Venezuela’s Behind on Its Debt and Facing Two Huge Bond Payments
bloomberg.com
bloomberg.com
https://www.usatoday.com/story/news/politics/2017/08/25/exec...
when you cant sell assets, you cant repay a bond. PDVSA, the nationalized oil asset of the state of Venezuela, is now legally prohibited from dealing with US markets.
While this all seems to be a reasonable response to the Maduro leadership issues in the country, one becomes immediately suspicious of the US intent in latin america when Vice President Pence cites the motivation as 'ensuring democracy.' the sentiment has about a 40 year grim history in the region as it applies to US foreign policy.
These restrictions are forcing an inevitable outcome sooner. Venezuela's debt load is unsustainable for reasons entirely of Chavez and Maduro's doing (as well as the people who elected them in elections that were, until fairly recently, fair and free [1]).
Suspicion is good. Using baseless suspicion to deflect attention from a well-based problem is not.
[1] https://en.wikipedia.org/wiki/Elections_in_Venezuela#Voting_...
I suggest your read or watch this and you'll be immediately less suspicious [1]
[1] https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit...
The laws the U.S. is deploying here are designed to prevent a despot from pilfering a population's wealth to pay cronies. Letting Maduro liquidate PDVSA to pay debts which should be defaulted on is precisely the intent of the law, an intent which aligns the United States with Venezuela.
Again, suspicion is healthy. But using the possibility of an international conspiracy to detract from a well-established national one (in Venezuela) is disingenuous.
Maybe the Washington Consensus really is a racket designed to turn underdeveloped nations into 1%-favoring client states. (Frankly, the least convincing part of Perkins is the claim that this is a formal conspiracy instead of a convenient result of non-conspiracy functioning.)
Even if that's true, refusing to deal with PDVSA is far from unreasonable on a practical and moral level. Maduro is running an unsustainable, patronage-based con, to the detriment of his country. Freezing his ability to do that via international finance is a pretty reasonable move, so it doesn't actually tell us anything about the presence or absence of a conspiracy.
That's the problem here. You've decided the only way Venezuela can emerge through this is by collapse and rebirth.
Pushing 31 million people right to the brink and hoping they fall your way is far from inevitable.
It doesn't have to be that dramatic and painful.
No, I have not. There are three ways a sovereign can deal with its debt: taxation, inflation and default. Chavez nationalized everything he could. Maduro inflated away the locally-denominated debt [1]. Dollar-denominated debt is immune to Bolivar inflation, so what's left is further taxation or default.
Maduro is choosing further taxation. ("Taxation" refers to the government's take rate of economic activity. Democracies publish tax rates. Dictatorships seize.) I'm arguing they should default. This would be good for Venezuela but bad for Maduro's regime, which appears to use dollar debt for patronage.
[1] https://upload.wikimedia.org/wikipedia/commons/5/58/Venezuel...
https://elhem.co/2017/07/27/nicolas-maduro-accused-of-crimes...
[1] https://www.greenleft.org.au/content/venezuela-election-resu...
"...key opposition candidates in the governor's races in Venezuela are gradually accepting the results as legitimate, except for one controversial close race that is being challenged in the State of Bolivar where opposition has some serious allegations due to the discrepancy in the results that the CNE announced, that's the election commission in Venezuela, the results that they announce and the printout of the report that was given to each party by the voting machines."
"ALEXANDER MAIN: First of all, it's really nothing new... Already in 2002, much of the corporate media internationally was suggesting that the presidency of Chávez had become something of a dictatorship and completely ignoring some of the anti-democratic activities of the opposition parties in Venezuela, and namely a coup d'etat was supported by most of Venezuela's opposition parties in April of 2002. This was initially represented as some sort of a popular uprising against the dictatorship, and it was really, I think, thanks to the reaction of other governments in the region that clearly saw that there was a coup d'etat that the narrative began to change around that.
"Soon afterwards, we got back into this tradition of suggesting that there was creeping authoritarianism going on in Venezuela. Very little was said about the fact that nearly every year, sometimes twice a year in Venezuela, you had elections being held at different institutional levels. These elections would typically have very big turnouts, they'd be very transparent, very free and fair... In fact, it can be argued that the electoral system in Venezuela has gotten more and more refined in terms of the degree of transparency, to the extent that in fact, it [speaks] in part to that transparency and the internal checks and balances that today you do have this controversy in the state of Bolivar... They can do this, in fact, because they have records from electronic voting machines, which everyone believes... the fact is that you have a system that's in place that can very easily allow for verification... It really is sort of a direct contradiction of this constant claim that the country is slipping into dictatorship. You don't have that when you have constant elections in which people, the majority of voters participate and where you can have confidence in the results."
[1] http://therealnews.com/t2/index.php?option=com_content&task=...
And yet... Well, these days their reporting looks like:
https://www.jacobinmag.com/2017/07/venezuela-maduro-helicopt...
https://www.jacobinmag.com/2017/07/venezuela-elections-chave...
https://www.jacobinmag.com/2017/05/venezuela-crisis-maduro-o...
You don't have to be a capitalist imperialist to recognize that this particular government has abandoned legitimacy and the interests of the people.
