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Tuesday November 29th, 2022

US mulling sanctions on Venezuela oil: Tillerson

AFP – The United States said Sunday it has not ruled out sanctions on Venezuelan oil as it turns the screw on President Nicolas Maduro, but is wary of hurting the country’s people.

Secretary of State Rex Tillerson is in Argentina during a tour of Latin America to bolster a common front against Venezuela’s bid to hold a presidential election that opponents deem illegitimate.

The top US diplomat has received support from other governments in the Americas, including on Sunday from his Argentine counterpart Foreign Minister Jorge Faurie, but some are cautious about sanctions.

At a joint news conference, Tillerson — a former chief of oil giant ExxonMobil — confirmed the ultimate option of sanctioning Venezuela’s key oil sector is under consideration, but that Washington shares its allies’ concerns.

Oil-rich and once one of the wealthiest countries in Latin America, Venezuela under Maduro faces economic collapse and widespread popular protest. The US, Canada and the European Union have imposed economic sanctions targeting Maduro loyalists seen as profiteers or human rights abusers.

Tillerson did not push back against the suggestion that sanctions on oil might also hurt US companies that have built refineries in the southern United States geared to accept Venezuelan crude.

"Obviously sanctioning oil or prohibiting the oil to be sold in the United States … is something we continue to consider," Tillerson said, while acknowledging Faurie’s concerns.

"As the foreign minister indicated, our disagreements are with the Venezuelan regime not with the people, the Venezuelan people are suffering mightily in the current circumstances."

Tillerson said oil sanctions could be deployed if it is decided that this would bring the crisis to a more rapid end "because not doing anything to bring this to an end is also asking the Venezuelan people to suffer for a much longer time."

But he added that Washington was also looking at how to "mitigate the impact on US business interests."

Faurie agreed with Tillerson that Maduro’s attempt to call an election on terms set by Venezuela’s non-elected Constituent Assembly was illegitimate and would be rejected by Argentina.

"As for the sales of oil and trade in oil that exist, that is particularly important, we should closely follow up on this to ensure appropriate balance between what the Venezuelan nation needs and what is being used by the leaders of the Venezuelan government," he said.

Maduro shot back, in a video on Facebook, saying that Tillerson "has just threatened us with an oil boycott. Well, we are ready. Nothing and nobody is going to stop us."

Tillerson is due to meet Argentina’s President Mauricio Macri on Monday before flying on to Peru and then Colombia, which has already received around half a million Venezuelan refugees.

He will then visit Jamaica for talks on how regional powers can replace the subsidized oil that Venezuela ships to Caribbean nations, in the event it is hit by sanctions or economic collapse.

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Sri Lanka rubber farmers to get boost from France, Michellin

ECONOMYNEXT – Sri Lanka will start a project supported by France and Michellin group to support 6,000 rubber farmers, cabinet spokesman Minister Bandula Gunawardena said.

Rubber farmers in Badalgama and Medagama in the Moneragala district will be supported improve their capacity and supply chains at a cost of 726,700 Euros.

Financial support will be provided by France’s Michellin group which has a subsidiary in Sri Lanka and the government of France.

The project will be implemented by France’s Ksapa group under the guidance of Ministry of Industries.

The cabinet of ministers had cleared a proposal by the Plantations Industries Minister to enter into an agreement to implement the project. (Colombo/Nov29/2022)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a twitter.com message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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