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Index
General context
Initial clarification
Major premise
The origin of the idea
Why the Bolívar Oro?
How did I conceive the idea of oil as an
instrument of International Reserves?
What Venezuela could do
Conclusion
1. General context
The Venezuelan government decided in July
2018 to incorporate a portion of the country's oil reserves as part of its
International Reserves and for that purpose has transferred to the Central Bank
of Venezuela a territorial area of the Orinoco Oil Belt. This fact has
generated opposing opinions in Venezuela of those who think that an asset such
as oil cannot be placed as an instrument of international reserves.
2. Initial clarification
I, Pablo Rafael González, do not have or have
ever had any kind of link with the current government of Venezuela, its
policies or its activities.
The first thing I must say is that since 1996
I have been raising the idea of incorporating a part of the monetary value of
the country's oil and diamond reserves as an instrument of International
Reserves; is not, then, a recent idea, but a proposition that I have been
making through my writings for more than 20 years, in books such as Critical Appreciation of Monetary Policy,
Bolívar Oro, Monetary Policy, a Different Vision and Monetary Policy, an
Unorthodox Approach and news published by international agencies (1).
3. Major premise
Can oil not extracted from the subsoil form
part of the International Reserves of a country?
The oil not extracted from the subsoil,
because of it is not an immediately available good, cannot be considered as an
instrument of the International Reserves of a country. But the monetary value
of the oil extracted and properly stored in a certain area if can be considered
as a reserve instrument because it is a tangible good of great world demand and
with a constantly known and relatively stable international price.
4. The origin of the idea
In 1996, I wrote the document titled Revaluation, fixed parity and creation of
Bolívar Oro as central objectives of monetary policy (2) available since
then in the Central Bank of Venezuela Library. This document, updated, then
served as the basis for the publication in 2007 by Monte Ávila Editores
Latinoamericana of the book titled Critical
Appreciation of Monetary Policy, El Bolívar Oro, in which I reiterated my
proposal to incorporate the monetary value of tangible wealth as oil and
diamond as additional instruments of the monetary policy of the countries.
Indeed, on page 46 of the aforementioned book
is the following quote:
"In the case of Venezuela, which is a
country of great wealth in its territory, including gold, diamond and oil,
which have immense value and can be exchanged for the universally accepted
international exchange instrument, the dollar, the situation is different.
Venezuela can create a new currency revalued and sustained by its great
material wealth. "
Then, on page 64 it says:
"The fact of being an oil country gives
Venezuela a privileged position because on oil, which is a product of demand
insured in international markets, it can maneuver its monetary policy
autonomously."
Regarding the environmental effects of mining,
the book on page 67 says the following:
"I certify that I do not agree with
mining because of the immense damage it causes to the environment, but I
recognize that less predatory mining could be developed in specific areas. The
only thing that would justify mining for a certain period of time would be the
State's best interest to increase its gold reserves. But once that purpose has
been reached, mining must be immediately suspended and measures taken to
restore the damage caused to the environment, through reforestation and other
conservationist measures.” End of the quotes.
5. Why the Bolívar Oro?
It is important to repeat that it was in 1996
when I first wrote the document Revaluation,
fixed parity and creation of the Bolívar Oro as central objectives of the
monetary policy that served as the basis for the book Critical Appreciation of Monetary Policy, El Bolívar Oro, published
later, in the year 2007, since it serves to locate the historical moment and
the why and for what of that book. For the year 1996 Venezuela faced a
difficult situation that was repeated with some frequency due to the decrease
in the price of oil. To contribute in the search for a solution to the crisis
of that moment, I wrote in 1996 the aforementioned document, Revaluation, fixed parity and creation of
the Bolívar Oro as central objectives of the monetary policy in which I
suggested to the President of the Republic , Rafael Caldera, that the Central
Bank of Venezuela would acquire all the gold production that international merchants
of Guayana, the Venezuelan Amazon, were taking. With this proposal to the
President what I aspired was to monetize that gold and incorporate it into the
International Reserves, in order to strengthen Venezuela's economic position.
6. How did I conceive the idea of oil as an
instrument of International Reserves?
The idea is very simple:
I thought that just as the United States had
established a Strategic Petroleum Reserve to prevent situations like the Arab
oil embargo of 1974, so Venezuela could create a Strategic Petroleum Reserve
whose monetary value could serve as support to the country's International
Reserves, since it is denominated in the most powerful and accepted
international currency in the world, the dollar.
The idea of the Strategic Petroleum Reserve
has not only been implemented by the United States, but also by Japan and now
China. In the case of these countries, the oil reserves have essentially an energetic
purpose, however, it should be noted that President Donald Trump (3) has suggested
the possibility of selling half of said Strategic Petroleum Reserve to
strengthen the financial position of the United States. This fact raised by
President Donald Trump contributes to support more the proposal I have made to
consider the monetary value of oil as a financial instrument that can perfectly
be applied to the International Reserves of the countries.
7. What Venezuela could do
Venezuela has all the elements to constitute
a Special Strategic Petroleum Reserve whose monetary value serves as a basis to
strengthen its International Reserves. It is enough to only create a public
company whose main owner be the Central Bank of Venezuela that, associated with
Petróleos de Venezuela, extracts and stores the oil properly and progressively,
which must remain there as a real guarantee of the securities that are issued
to be incorporated into the International Reserves of the country.
8. Conclusion
The use of the monetary value of oil and
diamond as instruments of international monetary reserve in addition to the
currencies, gold and the Special Drawing Rights of the International Monetary
Fund is an idea that I have been raising since 1996, more than 20 years ago. It
is not, therefore, a recent approach and in the case of countries such as
Venezuela, with an abundance of oil resources, diamond and gold, this
constitutes an advantage for the strengthening of its international monetary
position.
(1) El Economista 13 febrero 2013
DW 24 julio 2018
* The author, Pablo Rafael Gonzalez, is a Latin American
writer and researcher in the fields of philosophy, politics and economics
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