VÍCTOR SALMERÓN
EL UNIVERSAL

Amidst a dramatic increase of oil prices that has pushed the average price of the Venezuelan oil up from USD 49.63 ending the first quarter of 2007 to USD 89.21 the same period this year, the Central Bank of Venezuela (BCV) reported that Venezuela's foreign debt does not stop growing.

The consolidated numbers of the public sector, an indicator that includes state-run oil holding Petróleos de Venezuela (Pdvsa) and other state-owned businesses, show that the foreign debt rose 48.55 percent from USD 29.8 billion to USD 44.3 billion from March 2007 to March 2008.

Indeed, between December 2007 and the first quarter of 2008, the burden heightened by USD 4.48 billion. The BCV attributed this result to "foreign credits contracted by the oil sector and due to a renewed classification by sectors of the liabilities of recently nationalized businesses."

Last year, the government resorted continuously to the issue of bonds to keep under control the parallel exchange rate. This strategy explains most of the foreign debt growth.

Thanks to the purchase of such bonds, banks and wealthy sectors increase their accounts of US dollars abroad.

As noted by the BCV, in the first quarter of 2008, "private entities recorded a 22.6-percent increase in their assets and reached a level of USD 91.2 billion. This can be explained mainly because of the increasing assets deposited in foreign banks, in a context of bigger access to the foreign currency denominated debt securities market, invigorated by recurring placements of the official sector."

As a matter of fact, the Venezuelan foreign debt does not mean a sizeable burden in respect of the economy size -less than 20 percent of the Gross Domestic Product (GDP)-, the lowest in the hemisphere. However, the issue of increasing liabilities in times of high income is a matter of concern.

History tells that when oil prices sink, the GDP quickly deflates like a balloon, and the debt burden turns very heavy.

Gustavo García, an economist and professor with the Institute of Higher Business Studies (IESA,) explained, "It is a significant increase, because the domestic debt has grown also. There are unrecorded liabilities in the public sector, social security costs have climbed for the state; public sector liabilities are raising at a fast pace."

"This happens in a context where all raw material producing countries have enlarged the public assets funds, but in Venezuela there is increasing indebtedness," he added.