Here is our monthly summary of recent economic developments in Venezuela:
European Union's Foreign Affairs Council Extends Sanctions Against Venezuela and Government Officials
The Foreign Affairs Council of the European Union (Council) on Nov. 11, 2019, decided in their meetings to extend for one more year the sanctions (restrictive measures) that were imposed against Venezuela and Venezuelan government officials on November 13, 2017.1 In November 2017, the Council decided to impose such sanctions in view of the deterioration of Venezuela's democracy and rule of law, and human rights violations in that country. Restrictive measures include, among others, the seizure of weapons and equipment intended for internal repression, as well as a travel ban and freezing of assets to 25 people who hold official positions considering that, according to the Council, they are "responsible for human rights violations and/or for undermining democracy and the rule of law in Venezuela."2
Central Bank of Venezuela Issues Resolution on Indexation of Loans
The Central Bank of Venezuela (BCV) on Oct. 21, 2019, published Resolution 19-09-01 in the Official Gazette that regulates new loans indexed to an account unit called Commercial Credit Value Unit (UVCC). This unit is determined according to the Investment Index (IDI), and will be calculated in bolivars and adjusted according to the market reference exchange rate published every day onmthe BCV website. For the purpose of complying with the Resolution, banking institutions should:
For the purposes of the accounting valuation and the amortization or prepayment of the credits and loans granted, the loan balance at a specific date will result from multiplying the liability position in UVCC by the IDI value at that date. If the IDI of the anticipated date is lower than the IDI of the concession date, the current IDI will be used for the credit concession date.
Commercial credits granted prior to the entry into force of the Resolution – those regulated by Article 1 of Resolution 19-01-06, dated Jan. 30, 2019 – will maintain the conditions under which such credits were agreed until their full settlement, with the understanding that banking institutions may not charge an annual interest rate greater than 36 percent for such loans.