Weekly Report - 29 July 2003

Venezuela's finance minister, Tobí­as Nóbrega, said last week that he expects second-quarter GDP to be 14-16% down on the same period of 2002. He underlined that this was a personal estimate and that the final official calculations were not yet complete. Still, if he is right, the decline in activity is slowing down: in the first quarter, GDP was down by a record 29%. 

That, of course, was largely the result of the two-month strike-cum-lockout staged by the opposition. 

The government of Venezuela is planning to launch a US$2bn, seven-year dollar denominated bond issue. 'We decided to work on a seven-year basis and with a maximum interest rate of 7.0%,' Nóbrega said. 'Our belief is that the bond will end up being issued below 6.0%.' 

Potential local purchasers can buy the bonds in bolí­vares at the official rate of Bs1,600 to the US dollar and then sell them abroad for dollars. This makes them an extremely attractive option for local investors, as the US dollar is currently selling for around Bs2,900 on the black market. 

The minimum purchase level for the new bonds will be set at US$1,000. 

The funds generated by the new issue will allow the government to buy back bonds scheduled to mature in 2005, 2007 and 2008, as part of its debt-restructuring programme. 

Open unemployment in Venezuela appears to have virtually stopped rising. At the end of May the rate stood at 19.2%, only 0.1 points higher than a month earlier -which leaves it 3.9 points higher than in May last year. 

Private economists had been predicting that the rate would go on rising, to reach 22-25% by year-end. 

The government had introduced legal measures in April 2002 preventing companies from dismissing personnel. These were extended in July to cover the period to January 2004. However, the statistics show that despite the regulations, 540,000 people lost their jobs in the year to May 2003.