The unraveling of Venezuela’s socialist economy has been very hard to watch. Blame it on poor governmental management, the oil glut coupled with slumping oil prices globally, and a drought that has crippled many countries around the world.
But is selling off your country, or robbing Peter to pay Paul, the best way to get out of a financial crisis? This sure seems to be what the oil-rich country is doing. Venezuela’s Economy Vice-President Miguel Perez announced on Monday that an extension of an oil-for-loans deal made with China would keep the country from failing to honor its debts.
Now India has decided the oil-for-loans deal may be a good way to recoup the millions of dollars owed by Venezuela to the country’s top pharmaceutical companies. Several of India’s generics producers, including the country’s second-largest player, Dr. Reddy’s Laboratories Ltd, bet heavily on Venezuela’s economy, hoping to see big payoffs in a newly emerging market, according to the Economic Times.
In 2014-2015, India’s total good exports to Venezuela were $258 million (registering a 31 percent year-on-year growth). But owing to the downward spiral in the economic crisis in 2016, India’s exports so far in Fiscal Year 2016 (April-February) have only reached a total of $125.5 million. In Fiscal Year 2015, $143.55 million of the total exports to Venezuela were pharmaceuticals. In FY 2016, out of the total exports, $71.3 million was in pharmaceuticals.
The Hindu is reporting that sources in the government say the Commerce Ministry has proposed a mechanism to remedy the outstanding amount of money owed to the pharmaceutical companies.
The proposal would use the State Bank of India as a mediator in the loan payment process. To put it bluntly, Venezuela needs medicines as well as other goods, and Indian companies need to be paid for what they already have shipped. Dr. Reddy’s wrote off $65 million in the first quarter this year, and another company is owed $45 million in the first quarter.
“The situation in Venezuela is very precarious … the government knows it needs to do something about the medicine shortage, that’s why it is willing to discuss such a deal,” one Indian official told Reuters. “At this point, even if our companies get back 5 or 10 percent of the payment they are owed, they would be satisfied.”
Venezuela’s Ministry of health has not yet responded to a request for comment.
