Venezuela oil company to free up more dollars

AP News
Posted: Jan 28, 2013 10:51 PM
Venezuela oil company to free up more dollars

CARACAS, Venezuela (AP) — Venezuela's government announced plans Monday to have the state oil company turn over more of its earnings in dollars to the Central Bank, seeking to confront shortages of some foods and other products that have worsened due to a lack of dollars provided to importers at official rates.

Oil Minister Rafael Ramirez announced the change at a news conference, saying state-run Petroleos de Venezuela SA is to increase by nearly $2.5 billion the amount of dollars it turns over to the Central Bank this year.

Ramirez said that President Hugo Chavez had supported changing the law and that is to be approved by the National Assembly, where pro-Chavez lawmakers hold the majority.

Sporadic shortages of some foods such as cooking oil and chicken have worsened recently while the government has been making available fewer dollars at the fixed exchange rate. Since November, the government has scaled back the amount of dollars it has been providing through its currency agency to businesses and individuals.

The situation has generated growing rumors of a possible devaluation while pushing down the bolivar in street-level black market trading to less than one quarter of the official rate of 4.30 bolivars to the dollar.

Some business leaders have said that the insufficient amounts of dollars provided to businesses has led to fewer imports and worsened shortages of some foods and other products in stores.

Ramirez said the government has sufficient funds to meet the economy's needs for dollars. Oil is the lifeblood of Venezuela, accounting for most of its export earnings and helping to bankroll an economy heavily reliant on imports.

The law modifies the tax scheme for windfall oil earnings in the country, changing the formula to both free up more dollars for the Central Bank and reduce the amount flowing to the National Development Fund, or Fonden. The government uses that fund for a variety of government programs and public works projects.

Ramirez said that as a result of the changes, Fonden would be expected to receive nearly $3 billion less this year.

The redistribution of funds will also allow state oil company PDVSA to improve its cash flow and boost investments in the oil industry, Ramirez said.

Last year, the state oil company sold to the Central Bank $46 billion, Ramirez said. This year, he said, if oil prices keep to the range where they have been, the oil company should provide about $49 billion to the Central Bank.

Ramirez spoke in front of a photo of Chavez saluting, and showed journalists a document with the president's signature.

The oil minister was among several officials who visited the ailing president last week in Cuba, where he has been recovering since undergoing a Dec. 11 cancer surgery.

Vice President Nicolas Maduro had announced on Saturday that during their meeting, Chavez made decisions on certain economic matters and had signed various documents. They included the decisions announced by Ramirez on Monday.

PDVSA has accumulated growing debts in recent years while Chavez has enlisted the company for additional government tasks including food distribution and supporting social programs.

Last year, the company's debt reached $40 billion after rising from about $16 billion in 2007. Ramirez has insisted, despite criticisms by some market watchers, that the company has an appropriate level of debt. He said on Monday that during 2012 it paid debts of more than $15 billion.

Ramirez also denied one news account that some foreign companies have been holding off on their investments in oil projects in the country due to uncertainty about Chavez's health situation.

The oil minister said he plans to meet on Tuesday in Caracas with Igor Sechin, chief executive of the Russian oil company Rosneft, along with more than 30 other representatives of Russian businesses. He didn't offer details of what they plan to discuss.

Ramirez, whose responsibilities also include mining, said that Chavez last week approved a plan to assign more than 35,000 hectares (88,000 acres) of land in southern Bolivar state to the government-run Venezuelan Mining Corporation to develop gold mining projects. He said that Chinese and South African mining companies have expressed interest in joint ventures.