Is Venezuela's economy stronger than Mexico's?

Most of us who follow Venezuela would agree that this country's economy is in the tank, and largely reliant on oil, the one export that manages to pay the bills.

Mexico, however, is in a very similar situation. Pemex suffers, and Mexico is heavily reliant on the national oil company to maintain a robust revenue stream.

Then the so-called "global recession" hit. And somehow, Venezuela has faired better than Mexico. Here are the latest numbers:

Bloomberg reported on 20 August that Venezuela's economy shrank 2.4% during the second quarter of 2009, compared to 2Q08. This is the first time Venezuela's economy has contracted since 2003...

Mexico's National Statistics Institute reported on 20 August that the country's economy shrank 10.3% during the second quarter of 2009, compared to 2Q08.

PDVSA: Ongoing problems with contractors

Some 3,000 oil workers in the Venezuelan state of Zulia suspended their strike only once PDVSA agreed to pay their salaries. These are not PDVSA employees. They work for companies PDVSA has contracted out to perform a variety of tasks.

The fact that PDVSA will pay the workers directly, rather than settle its debts with the companies, suggests that due to cash flow problems, PDVSA can't pay off its debts with contractors.

Southern Pulse has reported - twice now - that US companies working in the region have shut down individual wells due to PDVSA's inability to make payments.

This seems to be a trend that will see PDVSA struggle as it tries to keep operations going amid a weakening oil price climate and increasing domestic turmoil over the Venezuelan economy in general.

Peru, dollars, and China

Word has come through that Peru is talking about swapping out its local currency for dollars amidst negotiations for a major loan. But the most interesting aspect of this economic news is that the Peruvian government is talking to the United States and China.

The Peruvian Finance Minister, Luis Valdivieso, said Peru is looking for some US$ 9 billion in loans to help finance some $35 billion in development projects.

Considering the change of the Presidential guard next week and other issues around the world, the US might stall - or prolong - the negotiations in the face of increasingly drastic Peruvian need. It will be interesting to see if China bails out Peru, with a long-term strategic look at what Peru has to offer in return, apart from repaying the loan and what Garcia has already given China by way of mining concessions...