VENEZUELAN CURRENCY FALLS TO 611 TO ONE US DOLLAR; COUNTRY RISK IS OFF THE CHARTS

The unofficial exchange rate for the Venezuelan Bolivar stands at 611.25 to one dollar (USD$), which reflects what many believe is the upcoming collapse of the Venezuelan economy. For Country Risk purposes, in a nation where obtaining dollars for any purpose is becoming completely impossible, a fair assessment is that any international commerce, especially lending, is out of the question at this time.

Another issue is the increasing probability that importers and businessmen will turn to their only sources of available dollars, money launderers working for Colombian and Venezuelan narcotics traffickers, or international black market currency dealers, where there is a real risk that counterfeit US$100 notes will be passed to them. Either resource is a dangerous choice.

Given that Venezuela's beleaguered president, Nicolas Maduro has, in desperation, stooped to creating a crisis over an old, and settled, territory dispute with neighboring Guyana, the domestic situation could deteriorate even further in the short term. As I have stated, several times in the past, Venezuela is past the point in its economy where any assessment of Country Risk can justify any investment of capital, opening of local bank subsidiaries or branches, or lending, and bankers should also warn their good clients, who are engaged in international trade, of the increased possibility of default upon obligations.

Additionally, in a country where nobody engaged in international commerce has any dollars, those Venezuelan nationals, or corporate entities, that present such wealth for deposit, in any North American or European financial institutions, may be either criminal criminal organizations, or legitimate companies that have been forced to front for such illegal entities. Enhanced due diligence on the applicants, or even taking a position to decline any such new business, is not only prudent, it is now mandatory.