In a recent article, Mike Gonzalez pronounced the Bolivarian Revolution dead: “This project has failed.” Needless to say, this cavalier suggestion would come as a surprise to those on the ground... Gonzalez begins with a strange conspiracy theory: that a helicopter attack against government targets was really a false flag operation carried out by the government itself. Unfortunately for him, this unsubstantiated innuendo — which echoed right-wing talking points — didn’t age well: less than a week later, Oscar Pérez made an appearance at an opposition rally.
It continues,
By portraying a chaotic constellation of facts without explaining their causes, by heaping blame onto the government while letting the opposition and imperialism off the hook, Gonzalez’s account shares much with its professed adversaries... left almost entirely out of this picture are the hundreds of thousands struggling for socialism on the grassroots level and having to make difficult decisions — with real consequences — amid the crisis of the present.
And your third source explicitly calls "to reject any and all calls for imperialist interventions aimed at 'saving' Venezuela." In conclusion it calls for us
to stand in solidarity with the majority of Venezuelans who are suffering at the hands of a vengeful, reckless opposition, and an incompetent, unaccountable government. There is little doubt popular-class support for the government has declined in recent years... It is equally clear popular-class support for the opposition remains limited, likely due to the popular classes’ well-founded distrust of and disgust towards the opposition, and particularly its violent, leading edge.
In short, they had an election where the people had to make some hard choices, like many democracies. Your sources do not dispute the validity of the election. A foreign country undermining an election in support of the violent opposition, which was explicitly rejected by the popular vote, is objectively not "in the interests of the people."
https://www.vox.com/platform/amp/world/2017/9/19/16189742/ve...
This is not true. The high-water mark for the Nazis was 43.9% in the 1933 election, far short of a majority. Hitler was appointed chancellor in a shady backroom deal and shortly afterwards banned all other political parties.
If you think it was unfair, you're going to have to cite some evidence. I've cited independent observers who noted the very high transparency of Venezuelan elections, to which you really had no response.[1]
With the stroke of their pens, other nations have limited what Venezuela can achieve on its own, and are forced to play the game as usual.
How anyone can say it a symbol of failed socialism states when you're being squeezed by international super powers into a corner with no real access, I have no idea.
Blind zealotry of their home land, IMO. I have zero faith or respect for humanity at this stage.
The US and other governments have been meddling in SA for decades.
Something that CANNOT be tolerated when it comes to the US and its most recent election, right?
On Friday, the government-run oil giant PDVSA owes $985 million.
Venezuela private firms should all be run through administration to wipe out the creditors and re-floated with Bolivar investment.
The domestic economy of Venezuela has collapsed due to extreme economic mismanagement, so switching to a local currency won’t help because the economy doesn’t have the local resources to rebuild. That means to rebuild it will need to import modern equipment and engage foreign expertise to rebuild and update infrastructure the country doesn’t have the capability to build itself anymore. Good luck getting the foreign currency needed to do that in a default.
Take the oil industry for example. Venezuela itself doesn’t have the capability to build significant new oil infrastructure or update it. In order to do that they need foreign currency to pay suppliers and contractors. So the only way to keep their oil industry going, on which the whole economy now depends, is using hard currency. They’re not going to socialist paradise their way out of this.
They are already too oil export heavy. Without proper inputs the outputs will be inferior, unexportable and inefficient.
If you refloat debt in a different valueless currency that you control the exchange rate on, you're de facto defaulting - nobody wants your currency. They want hard currency.
Re: currency you don't control, do you consider Ecuador a colony? They have debt in the sucre, which is pegged to the dollar. Is most of Europe a colony of Brussels? Except for the British and the Swiss, everybody else runs debt in Euros, which they don't control.
US can take loan in dollars because everyone has dollars to park, which is because everyone else has dollars too.
When the piper came due, they couldn't raise interest rates or devalue their own currency to deal with the situation.
Point is, it's not a colony situation. For a while, Greeks loved the fact they could borrow against the EU with low interest rates, much lower than their own financial situation would indicate. Once people started wanting their money back, yes, this limited their options. They probably shouldn't have put their own economy into that situation though, that's why the drachma used to fluctuate up and down so much and the interest rate was high, because they weren't really good for the money they borrowed.
You can make a powerful case that they are.
A country that doesn't control its money doesn't control its economic policy. Is there anything more important than the economy for a country?
A fair economic area need, first, a monetary and fiscal common policy, and, second, a policy choose in the interest of all the citizens in the area.
The Euroarea only have a monetary common policy and I'm not the only one that think that is not run in the interest of all the Europeans.
I can't talk about Ecuador, but historically, fixed exchange rates, as any fixed structure don't survive even small "earthquakes". It's even worse if it's not an fixed exchange rate, but a foreign currency. In the case of Ecuador, you can be sure that, at some point in the future, the economic policy run from Washington will be the opposite of what the country needs.
> A country that doesn't control its money doesn't control its economic policy. Is there anything more important than the economy for a country?
http://www.coha.org/examining-the-effects-of-dollarization-o...
The point of the article is that the economy of Ecuador was so bad dollarization caused capital flight to stop, stabilizing the economy.
I'm not an economist, but maybe the short term benefits outweighed the long term restrictions. But it did impose some amount of financial discipline on them that they never exhibited before, and would probably boost the confidence of foreign investors that they could invest and still get money out.
As a counterpoint, Venezuela is not a colony, but their economy is in a shambles, they can't feed their own citizens, but they have ultimate monetary control and can do whatever they want to their economy. That's what got them in this mess in the first place. Some thing as PRK and Cuba.