In what was surely a blatant attempt to suspend economic reality, a group of chamber of commerce leaders defied experts’ analysis of Venezuela to present to Emerging Markets a bullish case for investment in the country.
One of the group, Deulin Faneite, president of the Venezuelan Chamber of Businessmen and Industries of Mercosur (Cavemin), claimed that inflation in Venezuela was “below that of many other countries in the world, for example Mexico”.
Venezuela’s annual inflation hit 57.3% in February, the central bank said on March 14. Meanwhile, Mexico’s central bank said annual inflation fell to below the upper limit of 4% in early March.
One economic commentator at the IADB conference remarked: “It’s good to see that on the occasion of Mario Vargas Llosa’s 78th birthday, magical realism is alive and well in Latin America.”
Yet the “mistaken perception of reality” was exactly what the Venezuelan business delegation attending the IADB meetings said it was out to correct.
Faneite said: “Venezuela is the great investment opportunity in the world”.
High inflation was “fictitious” and generated by the parallel dollar rate, claimed Faneite, who said his delegation represented the private sector business community in Venezuela and was not linked to the government.
Nicolás Maduro’s government this week increased access to dollars with the Sicad II exchange rate mechanism that provided dollars at a rate of 51 bolivars.
In the black market — now called the parallel market since Sicad II decriminalized the unofficial exchange of dollars — the bolivar rose from around 90 to 65 bolivars to the dollar.
Analysts at investment banks were sceptical Sicad II had gone far enough, but Faneite said he was “in no doubt that the parallel dollar will cease to exist” with the new measures.
Official FDI figures do not reflect the momentum that Faneite claims. Foreign direct investment in Venezuela was $3.69bn in 2013, according to the central bank — higher than 2012 but lower than 2011. But he insisted he had anecdotal evidence to prove his bullishness.
“We’ve met the president of LG Industrias, which shows that Venezuela is a country for opportunities for foreign investment and the growth of companies,” he said.
“We have the entire world knocking on Venezuela’s door to invest here and have met more than 100 foreign companies in the last year, which shows the interest there is.”
Faneite said the government understood the “important requirement” for foreign investors: the need to repatriate their profits and had recently put in place legal measures to guarantee this right.
Suppliers, service companies and oil partners are owed billions of dollars in late payments by the Venezuelan government.
But according to Faneite “Venezuela is not exceptional in the world” in this respect. He said that it is normal for a government to owe businesses, or indeed other governments, money.
“For example, government of large countries owe huge amounts to China,” he said.
China does indeed own significant volumes of US Treasury bonds, for example. But barring a back-office glitch in 1979, the US has not defaulted on its debt since 1812.