Venezuela: A profile
· Venezuela is a Latin American country which has huge
geographical diversity from snow-capped Andean mountains in the West to
Amazonian forests in the South.
· With a population of 30 million, the country is one of the most
urbanised nations in South America.
· Venezuela has some of the largest proven reserves of oil in the
world and its economy is highly dependent on oil.
· and even the Venezuelean girls are beautiful :D :D
What is happening in
VENEZUELA ?
Venezuela's President
Nicolas Maduro has declared a state of emergency to combat the economic war he
says foreign powers and right-wing forces in Venezuela are waging against the
Latin American country.
·
On Friday, President Maduro declared a state of emergency for
60 days, accusing the business elite of boycotting the economy and the United
States of plotting a coup against his socialist government.
·
In measures published in the government gazette on Monday, the
armed forces and local committees now have powers to distribute and sell food.
·
Authorities will also be allowed to cut the working week in the
private sector, as they have done in the public sector, to conserve
electricity.
 |
·
The new measures also allow the government to take control of
basic goods or services, which analysts say opens the way to the expropriation
of companies.
 |
What is the ground situation
?
Venezuela has the world's
highest inflation rate at 180% and there are shortages of basic goods as well
as power shortages.
·
With subsidised goods becoming increasingly scarce, many
Venezuelans have been forced to queue for hours to get the essentials.
·
When a sought-after staple such as cornflour arrives at a
supermarket, the word will spread quickly over social media and hundreds of
people will queue to get it.
·
The government says the shortages are being made worse by an
"economic war" being waged against it.
·
It says that some people are hoarding goods while other buy more
than they need to sell them on at a profit.
·
To cut down on such behaviour, President Maduro announced in 2014
that he would introduce fingerprinting for
shoppers.
·
He has also accused merchants of holding back goods to drive up
prices.
·
The government says that up to 40% of all subsidised goods are
being smuggled into neighbouring Colombia, where they are sold at a massive
profit.
·
In August 2015, Mr Maduro ordered the
partial closing of the border with Colombia.
·
Despite these measures, the shortages have become chronic and the
queues continue.
·
Some Venezuelans are even reporting going hungry because they
struggle to get the food they need.
It seems
low oil prices have hit VENEZUELA badly !! Why low oil prices are bad for
Venezuela ?
·
There is no question that Venezuela is heavily dependent on oil,
of which it has the world's largest proven resources.
·
Oil accounts for about 95%
of Venezuela's export revenues and was used to finance some of the government's
generous social programmes which, according to official
figures, have provided more than one million poor Venezuelans with homes.
·
But prices for Venezuelan oil have plummeted. They almost halved
from an average of $88 per barrel in 2014 to $45 in 2015.
·
By 13 May 2016, they had fallen to $35 per
barrel.
·
The low oil price means that the government does not have the
amount of dollars in its coffers it once had.
·
This in turn is a problem because Venezuela's economy is not at
all diverse.
·
The country grows and produces very little except oil and has
historically relied on imports to feed its people.
·
A lack of dollars means it is struggling to import all the goods
its people need and want.
What's behind the
shortages?
·
The fact that the government has fewer dollars at its disposal
to import goods is a large part of the problem.
·
But there are also other factors.
·
President Hugo Chavez, who governed Venezuela
from 1999 to 2013, introduced price controls on some basic goods in 2003.
·
The idea was to make essential goods affordable for Venezuela's
poor. The prices of items such as sugar, coffee, milk, rice, flour and
corn oil were capped.
·
Producers complained that the new regulations forced them to
operate at a loss.
·
Some refused to provide goods for the government-run stores
where the price-controlled goods were sold; others decided to stop producing
these goods altogether.
·
The result was that the country became even more
reliant on imports.
Ok...but
their is also some kind of constitutional crisis (National Assembly v/s
President) ?
 |
·
In parliamentary elections in December 2015, opposition parties
won a majority of seats in Venezuela's legislative, the National Assembly.
·
They campaigned on a promise to remove President Maduro from
office before his term ends in 2019.
·
Since their election victory they have tried to do this by a
number of means.
·
They proposed a constitutional amendment aimed at shortening his
term from six to four years, but it was rejected by
the Supreme Court.
·
They have also handed in a petition with 1.85 million signatures
requesting a recall referendum be held. Many Venezuelans blame Mr Maduro
for the economic crisis the country is experiencing.
What is the
latest in the story ?
·
The Venezuelan Supreme Court has ruled that a decree issued by
President Nicolas Maduro last week declaring a state of emergency is
constitutional.
·
The decree gives Mr Maduro extra powers to deal with Venezuela's
economic crisis, including the right to impose tougher security measures.
·
The opposition-controlled parliament rejected the decree on
Tuesday.
·
But the Supreme Court, which rarely rules against the government,
said the decree was justifiable.
·
The court upheld the decree because of what it called "the
extraordinary social, economic, political, natural and ecological circumstances
that are gravely affecting the national economy."
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Ok...but
we are INDIANs ...lets look as to how it affects India....how we are in the
picture ..if we are...in short ( w.r.t. India ) !!
·
India’s goods exports to Venezuela in 2014-15 were $258 million (registering
a 31 per cent year-on-year growth).
·
Owing to the crisis in Venezuela, India’s exports in FY16
(April-February) have touched only $125.5 million (almost half).
·
India shipped mostly pharmaceutical products which amounted to
$143.55 million in FY15 and $71.3 million in FY16. The sector is the worst
affected due to the payment defaults.
·
Venezuela is a major source of crude oil for India which is its
world’s third largest importer after United States of America and China. Four
Indian companies ONGC Videsh, Indian Oil Corporation, Oil India and Reliance
have invested heavily in Venezuelan oil fields.
So what
is proposed ?
·
Under the proposed payment mechanism when Indian importers pay
for oil and other imports from Venezuela, a certain portion (say around 30 per
cent) of the payment will be held by an Indian public sector bank, say SBI, in
Venezuela.
·
The sources said due to the fear of losing the Venezuelan market
to competitors from other countries including China, India’s exporters including
from the pharmaceutical sector have decided to hold on for the moment despite
the payment problems.
·
When India’s exports to Venezuela, the Venezuelan buyer
(importer) will certify that they have received the goods and instruct the
concerned Venezuelan bank to release the payment to the concerned Indian
exporters. This instruction will be passed on to SBI-Venezuela and then to
SBI-Mumbai. Finally, SBI-Mumbai will release the payment to Indian exporters by
debiting from the vostro account.
·
Then through a vostro account that money will be kept in SBI’s
Mumbai branch and converted to Indian rupees. (‘Vostro’ is an Italian term
meaning ‘yours’, and vostro account refers to holding ‘your’ money or
Venezuela’s money in this case.)
·
When India’s exports to Venezuela, the Venezuelan buyer
(importer) will certify that they have received the goods and instruct the
concerned Venezuelan bank to release the payment to the concerned Indian
exporters. This instruction will be passed on to SBI-Venezuela and then to
SBI-Mumbai. Finally, SBI-Mumbai will release the payment to Indian exporters by
debiting from the vostro account.
·
The sources said due to the fear of losing the Venezuelan market
to competitors from other countries including China, India’s exporters
including from the pharmaceutical sector have decided to hold on for the moment
despite the payment problems.
THE ABOVE is more or less
like a IRAN like solution as far as payments is concerned !!
Point to be noted
::- The trade balance is still hugely in Venezuela’s favour (due to oil).