[Marxism] Repercussions

["S. Artesian" <sartesian@xxxxxxxxxxxxx>]

A short time ago, the esteemed economists associated with CEPR issued a 
prospectus on Venezuela based on the decline in oil prices, concluding that 
Venezuela was at little if any risk of economic distress based on balance of 
payments issues that might arise from the decline in the price of oil.

One of the signature characteristics of bourgeois political economy through 
history-- from its physiocrats, its laissez faire advocates, to its 
interventionists is this notion of balance-- as if everything revolves 
around achieving, maintaining, or restoring some sort of "balance" to the 
capitalist economy.  To me, at least, its seems that political economy has 
never fully overcome its mercantilist roots, which is no surprise, since 
every capitalist thinks, actually hopes and wishes, that  exchange, trade, 
is where the butter is, and production is just so much burden...  Anyway 
that's a subject for a different discussion.

Returning to Venezuela, the Financial Times noted Friday that the Venezuelan 
state oil company,  PDVSA is about to float a bond issue of  $2 billion, and 
in dollars [so much for decoupling],  to compensate for reduced cash flow 
due to declining oil prices.

Proceeds from the issue will be utilized by PDVSA to pay off 3rd party 
suppliers and contractors.  The PDVSA financial management wants to pay off 
a backlog of invoices,  suggests the FT, by taking advantage of the 
divergence between the official exchange rate and the parallel ["black"] 
market rate for bolivars to dollars.  The official rate is maintained at 
2.15  bolivars to the dollar, with the parallel market rate at 7 bolivars to 
the dollar.

The FT claims PDVSA has been converting dollars to bolivars on the parallel 
market and while these bonds are denominated in dollars for purchase, they 
are payable in bolivars.

In order to "husband" declining dollar stocks due to shrinking oil revenues, 
the government has restricted access in exchanging dollars for bolivars at 
the official rate, unintentionally strengthening the black markets.

If PDVSA actually uses the proceeds from the bond sale to pay off its 
backlog of invoices to suppliers in dollars but at the parallel market 
rates, it will "book" a profit essentially as currency speculators book 
profits, by devaluing a currency, in this case its own, "buying low"  after 
selling its debt at the offical rate "selling high."

Venezuela  will have the govts. single largest supplier of revenue 
effectively agreeing to a devaluation of the bolivar, with PDVSA booking its 
profit from the depreciation of the rest of the Venezuelan economy.   Hey, 
that sounds just like what US oil companies do through OPEC driven price 
increases. 


________________________________________________
YOU MUST clip all extraneous text when replying to a message.
Send list submissions to: Marxism@xxxxxxxxxxxxxxxxxxx
Set your options at: 
http://lists.econ.utah.edu/mailman/options/marxism/archive%40archives.econ.utah.edu