The authorities in Venezuela want to reduce dollar payments: causes
The Venezuelan economy is going through a difficult time. Prolonged protests, sanctions by the U.S. and the EU, the overthrow of the government have a negative impact on all spheres of life. The authorities in Venezuela are actively looking for ways to get the country out of the crisis. They have suggested switching to yuan to pay for some goods and services from suppliers. Caracas believes that such a decision would bypass the U.S. sanctions, which make it difficult to settle in dollars.
The authorities want to introduce a new payment method for companies that cooperate with the public sector. The accounts will be made through Chinese banks. PDVSA, a state-run oil company, has also received a proposal.
The official statement about this type of calculation has not yet been received from the authorities, but the media claim that the details were clarified orally with the company executives and that the latter are thinking about whether to accept such an innovation or not.
It is not yet known whether PDVSA or other state enterprises have already conducted transactions through Chinese banking institutions.
Many experts are sceptical about the proposal from the Venezuelan authorities. It complicates the planned account opening process – it is quite long and complicated. In addition, the news is not commented by the Ministry of Information, the Central Bank of Venezuela and the People’s Bank of China.
The incentive to switch to yuan payments was the U.S. sanctions, which were extended in August, when most government agencies in Venezuela, including the Central Bank, were banned. This decision of Washington significantly limited the actions of Caracas, and it became practically impossible to carry out payment transactions in dollars. Calculations in the national currency, bolivars, are complicated by hyperinflation, which last year was more than 130 000%.
The United States harshly criticizes Venezuelan policy. Washington recently stated that profits from oil sales should be used by Caracas to provide food and medicine to its citizens rather than to cover its debts to other countries.
The State Department of the United States said that the economic crisis and shortage of goods in Venezuela began even before Washington imposed sanctions. Due to the huge corruption of the government, money from oil exports does not go to improve the living standards of the population, but remains in the pockets of officials.
Despite the huge economic problems, the authorities in Venezuela continue to invest in the military segment instead of the social segment. For example, new contracts were signed with Russia for $209 million during the year to supply helicopters and other equipment. And at this time, citizens are catastrophically short of products.
