Authored by Zainab Calcuttawala via OilPrice.com,
Venezuela is now in a “deeper phase of economic stress,” Moody’s Investor Service said on Wednesday, according to The Oil and Gas Journal.
Falling oil production and tough economic sanctions have increased pressures on the nation’s financial capacity. Mismanagement and underinvestment in the country’s oil and gas industry is causing defunct facilities to produce low quality oil that does not meet the requirements of its usual buyers.
Moody’s sees “a negative feedback loop between declining production across all economic sectors, accelerating scarcity of hard currency, and an economic policy mix defined by price controls and forced discounting that exacerbate supply shortages and hyperinflation.”
Venezuela’s production is falling faster than higher barrel prices can fill the revenue gap, the credit rating agency added.
“The fall in production will only exacerbate cash-flow stress,” Moody’s research note reads.
“While oil prices have rallied in recent months, the decline in oil production will more than offset the would-be increase in dollar inflows from oil exports. This has negative implications for both debt repayment capacity and Venezuela’s already grim economic outlook.”
Hyperinflation will continue at the 4000 percent level through 2018 due to the financial deterioration.
President Nicolas Maduro is still intent on milking the digital currency fad to help alleviate the cash shortage and circumvent U.S. sanctions. After proposing an oil-backed national cryptocurrency called the petro, Maduro is now calling for an OPEC-wide one that would also include other large producers.
Speaking to media in Caracas after a meeting with OPEC’s secretary-general Mohammed Barkindo, Maduro said earlier this week, “I will make an official proposal to all OPEC members and non-OPEC states to work out a joint cryptocurrency mechanism backed by oil.”
Some 5 billion barrels of crude have been set aside to back the petro, which would be priced at $60 a piece, Russian Sputnik reports, adding that the first batch of petros to be sold will be of 100 million coins. The price per coin is tied to the price of Venezuelan crude.
via Zero Hedge http://ift.tt/2BjB3dl Tyler Durden