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A loan with the IMF? The reason why more than 5,000 million dollars were added to Venezuela’s international reserves

From one day to the next, Venezuela’s international reserves increased by more than $ 5 billion. The news did not go unnoticed by the media and social networks, which immediately speculated about the reasons for this balance, at a time when the South American country is still under the tight financial blockade of the US and the European Union.

As is customary in Venezuela, the fact has a simple explanation, but a complex execution. That amount, about 5.1 billion dollars, comes from the International Monetary Fund (IMF), an institution that has been severely questioned by Chavismo in the official narrative and that, for the same reason, aroused the suspicions of the entire political spectrum in the country.

Is it an acquired loan? A secret negotiation? Neither option. In reality it is about the Special Drawing Rights (SDR), an “international reserve asset created in 1969 by the IMF to supplement the official reserves of member countries”, as stated in the web of organism. The problem is that having them will be difficult for the Government of Nicolás Maduro.

A right, a pandemic

Last August, the IMF approved an allocation of SDRs, equivalent to 650,000 million dollars for members, with the aim of “propping up global liquidity” amid the impact of the health crisis caused by Covid-19.

“This is a historic decision: the largest SDR allocation in IMF history and a boost of encouragement to the world economy in the midst of an unprecedented crisis “, declared then the director of the organization, Kristalina Georgieva. Among those beneficiaries is Venezuela, a country that is entitled to receive the equivalent of $ 5.1 billion (or what is the same, SDR 3.568 billion).

The agreement entered into vigor as of August 23, but it was not until last week that the statement confirming the assignments was made public. For this reason, and as normally happens, the BCV included the amount in its balance on September 8, since these resources are considered reserves.

Strictly speaking, the SDR – whose value is determined with a basket of five currencies (dollar, euro, pound, yen and yuan) – is not a loan, but an allocation that by right is distributed among IMF members, “in proportion to their relative quota” in the body, that is, on the basis of what the country participates in or contributes to the Fund.

This is not the first time these assignments have occurred. Since 1969, the IMF has distributed SDRs to its members three times: the first for 9,300 million SDR (1970-1972); the second for 12.1 billion SDR (1979-1981); and a third, which was delivered in two blocks, for a total of 182.7 billion SDR, in 2009, in the context of the global economic crisis.

In 2009, during the government of the late former president Hugo Chávez, Venezuela obtained a special allocation for 1,971.22 million SDR and another for 255.15 to face the crisis that broke out in 2008. That, precisely, has been the common point of these operations: they coincide in the context of economic difficulties global. Now the main reason is the covid-19 pandemic.

This would be the fourth time that the IMF delivers these resources so that, in the words of its director, they can be used to supplement the countries’ foreign currency reserves, to combat the health crisis or to reduce “their dependence on internal or external debt. more onerous “. In practice, the only thing that would monitor the fund it would be transparency in execution of the amounts because the countries, sovereignly, are the ones who are empowered to decide how to invest them.

Why is there controversy?

When the BCV included the amount in its balance sheet, the controversy was not long in coming. Some economists linked to the opposition assured that it was “disparate“That will be added to international reserves because the country still cannot have those resources.

The reason for this impossibility lies in the self-proclamation of the former opposition deputy Juan Guaidó as “interim president” of Venezuela, in January 2019. And it is that, due to that unconstitutional outburst mainly endorsed by the United States, the South American country cannot dispose of of those resources freely to attend the coronavirus crisis.

On Tuesday, Guaidó – who is being investigated for “qualified theft of assets” – he claimed that access to SDR would be on the table in the negotiation carried out by the opposition and the Maduro government in Mexico, and which will have a third round at the end of this month. Previously, both political sectors had reached a partial agreement that coincides with the need for the State to regain control of the assets that have been blocked, confiscated or seized abroad with the consent of the Venezuelan right.

Meanwhile, the IMF has not ruled on the possibility that Caracas can make use of the money, since since 2019 the organism declared itself in limbo Given the lack of consensus among its members on the political situation in Venezuela: it neither openly recognizes the Maduro government, nor the former opposition parliamentarian. His only response in those two and a half years has been silence, by cutting off communication with his natural interlocutors, which are the Ministry of Finance and the BCV.

Some sectors of the left, for their part, openly criticized the Government because the money (which is still not accessible) comes from an institution as delegitimized in official discourse as the IMF. From the Communist Party, for example, they rejected that the reception of the SDRs in Mexico be negotiated because they consider it “the first step for the return of Venezuela to the financial institutions of the Washington Consensus.”

“It is naive to think that these forces they will not take advantage to impose some conditions“said the PCV, although it recognized that the SDRs are not a pact with the IMF nor do they compromise the sovereignty of the country. The fear, for those sectors of the left, is that in the context of crisis, Venezuela will be pressured to accept the ‘ recipes’ of the organism, which were already applied in the country in 1989 and which precipitated the social outbreak known as’ El Caracazo ‘.

But while the destination of the resources and their execution are still unknown, the truth is there is nothing new in that the BCV balance sheets reflect the SDR as a reserve, since it is a practice that has been carried out without interruption since the creation of these instruments, and that did not stop even with the outrageous appearance of Guaidó in the Venezuelan political scene, as recorded in the monthly or quarterly financial statements published by the institution.

Nazareth Balbás

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