GLOBAL ECONOMY

Where's the beef? Venezuela offers its oil to Uruguay in exchange for food

Venezuela announced on Tuesday that it had modified an existing trade deal with beef-rich Uruguay to allow the government of President Nicolás Maduro to use oil to pay for meat and other goods in an effort to ease the drastic shortages currently plaguing the South American nation.

In a deal first hashed out in July, Venezuela agreed to ship 12,300 barrels per day to Uruguay in exchange for beef, soy, rice, and oranges.

Maduro and outgoing Uruguayan President José Mujica changed a 2005 cooperation agreement in late January that originally stipulated Montevideo can pay as much as 25 percent of its purchases in 15 years so long as Venezuela's export barrel remains above $30. The new deals allows Uruguay to pay as much as half of that with goods pre-approved by the ailing Venezuelan government while the rest still has to be paid within 90 days at a 2 percent interest rate.

The announcement of the new trade stipulations with Uruguay comes less than a week after Maduro's visit to Trinidad and Tobago, where Prime Minister Kamla Persad-Bissessar suggested an oil-for-toilet paper swap.

"The concept of commodity sharing is simple – the Government of Trinidad and Tobago will purchase goods identified by the Government of Venezuela from T&T's manufacturers, such as tissue paper, gasoline, and parts for machinery,” Persad-Bissessar said, according to Bloomberg.

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Venezuela, which has the world's largest oil reserves, has been plagued with a number of shortages over the last few years as the economy in the South American country deals with crippling inflation and widespread unrest.

Maduro has blamed the chronic shortages on a conspiracy between opposition political parties and wealthy Venezuelans who are unhappy with him continuing the "21st-century socialism" implemented by late leader Hugo Chávez.

Analysts, however, argue that those same controls - nationalization and extensive social programs, for example – have created large imbalances that have harmed the economy and led to shortages.

Strict currency controls implemented under Maduro have also reduced access to hard currency, which complicates imports and has created shortages of basic goods, including medicines, flour, shampoo, spare parts, and meat.

"Price controls, for example, act as a disincentive to local producers, forcing them to cut output," said the survey organization Consensus Economics, according to the BBC. "The resulting scarcity forces up inflation, defeating the entire purpose of price controls in the first place."

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