Venezuela’s Behind on Its Debt and Facing Two Huge Bond Payments(bloomberg.com)
bloomberg.com
Venezuela’s Behind on Its Debt and Facing Two Huge Bond Payments
https://www.bloomberg.com/news/articles/2017-10-23/venezuela-s-behind-on-its-debt-and-facing-two-huge-bond-payments
79 comments
> one becomes immediately suspicious of the US intent in latin america
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_...
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_...
> inevitable outcome
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.
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.
> You've decided the only way Venezuela can emerge through this is by collapse and rebirth
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...
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...
> one becomes immediately suspicious of the US intent.
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...
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...
I've read and enjoyed it. Knowing good people who work and have worked for Bechtel, et cetera, I can assure you that the riveting read it makes contains some truths and many exaggerations.
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.
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.
The answer could be both. The problem is the lack of coverage on the ground.
In this case, though, the point is that it doesn't actually matter.
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.
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.
regardless of what you think of Trump, this is the correct action. The maduro govt is not just full of issues, they are murdering and starving their own population and any funds are used to prop up the privileged few elite in the aristocracy. El mercosur is about to expulse venezuela so this is not just some yankee only EEUU foreign agression bs. If you support the Maduro government, you're against humanity at this point.
https://elhem.co/2017/07/27/nicolas-maduro-accused-of-crimes...
https://elhem.co/2017/07/27/nicolas-maduro-accused-of-crimes...
54% of the population supported the Maduro government in the election.[1] If you think Trump is taking the "correct action," you're against democracy at this point.
[1] https://www.greenleft.org.au/content/venezuela-election-resu...
[1] https://www.greenleft.org.au/content/venezuela-election-resu...
You're really citing results from an authoritarian regime known for scrubbing numbers and propaganda as evidence of popular support?
As I've mentioned elsewhere in this thread, I recommend watching Abby Martin's on the ground reporting in Venezuela to get a full picture: https://www.youtube.com/watch?v=YUYWrPiUeWY (this particular episode is one of many examples)
No, there is good reason to believe the election was fair. The mainstream U.S. reporting on this is extremely biased; the U.S. has a long history of deeply anti-democractic attitudes towards Latin America (since at least the Monroe Doctrine). Excellent and detailed reporting here:[1]
"...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=...
"...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=...
My go-to source on this has actually been Jacobin - first because socialist regimes abroad are their wheelhouse, and second because they're particularly incentivized to give a positive view of Venezuela. They gave Chavez consistent support well past 2002, which makes me think they're not subject to the criticism you've offered here.
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.
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.
There is nothing in your sources that disputes the legitimacy of the election results. Your second citation actually criticizes the first:
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."
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."
Chavez was a military man who established a dictatorship, and his successor continues. You are kidding yourself if you really think this has anything to do with big bad guy US. Not all problems derive from the US.
If you consider Chavez's presidency as dictatorship, you are very mistaken. He was a populist, but never a dictator. I know Vox is not always the best source of news, but this article is spot on:
https://www.vox.com/platform/amp/world/2017/9/19/16189742/ve...
https://www.vox.com/platform/amp/world/2017/9/19/16189742/ve...
This is technically true, but while in office, Chavez eliminated most of the institutions necessary for a healthy democracy (eg independent judiciary). If he was not technically a dictator, he acted like one, and his successor is filling the role he made possible.
When this is the outcome, I am definitely against democracy. The Nazis were elected into power through democratic processes, does that make anything they did somehow ligitimate? Do the venezuelan people deserve to die of starvation and lack of basic medical necesities b/c they elected a criminal into power (assuming your stats are true)?
The Nazis were elected into power through democratic processes
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.
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.
It seems you're assuming democratic systems/processes are only two party and rule by majority i.e. votes of > 50% means power. Thats not what I said, but if thats your definition then though a valid point, it still doesn't apply to the nazi situation. Most social democratic systems in Europe now and then dont work this way. You can easily become a controlling party by getting 20-30% of the vote even today in Germany for instance. At the time it was much worse, you could become a represented political party with a very low % of votes (under 5%)
You probably mean well, but you are basically arguing against progress. The US might have ill intent, but even assuming ill intent, that intent is still better for the people of Venezuela than the current government which has left them starving and represses them.
The president of the U.S. undermining the results of a free and fair Latin American election is not "progress". That's par for course since at least 1904.[1]
[1] https://en.wikipedia.org/wiki/Monroe_Doctrine
[1] https://en.wikipedia.org/wiki/Monroe_Doctrine
Getting a non authoritarian regine in place would be progress in almost every way. The Monroe Doctrine precedes 1904. It's interesting that the Venezuelans have been in favor of it at times:
https://en.wikipedia.org/wiki/Venezuelan_crisis_of_1895
https://en.wikipedia.org/wiki/Venezuelan_crisis_of_1895
It is clear what Venezuelans are in favor of; they just had an election. If you support undermining the election for their own good... who is the authoritarian here?
