Lack of credit pushes Venezuelan companies to seek loans abroad

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CARACAS, Sept 28 (Reuters) – Venezuelan business owners struggling to access credit amid their country’s lingering economic crisis are seeking loans from foreign banks, businesspeople and sources of the financial sector, told Reuters.

Local banks in the South American country offer few loans to the private sector due to the efforts of Nicolas Maduro’s government to reduce inflation by increasing the supply of foreign liquidity, limiting credit expansion, reducing spending public services and raising taxes.

Large companies in need of finance have started seeking loans from foreign banks with local partners or connections, private sector and financial sources said. The loans have market-rate interest rates and a high collateral threshold, they said.

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By law, local banks must keep 73% of their deposits at the central bank, leaving little room for lending.

“Industries need to look for options to maintain their operations,” one businessman said, adding that since loans are expensive due to interest and collateral, only big companies can seek them. “Small and medium enterprises cannot transport them.”

Several companies seeking credit belong to the agricultural sector and need funds to buy wheat, fertilizers and other goods abroad, three sources said.

Other companies seeking loans focus on exporting food and drink, they added.

Neither the central bank nor the banking regulator responded to requests for comment.

The US sanctions imposed in 2019 aim to limit Maduro’s access to funding and do not prohibit private Venezuelan companies from operating abroad.

Loans sought in other countries by large Venezuelan companies typically amount to more than $500,000, two of the sources said, asking that the names of the companies and banks remain confidential for security reasons.

“The government is transferring the biggest burden of its adjustment plan to the private sector by restricting business credit and consumer credit, which partly affects households,” said economist Daniel Cadenas.

Venezuelan banks’ credit portfolios total some $583 million, according to official July figures, but economic analysts say businesses’ funding needs are 10 times higher and the room for maneuver offered by the relaxation of controls change has not led to a full economic recovery.

“The bank has become more transactional, rather than giving credit,” a finance source said.

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Reporting by Mayela Armas; Written by Julia Symmes Cobb; Editing by Vivian Sequera and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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