Delcy Rodriguez announces financial reforms
President Nicolas Maduro (left) and Vice President Delcy Rodriguez (right) in a meeting with representatives from banking and finance associations.
On 29 August Venezuelan Vice President Delcy Rodriguez announced reforms to encourage growth in the financial sector.
New measures include reducing reserve requirements, allowing hard currency transactions between Venezuelan banks, and notes issued by the finance ministry.
Government policy towards the economy is transitioning from reducing inflation at all costs to encouraging growth. The economy is stagnating—for its small size—and foreign investment is expected to be limited after the July vote, considering that there is no clear end to sanctions.
The appearance was made days after a cabinet reshuffle. Rodriguez was ratified as Vice President of the Republic, while she left the Ministry of Economy, Finance and Trade; she was appointed to the Ministry of Oil and as Sectoral Vice President for the Economy.
The new measures
Rodriguez announced a reduction in reserve requirements to give out credit, without providing more details. They reached 100% in 2019 as part of the inflation-reduction measures she directed. Monthly consumer price inflation was brought down from three figures in 2019 to one last year.
The government will facilitate an interbank foreign currency market, so that banks can trade the US dollar directly. A new app to send payments in hard currency between Venezuelan banks has just been approved.
These measures are a step in accepting the dollarisation process, yet in a way that reinforces control by the Venezuelan state. The use of US and European bank accounts, often linked to platforms like Zelle and PayPal, has become widespread for businesses and consumers.
Bank commissions will be updated, in her words “to ease the use of the bolivar and strengthen monetary sovereignty.” There will also be a new insurance framework for low-income Venezuelans.
Finally, Rodriguez said that the state will issue treasury notes in the local market. It seems that they will be more like instruments to hedge against the depreciation of the bolivar, which the central bank already issues. The Vice President said that the notes will be made available for banks and the general public, and trade in the stock market.
The financial sector: Fast growth, small size
A private report on the financial sector made this year showed that there is an enormous gap between available capital and what the private sector needs.
In 2000, bank credit represented 10% of GDP, while now they are at 1.2%. Deposits are also down, from 16% to 4.5%, but the ratio to credit has more than doubled. Stock market capitalisation is equivalent to 2.5% of GDP, while in Colombia it is 39.6% and in Peru 37.8%.
Credit is now pegged to the US dollar. Still, retail loans are estimated to be below 5% of bank portfolios, credit cards have limits of $60 to $100, and mortgages are virtually extinct.
The financial sector is seeing some corrections, growing faster than the rest of the economy. A UNDP report showed that credit in dollar terms grew by 79.7% from Q1 2023 to Q1 2024. And, despite the grim economic prospects ahead, the stock market is slightly up after the July vote; there was no rout.
According to the central bank, the finance and insurance sector would have grown the most this year: 17.1% in the first quarter and 20.92% in the second, when the national rates were 8.4% and 8.78% respectively. Experts have raised concerns with the institution’s methodology, but the sector nonetheless outperforms the rest of the economy.
