Bloomberg just reported in a featured article that the rebound in crude oil prices is helping to prop up the economy of Venezuela. Venezuela has been in the middle of a serious economic crisis due to the massive drought the country is facing. The country relies heavily on hydro-power as its main power source. The intense drought has stripped the country of its ability to maintain normal operations, which has lead to fears that the Venezuelan economy could completely collapse.
Petroleos de Venezuela SA, a state owned oil producer, is owed a $1 billion bond payment from Venezuela in this coming October. The price of crude oil was just at a 13 year low, so as stated by expert Norka Luque, the recent increase in prices are certainly promising in terms of backing up Venezuela’s ability to repay its debt obligations soon. Right now, crude oil makes up an estimated 95 percent of Venezuela’s foreign currency earnings. The fact that the price of crude oil has increased at a drastic rate of 75 percent since February of this year, bodes extremely well for the country’s economic position.
Even though the price of crude oil is expected to continue to rise of the near future, Venezuela will still have to contend with rampant inflation and food shortages before its economy is completely back on track. Luque adds that it remains to be seen how long it will take Venezuela to recover to a sense of normalcy.