Another move by Venezuela to get around US sanctions

The Government of Nicolás Maduro continues to seek alternatives to the financial pressure exerted by Washington.

The  blockade and  financial embargo that the United States imposed on the Venezuelan Government’s bank accounts, forces Caracas to try out ways to get rid of these measures in the midst of a serious economic crisis.

On repeated occasions, Venezuela has  denounced  that the ultimate goal of financial sanctions is an armed intervention to the Caribbean country.

For that reason, the  Government  announced on Tuesday that all transactions in its foreign exchange market will be referenced in euros and not in dollars.

# 17Oct | LA THE LABEL OF THE DAY!  # Financial ProtectionThe transactions of the national exchange market will be referenced, in the euro the auctions of the Dicom and the credits that deliver the financial system of the country will be in euros, yuan and other convertible currencies pic.twitter .com / ESfMU5qD3o

– MIPPCI (@Mippcivzla) October 17, 2018

This is a new move to try to avoid US sanctions that prevent the Government of Nicolás Maduro:

• Refinance and renegotiate your debt.
• Obtain financing in the international market.
• Acquire spare parts for industries, medicines, medical equipment, food and supplies for agricultural production.

However, the elimination of the dollar as a foreign exchange marker does not mean that the US currency “must necessarily stop circulating”, only “increase the circulation of the euro” in the country, says Luis Salas, associate researcher of the Latin American Council of Social Sciences (CLACSO ).

To achieve the success

The impacts of the use of the euro “will be linked to the decisions that Europe makes about whether or not to follow the dictates of Washington,” says Venezuelan economist Raúl Peñaloza, a member of the Venezuelan Observatory of Economic Reality (OVRE).

On this aspect, the European announcement to establish a mechanism to make financial transfers with Iran, is an antecedent that is “important to evaluate”, adds Peñaloza, because it goes against the sanctions announced by  Donald Trump against the Persian nation.

Alternatives to the dollar

They are announcements, says the economist, that “although timid”, they show a change in the European policy with respect to the unilateral decisions of the United States.

Peñaloza believes that the Trump Administration has received “clear messages from many countries”, contrary to his claims.

Governments are looking for “alternatives to get rid of the straitjacket that commercialization involves in dollars,” says the economist.

For that reason, it qualifies as “very significant” that Venezuela explore other avenues for the commercialization of its hydrocarbons, because the negotiation of energy in dollars has been the lever of US economic development.

Euros to scene

The Venezuelan government not only separates from the US currency, but also announces the injection of  2,000 million euros to bid on the currency market between the months of November and December.

Luis Vicente León, director of pollster and opponent of the government of Nicolas Maduro company,  said  that the injection of euros into the economy is  a nod to the domestic private sector . However, he believes that the credibility of the announced amount, as well as the continuity of that strategy, “is very, very low”.

For his part, Raúl Peñaloza believes that the “intervention of the State” will motorize the foreign exchange market, and may be “the last impulse before the definitive dismantling of exchange control”, in force since 2005.

Trust

Despite the announcement, Raúl Peñaloza points out that in the immediate  future the effects of the change from the dollar to the euro will not be perceived  , since it will depend on the dynamism of the transactions with the European currency.

For the Venezuelan economist, the options explored by the Government of Venezuela are a way to alleviate the crisis. The sanctions imposed by Washington “do not affect only state companies or some officials individually, but the entire country,” he concludes.