Analysts and business leaders say that foreign currency flows into Venezuela's private sector could drop in the next few weeks, after Washington ordered a ban on oil tankers as part of sanctions. This would likely fuel inflation in this OPEC country. U.S. president Donald Trump ordered Tuesday's?blockade?, Washington's latest effort to put pressure on Venezuelan President Nicolas Maduro by targeting his government's main source of income. Trump's anti-Maduro campaign has included a buildup of military forces in the region, and over two dozen attacks on boats that the U.S. claims were drug traffickers and killed at least 90 people. Trump has repeatedly said that U.S. land attacks against Venezuela could start soon, and that Maduro must leave office. However, the Venezuelan President appears to have a strong military backing and the support of his cabinet as well as allies like Russia.

OIL BUYERS DEMAND VENEZUELA CONCESSIONS

Maduro, his government and the U.S. have denied all connections with drug trafficking. They claim that the U.S. wants a change in leadership to gain control over Venezuela's natural resource reserves, including its vast crude reserves. Sources have said that Venezuelan oil consumers are demanding steeper discounts, and changes to "spot contracts" because of the seizure of a vessel last week. Around 80% of all exports are sent to Asia.

U.S. sanctions force companies in Venezuela that want to import raw materials to exchange local bolivars into dollars generated from the oil trade or foreign card transactions at the central bank's exchanges. Analysts and business leaders say that uncertainty about 'crude shipments' will reduce oil revenue and the supply of cash and cryptocurrency available to industries.

Alejandro Grisanti, an economist, said: "This could be the most powerful action by the United States." The government's allocation of foreign currency to businesses was already decreasing. According to financial sector and local analysis firms, they totaled $5 billion between January and November, a 16% drop from the same time period in 2024. Analysts said that flows could drop further as the U.S. sanctions could affect up to half of oil exports.

Worries about Dollar Availability

Financial sources reported that the dollar and crypto supply on Monday was 6% less than the previous week.

One businessman, who requested anonymity, said that private sector executives were worried about the dollar availability in coming days. However, another source claimed that manufacturers have enough stock to meet current consumer demand.

The central bank and the communications ministry?didn't respond to comments. Vice President Delcy Rodriguez stated on Wednesday that crude oil exports continued despite an "illegal blockade". Maduro's Government has slowly begun to allow dollar-tied cryptocurrency such as USDT (also known as Tether) in private currency exchanges. This change was made after a U.S. licence allowing Chevron's to export Venezuelan oil - but barring payments to Maduro’s government.

Another analyst, who requested anonymity, said that a low supply of dollar in any form would pressure the exchange rate. In Venezuela's economy devaluation is reflected in prices.

Analysts say that the official exchange rate depreciates by about 1% per day, which forces families to pay higher prices for food, medicine, and other necessities. Some worker bonuses, previously paid in foreign currencies, are now paid in bolivars indexes to the exchange rate.

JP Morgan, in a Wednesday note, predicted that local prices would rise by 420% this coming year, given the local economy's dependence on imported goods.

According to the International Monetary Fund, Venezuela's inflation could reach 548% by year-end. Since October 2024, the central bank hasn't published any price data. Rod Nickel, Nick Zieminski and Rod Nickel are responsible for reporting.

(source: Reuters)