More resources will be channeled from the oil exports to the Central Bank in 2013 by Venezuela, as confirmed by Rafael Ramirez, the Oil Minister of this Latin American country. Venezuela is currently looking forward to alleviate a shortage of USD which has resulted into crimps in the imports. This move is going to be taken in an attempt to combat the current situation. The levies on the Venezuelan oil industry will be reduced and as part of that, the rule named windfall tax will be modified. This new rule will now, after the changes, be applicable to oil prices above $80 each barrel. The law earlier used to be applicable for oil prices of $70 per barrel or more. This movement is going to lower the funding of Fonden, the off budget development fund of Hugo Chavez, the Venezuelan President. Before implementation, these changes, however, have to be approved by the Congress.
This measurement is part of the Economic Growth plan which has already been approved by Chavez. The President is currently undergoing treatment in Cuba. As the foreign currency is falling short of the expected level, the Bolivar has experienced a decline of 53% and is at 18.35 per USD in last year. This stoked inflation and several staple goods such as corn flour, chicken and milk had shortages.
According to the analysts of Eurasia Group, the Venezuelan Government will only go for timid economic measures and is not going for a decision to devalue the Bolivar. This is because of the political uncertainty of the country, as mentioned by these analysts. They added that these measures are expected to reduce the shortages and rein in inflation; however, the state oil company’s cash flow will not improve. This is not going to improve the company’s ability to invest either.
In 2013, thanks to the measurements, Petroleos de Venezuela SA will see its cash flow increasing by $1.42 billion. Apart from that, the Dollar amount it will sell to the Central Bank is also expected to increase by $2.47 billion. Last year, Fonden received around $15.5 billion from Petroleos. Because of the updated tax plan, in 2013, it is expected to receive $12.6 billion instead. However, many analysts feel that devaluation would have been more logical and this measurement is not going to help Petroleos big time.