Brace for Venezuela fallout
THE MAJOR ECOMOMIC and financial problems that Venezuela is confronting are likely to have negative fallout for the Caribbean.
That’s the view of LATAM PM, a group of “independent analysts” in Latin America.
And while it believes some of the hardest hit would be those benefitting from Venezuela’s PetroCaribe agreement, the organisation said others that were not, including Trinidad and Tobago and Barbados, would still feel the impact of their neighbour’s challenges.
Venezuelan president Nicolas Maduro has declared a 60-day state of emergency due to what he called plots from the opposition and the United States to topple his government. LATAM PM said this was influenced by the fact that the economy there “is doing terribly”.
“Inflation hit 180.9 per cent and the economy contracted 5.7 per cent last year, according to central bank figures. Contagion risks are significant: on one hand, regional risk could spike, with Brazil and Ecuador already in a recession,” it said.
“PetroCaribe . . . is also in big danger. Between 2004 and 2008, Venezuela experienced an economic miracle. Its economy grew ten per cent on average every year, while GDP per capita expanded by 26 per cent. Now Venezuela is going backwards.
“By 2018, the country will reach the GDP seen in 2005, but with a population six million (20 per cent larger). GDP per capita will fall to 2000 levels by 2018, as if 18 years had never occurred for the economy.”
LATAM PM said it was only “a matter of time” before PetroCaribe’s survival would be threatened and it added “this will bring economic instability to Central America and the Caribbean”.
“The region will find itself with financing problems, and debt is likely to increase. Although the recent bond issuances of the Dominican Republic and Jamaica helped them to reduce their debt, the increasing fiscal pressures could compromise repayments,” it stated.
“To overcome the challenge, the region will require more assistance of international organisations and the US”. (SC)