SANTIAGO – Chile’s Central Bank Wednesday announced to have revoked a reciprocal credit line with its Venezuelan counterpart due to constant defaults on payments this year.
In a statement, the Bank said it had notified Venezuela’s central bank and that the line would be cancelled within 10 days. The monetary authority said it has been taking steps to mitigate its exposure to Venezuela since 2014 and was currently owed $2.1 million by that country’s central bank.
Chile is the latest country to suspend business dealings with the Latin American nation. The credit line agreement between the two countries dates back to 1989, as part of the Latin American Integration Association (ALADI).
“The progressive deterioration of Venezuela’s financial indicators and the (Venezuela central bank‘s) behavior in prior years under this arrangement had already motivated us to adapt measures to safeguard the Central Bank of Chile’s wealth,” the monetary authority said in a statement.
To collect that money from Venezuela, Chilean Central Bank officials said they will take “all legal measures within their reach.”
Venezuela’s economy is undergoing a deep recession and its currency reserves are at their lowest levels in years as the OPEC country grapples with low oil prices and a flailing socialist model.
The cancellation is just one piece of bad news in what has proven to be a bad financial month for the socialist nation, run by President Nicolás Maduro. The country’s state-owned oil company, PDVSA, continues to struggle to maintain regional trade relationships with countries that no longer trust it to uphold its commercial commitments.
Caracas has said it will make all pending debt payments despite a set of difficulties that have resulted from financial sanctions imposed by the United States.