U.S. Markets closed
  • S&P Futures

    -3.25 (-0.08%)
  • Dow Futures

    -10.00 (-0.03%)
  • Nasdaq Futures

    -11.50 (-0.08%)
  • Russell 2000 Futures

    -0.90 (-0.04%)
  • Crude Oil

    -0.49 (-0.55%)
  • Gold

    -1.60 (-0.09%)
  • Silver

    -0.07 (-0.36%)

    +0.0001 (+0.0102%)
  • 10-Yr Bond

    -0.0580 (-2.04%)
  • Vix

    +0.42 (+2.15%)

    -0.0006 (-0.0458%)

    +0.0700 (+0.0525%)

    -658.43 (-2.65%)
  • CMC Crypto 200

    -16.99 (-2.88%)
  • FTSE 100

    +8.26 (+0.11%)
  • Nikkei 225

    +4.83 (+0.02%)

Venezuela's woes deepen as Citibank shuts teller window

Caracas (AFP) - Venezuela's howling economic woes have worsened as Citibank closed the government's overseas payments account and multinational firms are packing up and leaving.

The beleaguered government -- the opposition is trying organize a recall referendum against the president -- has responded by shifting more power to the military in order to cling to power and avert total collapse.

The army is now in charge of distributing food and other basic goods. Shortages are acute in this South American country blessed with the world's highest oil reserves but devastated by the drop in world crude prices.

Citibank confirmed Tuesday that after a risk assessment, it has closed the account that the Venezuelan government used to make international payments.

Socialist President Nicolas Maduro likened the move to a financial blockade.

Venezuela used the account to make payments to other accounts in the United States and elsewhere in the world.

Now its economic mess is worse because it will have to find another bank to deal with, so as not to get closed out of the international financial system altogether.

"This adds another problem because it makes external payments harder and complicates overseas transactions for a country that was already in a severe crisis," said opposition lawmaker Jose Guerra, a former central bank governor.

The snub from Citibank is the latest in a string of closures or scaling back of operations of foreign companies operating in Venezuela, such as Coca-Cola, US food giant The Kraft Heinz company, Clorox and airlines Lufthansa, Aeromexico and American Airlines.

The Maduro government made good Monday on a threat to take over the facilities of companies that shut down.

A plant run by US consumer products giant Kimberly-Clark -- it makes products such Huggies diapers and Scottex toilet paper -- has been turned over to its workers.

The company said that it simply could not get ahold of hard currency to buy raw materials in Venezuela.

- 'Nobody stops Venezuela' -

Maduro digested this news with the defiance characteristic of him and his mentor, the late populist president Hugo Chavez.

"Do you think they are going to stop us by putting in place a financial blockade? No, ladies and gentlemen, nobody stops Venezuela! With Citibank or without it, we are moving forward. With Kimberly or without, we are moving," he said Monday night.

But the country's economic problems are indeed crushing.

An estimated 80 percent of food items, medicines and other basics -- even soap -- are in short supply. Inflation hit 180 percent last year and the IMF has forecast it at 720 percent this year.

The country imports just about everything it consumes. But the dollars needed to buy all that stuff are also in short supply: both because of the drop in oil prices and because of currency controls the government exercises.

"Companies are leaving because they cannot get hard currency. They have nothing with which to import raw materials, and stop producing," said economist Pedro Palma of consulting firm Ecoanalytic.

"The response is to take over plants. But what are the workers going to use to produce?" he mused.

Critics say the problem stems from the leftist government's model of tight grips on the economy and the currency controls in place since 2003.

Maduro says he is being targeted by US interests and local business elites bent on stoking grassroots anger and removing him from power.

- Militarization of the economy -

As the crisis deepened, Maduro announced Monday night a new plan to fight all the rampant shortages by having soldiers oversee food distribution and he put his defense minister, General Vladimir Padrino Lopez, in charge.

The new thrust is called the "Gran Mision de Abastecimiento," which translates as "Great Supply Mission."

Civilian ministers are now subordinate to the military. Maduro also named a new head of the National Guard.

The military began overseeing distribution of food and basic goods at ports, airports and businesses in a number of states.

Maduro said the goal is to end corrupt practices, such as crooked officials turning food deliveries over to smugglers who resell the items at much higher prices to the few Venezuelans who cannot afford to pay.

"We are seeing a major movement of pushing civilians to the side in benefit of the military, which is what is holding up the Maduro government," economist Jesus Casique told AFP.

"This, the Citibank issue and the companies that are leaving all affect the country's image and discontent within Venezuela," Casique added.

Padrino Lopez said he is no fan of military intervention in civilian affairs, but national security and defense are at stake.

"It is a matter of discipline," the defense minister said.

Maduro says the military will make things right, arguing that the private sector controls 93 percent of distribution of basic goods and is killing the economy with hoarding and scalping.

Out of a total of 30 government ministries, the military is now in control in 10.

This not going down well with critics of the Maduro government.

The Venezuelan Bishops Conference said the rise of the military is a "threat to tranquility and peace."