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High
oil prices bolster balance of payments.
The preliminary balance of payments data released by the Central Bank in
late-December showed a further widening of the current account surplus in
the last quarter of the year. In 2000, the current account surplus
reached US$ 13.4 billion, up from a US$ 3.6 billion surplus in 1999.
The trade balance remained the key driver behind the strong current
account surplus. According to the data, the trade surplus widened
from US$ 7.6 billion in 1999 to US$ 18.0 billion last year. The
63.5% growth in oil exports represented the driving force behind the
strong expansion, while non-oil exports grew at a lesser 29.1%. The
resumption of domestic economic activity also served to substantially
boost imports, which were up 21.6% over 1999. This month’s
Consensus Forecasts indicates that panellists anticipate the current
account surplus to remain high but narrowing this year.
Exchange
rate regime revised.
On 21 December, the Central Bank announced the revision of the exchange
rate regime. The existing exchange rate band that permits
fluctuation of 7.5% around the central parity remained in place.
However, the monetary authorities tightened the monthly depreciation rate
from 1.28% to 0.58%, or from approximately 16.5% to 7.2% annually.
In addition, a new central parity reference was set on 29 December 2000 at
699.75 Bs/US$. Annual inflation still remains well in excess of the
new rate of depreciation and as a result the Bolivar is likely to continue
appreciating in real terms relative to the US$. The resultant
overvaluation (by conservative estimates some 30-35%) is likely to keep
the currency vulnerable to speculative attacks if international reserve
levels deteriorate in the future. However, the current oil-led
export boom is likely to further bolster reserve levels, which rose from
US$ 15.1 billion at the end of 1999 to US$ 17.5 billion last year.
International reserve levels, excluding Macroeconomic Stabilization Fund
resources, provide coverage for the equivalent to 13.1 months of imports.
Participants expect Bolivar stability to be sustained this year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Venezuela. For more details please click here.
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