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To: djane who wrote (7925)	9/11/1998 11:08:00 PM
From: djane	Read Replies (1) \| Respond to of 22640

High rates choking Venezuela [Can you imagine 80-90% consumer loans?] Published Saturday, September 12, 1998, in the Miami Herald By TIM JOHNSON Herald Staff Writer CARACAS -- When bankers in January granted police officer Nelson Sturabotti a mortgage to purchase a $47,000 three-bedroom apartment, he almost exploded with joy. But today, that jubilation has turned to anger, even desperation. In the past nine months, interest rates have doubled, and Sturabotti's $377 monthly salary no longer meets his soaring monthly mortgage payment, based on floating interest rates. The police officer and his family of four soon may be on the street. "If they don't raise my salary, I will lose the apartment,'' he says bitterly. Around Latin America, Central Banks are desperately trying to defend their battered currencies, drawing on foreign reserves and sending interest rates soaring. The foreign reserves are dwindling because the Latin governments are selling their dollars to buy back the local currencies their people are sending abroad for safekeeping. Higher interest rates are to entice people to leave their savings in their local currencies. But higher interest rates have left consumers, homeowners and businesses frantic as they struggle with rising credit card and mortgage bills and loan payments. In Venezuela, consumer loans now carry interest rates as high as 80 percent and 90 percent, bringing the economy to a near-dead halt. "Stores are empty. Car sales have dropped dramatically. And banks will be hard hit,'' said German Garcia Velutini, president of the Vencred holding company that owns part of the private Banco Venezolano de Credito. Nearly every sector of the economy is reeling from the high cost of credit. "There is a state of generalized anxiety,'' said Cira Romero Barbosa, a local economist. "You have terrible economic uncertainty. Almost everything is being put on hold,'' added Antonio Herrera-Valliant, general manager of the Venezuelan-American Chamber of Commerce and Industry. A confluence of factors has bleakened the outlook. First, world oil prices have plunged. The Venezuelan government depends on oil exports for nearly 70 percent of its income, so the loss of $7 billion in revenues this year is emptying the treasury. A global recession promises to prolong recovery. More significantly, a radical former military coup leader, Hugo Chavez, is the runaway favorite to win presidential elections Dec. 6, sending jitters through the business community. Impoverished Venezuelans view Chavez as a beacon of hope, but business owners dread that he will scare away investment, impose economic controls and loot the well-run state oil company. Foreign investment in Venezuela this year has fallen 65 percent. In a Fiat showroom in the Caracas district of Chacao, car salesman Victor Mansilla looked forlorn. Not a customer was in sight. "People come in to look,'' Mansilla said. "But when you show them the interest rates of around 80 percent, they run out. No one can pay that.'' Walking hand-in-hand with his wife at the new Sambil shopping mall in Caracas, real estate broker Jose Manuel Garcia said he couldn't recall when Venezuela was last in such dire shape. "We're practically at the edge of collapse, really bad off,'' he said. "I have a client who is selling three businesses -- two liquor stores and a perfume outlet. He wants to be entirely liquid.'' Fears of bad consumer loan portfolios are spawning rumors that the banking system may be in trouble -- just four years after a major banking collapse. Planning Minister Teodoro Petkoff Thursday night decried the "disgraceful rumors'' as "ridiculous speculation.'' But Garcia Velutini, the investment banker, affirmed that some of Venezuela's weaker financial institutions are in trouble. "There are banks with 30 percent of their portfolios in credit card loans,'' he said. "The banks pushed people into loans. . . . Several banks will go bankrupt.'' Despite the economic turmoil, President Rafael Caldera appears determined to avoid a devaluation of the bolivar, the national currency, even if it means keeping interest rates high and running down foreign reserves. Copyright c 1998 The Miami Herald Getting in touch with HERALDlink