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Impact of the United States Financial Sanctions on the Bolivarian Republic of Venezuela Special Report PDF Print E-mail
Friday, 14 September 2018 20:30

Situation of balances and movements of the Single Account
August 2017-2018

Executive Summary

1. Background:

Since the entry into force of Donald Trump´s Government Executive Order in August 2017, in which financial sanctions were issued against Venezuela, the Republic has faced an international financial blockade. Its main effects are:

1. Closure of accounts in correspondent banks such as Commerzbank AG, Citibank and Bank of China Frankfurt, in which Venezuela maintained, by August 2017, around USD 150,000,000.00. These banks aligned with the blockade, preventing the use of money for the acquisition of food and medicines. This resources remained blocked in the case of Bank of China in Frankfurt until March 2018.

2. To this date, Venezuela has not been able to maintain accounts in US Dollars, so it became necessary to search for new European, Middle Eastern and Asian Banks, adopting the Euro as the main currency and using other currencies of emerging markets (Turkish Liras, Dírhams and Yuanes), with greater volatility compared to the Dollar. This situation has resulted in significant losses due to the exchange differential. In general terms, the consequences are higher transactional and financial costs that most be assumed by the Republic.

2. Financial cost resulting from sanctions

2.1. Example: Resources invested in Food

Starting from sanctions on August 2017 until now, a total of USD 6,172,832,640.37 have been invested in food.

The case of food stands out for its strategic importance and for the obstacles that Imperialism has placed to avoid the consolidation of the country's food supply programs. Since the imposition of sanctions, we have made an investment in food for a total of USD. 2,448,126,087.94, the result of adding the acquisition of raw materials plus finished products, as follows:

Alimentos  USD
Finished Products (CLAP)  1,556,523,228.33
Raw Material (Vessels) 891,602,859.61
TOTAL (IN USD) 2,448,126,087.94

Financial and commercial sanctions have hindered the acquisition of food. The operational obstacles imposed by the shipping companies and international ports, such as change of vessels to transport the cargo destined for Venezuela, the increase in waiting times, and also in tariffs, have caused important losses to the country, estimated in USD. 37.04 MM.

These losses are caused, in first place, because of increase in the average waiting time of ships, that went from 45 days in 2017 to 60 days in 2018, 33.33% more. Secondly, because of an 51.52% increase in the costs for days of delay in the case of bulk carriers, that passed from USD. 16,500 to USD. 25,000, an additional cost of USD. 26.65MM in comparison to 2017. In the case of container vessels, their associated costs increased on average by 40.63%, from USD. 3,200 to USD. 4,500, with an additional cost of USD. 10.40MM in comparison to 2017.


2.2. Banking Commissions and average time for the payments:

Prior to the enforcement of US sanctions on financial transactions, the payment instructions were sent through correspondent banks and made effective within 48 business hours. Now, on average, a payment is made between 10-20 continuous days, after the verification and approval of the compliance officers of the banks involved in the operation. To this date, the operating costs (which include costs for transfers, payment inquiries and amendments to different transfers) add up an amount of USD. 655,200.00.

Additionally, as a result of the need to perform Forex operations (currency exchange), due to the impossibility of using the US Dollar, the Republic has lost more than USD. 20,000,000.00, another consequence of the criminal blockade.

2.3. Credit Suisse:

The Executive Order has generated an important loss of USD 264,180,768.00, due to delays in payments of bonds acquired through Credit Suisse (CLN), related to titles of Venezuela´s External Public Debt and other financial values issued by the Republic.

2.4. Financial loss of Venezuelan Bonds blocked by Euroclear:

In July 2017, the nominal value of the portfolio of Venezuelan bonds in custody of Euroclear was USD 1,973,228,192.00, while the market value on that same date was of USD 1,093,529,941,96. However, as a result of the sanctions and the international financial blockade of bonds issued by the Republic, the reflected value of the aforementioned bonds (PDVSA and GLOBALES) in the international stock exchanges has fallen steadily by July 2018 (according to Bloomberg's financial services) reaching a market value of around USD 625.90 million, amount that represents a loss of 57.24%, USD. 467.62MM.

3. Financial sanctions are a big business:

All these atypical phenomena suffered by Venezuela since 2017, nonexistent in an economy without a financial blockade, prove to be a big business for those who impose it. Venezuela has had to endure this big business, which has cost the country around USD. 789.50 MM.

To this amount, we must add more than USD. 1,600,000,000.00 belonging to Venezuela that Euroclear retains, making it impossible for the Republic to make regular payments.

Last Updated on Monday, 17 September 2018 18:31
 
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