Venezuela: Defending National Savings

Geronimo Paz

“Robbing a bank is a crime, but it’s more of a crime to create one.”

– Bertolt Brecht

We find ourselves fighting a triple battle: the battle against the coronavirus, the battle against the escalation of the American aggression and the battle for the reactivation of the economy, a battle that is conditioned in turn by the set of coercive measures such as the commercial and financial blockade that is part of the hybrid war that the United States is waging against the country. The national government is conducting efforts on each of these fronts with the clear purpose of guaranteeing peace, sovereignty and democracy, with successes and failures, with greater or lesser effectiveness, but with firm determination.

In economic policy we must act as expeditiously as we act against the coronavirus. We must act quickly and with comprehensive measures that not only protect the productive apparatus from the economic impact of the pandemic but also lay the foundations for a sustainable medium- and long-term recovery. The current political and economic situation presents a set of opportunities that we must consider in order to move forward in this regard, despite the harsh restrictions and limitations that we have, as well as a global situation of recession and a fall in the main indicators of the international stock markets and markets, which makes it extremely complex, but at the same time urgent, to define concrete actions in the area of economic policy.

Among the strategic tasks, which in the current situation are not only possible but essential, is the need to deeply restructure, in accordance with the supreme national interest, the financial sector, which until now has been essentially oriented towards speculative activities. Banking, both public and private, must be oriented more towards financial intermediation and less towards speculative activities, since its raison d’être is to guarantee the stimulation of national production.

At present, the national bank has approximately 60 trillion bolivars deposited in the BCV as a result of legal reserve requirements. This is a large part of the national savings of the entire country, and a key factor for the reactivation of production, which should be managed in accordance with this purpose, in order to stimulate national productive activity with credit, in a situation in which the State has severe liquidity restrictions due to the coercive measures imposed by the United States. This national savings becomes a strategic resource that must be placed under state control, not only to stabilize macroeconomic variables such as hyperinflation, but also to reactivate and redirect credit towards key and priority sectors, i.e. those that can guarantee the production of food, medicines, ensure logistical chains, security and defense and, above all, to recover wages that allow workers to meet their basic needs and have a comfortable life.

As part of the measures announced by the Bolivarian government to confront the economic impacts of the pandemic, the Central Bank of Venezuela (BCV) decided to reduce the legal reserve in national currency by 7 percentage points, which represents 93% of the weekly balance for financial entities. This specifically means that banks will have 7% of the total amount deposited in the BCV as deposit guarantee reserves to be theoretically placed in production credits. This 7%, calculated on the basis of the remaining 60 billion bolivars or less, which represents the entire national bank deposit for legal reserve purposes, is something like 4.2 billion BsS and close to 50 million dollars, which should go to financing the agricultural and industrial sectors, the production of medicines, etc.

This timely and appropriate measure runs the risk of being cancelled out by the chronic and compulsive speculative practices of the Venezuelan banking system, if measures are not taken by the State to guarantee that credit is truly oriented towards production. The State is ultimately responsible for this, as it has the powers and the legal and technical instruments to do so. Draconian mechanisms must be created and established as a severe penalty against the banks that divert these funds to speculative activities. Given the state of national emergency, the legal reserve fund should be considered a strategic reserve and should be managed according to national security criteria and, therefore, should be a matter of state. This does not mean nationalization, expropriation or the establishment of measures that make its use more complex than it should be at present, given the complex situation of the country.

Translation by Internationalist 360º