If you really believe what you are saying, you are great prey for authoritarians, so watch out and take care.
Either you believe the election was unfair or you believe it was fair but we, the U.S., have the right to undermine it. The latter is trivially an authoritarian, anti-democratic stance, although unfortunately par for course in U.S. - Latin American affairs.
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]
[1] https://news.ycombinator.com/item?id=15536102
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]
[1] https://news.ycombinator.com/item?id=15536102
The ability of external powers is a point I bring up when people go on about Venezuela being a failed socialist state.
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.
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.
Venezuela was well on its way to failure well before the US introduced any sanctions.
RECENT sanctions.
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?
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?
Not sure why you're bringing up election meddling when both Chavez and Maduro were elected. What was this meddling supposed to accomplish?
The paradox of Venezuela is a populist government that beasts its chest about foreign imperialism starving its citizens to make bond payments to foreigners. We're beyond the point where a sane democracy would have defaulted. The only conclusion I can come to involves cronies of the administration holding substantial amounts of the debt. The payments aren't on interest and principal, but for patronage.
They need to keep the capital flowing in order to fund the police/military that prop up the authoritarian regime.
It's difficult to figure out what's really going on there. I followed Abby Martin's reporting on the ground recently, and it's quite eye opening: https://www.youtube.com/watch?v=YUYWrPiUeWY
I've only seen a few pieces by Martin, but everyone was a gross distortion of the situation covered. She's a propagandist pushing anti-Western narratives, not a journalist summarizing the facts. I suspect her coverage here may be influenced by her anti-Western feelings.
The bond markets have pretty much been expecting a default for several years but they have continued making payments even though they can't buy food and medicine. It's a very strange policy.
On Friday, the government-run oil giant PDVSA owes $985 million.
The article names a number of the bond holders. In general terms, almost every hedge fund owns some amount of the $140B in outstanding debt.
"Almost every hedge fund" is a bit of an exaggeration but outside of the hedge fund universe, PDVSA bonds are definitely held by a lot of mutual funds I guarantee that some people here own.
The bonds are traded on the markets, so in theory it could be anybody that can hold bonds and could change at any time.
Article autoplays video with audio. Just so you know. Incredible that Bloomberg treats their readers so poorly.
Off topic, but if you're using Chrome, change chrome://flags/#autoplay-policy to 'Document user activation required'.
[deleted]
The "Disable HTML5 Autoplay" Chrome plug-in stops this.
Scary times ahead for Venezuela. It's too bad it will be the average person paying the price for the corrupt few.
kyleblarson(4)
If you run sovereign debt in a currency you don't control, you become a colony, not a country.
Venezuela private firms should all be run through administration to wipe out the creditors and re-floated with Bolivar investment.
Venezuela private firms should all be run through administration to wipe out the creditors and re-floated with Bolivar investment.
Nobody wants BSF. Plus the government does shenanigans with the exchange rate, with the official exchange rate having no relationship to reality.
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.
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.
You should ask some Greeks if they feel they are in a colony like position with respect to Brussels/Germany. Controlling your own money is a key factor to maintaining sovereignty. Goldbugs take this to a level where they desire personal sovereignty and thus a money not controlled by the government (gold or silver).
It's seldom for a debtor in need to choose the currency. If Greece kept drachma, they'd still need to borrow in euro or dollar as few would have drachmas to loan.
US can take loan in dollars because everyone has dollars to park, which is because everyone else has dollars too.
US can take loan in dollars because everyone has dollars to park, which is because everyone else has dollars too.
In any country with a free exchange of currency there is no problem for investors to get any amount of currency they want. They buy it on the open market. Forex is the biggest and most liquid market in the world. Before the Euro every country in Europe had bonds in their own currency. Interest rates were higher in some due to inflation and default risk, but there was no problem borrowing large sums of money.
Well, the Greeks had a grand old time borrowing against the Euro when people were still willing to lend to them.
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.
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.
"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?"
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.
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.
I think you're over simplifying a bit.
> 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.
> 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.
How would Bolivar help them if it becomes worthless? They need inputs (raw materials, services), and those are only partially available locally.
They are already too oil export heavy. Without proper inputs the outputs will be inferior, unexportable and inefficient.
They are already too oil export heavy. Without proper inputs the outputs will be inferior, unexportable and inefficient.
What have private firms got to do with this? The debts are owed by the government and the government owned state oil company.
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.
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.
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.