks were private.
The delays pose a much bigger risk for smaller Panama and Colombia. Business in the Colon Free Zone adjacent to the Panama Canal is down about 10 percent this year, due to declining Venezuelan purchases, said Severo Sousa, who represents exporters in talks with the Venezuelan government.
Sousa estimates Venezuela owes Panamanian companies about $1 billion, of which only 10 percent has been recovered.
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