Buckle up Venezuela! Its going to be a [economic] bumpy ride...

Yep, finally today the Venezuelan Government has issued a statement concerning the real deal economic global crisis affecting also, who? Venezuela. It is obvious that Venezuela is probably one of the first affected countries in the whole world. The reason, well would it be just because 90% of government spending comes from oil revenues. And more importantly, Venezuelan economy depends roughly 60% from imports. The drop of the oil prices had to mean something to Venezuelan economy, almost a year ago Venezuela oil crude was trading around $125 per barrel, now its lucky to get even $38, thats a -30%, and I am being very optimistic.

So finally today Chavez gave in on the subject, Ali Rodriguez, Venezuela´s Finance Secretary has issued a statement saying that the Government will make economic adjustments announcements in 15 days. What??? I know Mr Rodriguez is the Finance Minister but is he buying time? At the same token the inflation levels seems to surging through the days of the year 2009, and at the same time next week we have an increase in the Tax Unit (Unidad Tributaria) from Bs. 46 to Bs. 55, an increase in 19% percent. How will this affect Venezuelans? Well, let me put it this way, how about Stanflation, that is inflation with economic recession. I seriously think that it will probably take 3-4 weeks to really feel it in local supermarkets.

At the same time, considering that Venezuela generally depends on its oil revenues for its internal economy, the President of PDVSA and Energy Minister (Venezuelan Oil Czar) has also announced that PDVSA is considering renegotiating with Venezuelan oil contractors a decrease in 40% for their fees. He is arguing a radical change in circumstances, and as an attorney know the implications of such an argument. Bottomline, it is publicly known in Venezuela that PDVSA has defaulted on its local contractors and now PDVSA will argue "radical change in circumstances" to negotiate their way out of their legal quagmire. The term legally is Rebus Sic Stantibus, which derives from latin "fundamental change of circumstances" that gave reason for the contract to take place and remains a lawful option to excuse performance on contractual terms. Whats going to happen then Venezuelans would ask? Contractors will have no other option but to accept...and ooops, another factor to consider for the Stanflation to seriously kick in.

My economic advise, divest Venezuelan currency and invest in real estate and wholesale goods. Watch the government regulation on the latter...