THIS IS WHAT AMERICANS WILL GET IF THEY VOTE FOR 4 MORE YEARS OF MARXISM with Hillary Clinton AFTER 8 YEARS OF Obama's Marxist failed economic policies. And don't tell me Venezuela is an exception. NAME ONE SUCCESSFUL Marxist Socialist Nation ON THIS PLANET throughout history. ANSWER: THERE IS NONE.
Venezuelans voted for Maduro simply because he supported the same damn failed policies his Marxist Socialist predecessor believed in. They didn't give a damn that the only real experience Maduro has ever had was driving a fricken bus and leading a labor union protest against his employer. Yeah, that makes sense. Let's vote for more of the same crap sandwich please. Because it tastes so damn good. NOT. :/ Now the Venezuelan people are living in hell and people, mainly Chavistas, still have THE NERVE to defend the Marxist Socialist inept government and blame the US for Venezuela's nightmare. Yeah. Okay. Whatever.
Venezuelans voted for Maduro simply because he supported the same damn failed policies his Marxist Socialist predecessor believed in. They didn't give a damn that the only real experience Maduro has ever had was driving a fricken bus and leading a labor union protest against his employer. Yeah, that makes sense. Let's vote for more of the same crap sandwich please. Because it tastes so damn good. NOT. :/ Now the Venezuelan people are living in hell and people, mainly Chavistas, still have THE NERVE to defend the Marxist Socialist inept government and blame the US for Venezuela's nightmare. Yeah. Okay. Whatever.
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CNN Money, USA
written by Patrick Gillespie
Tuesday October 18, 2016
Venezuela's government-run oil giant -- the country's largest source of cash -- is warning that it could default on its bonds as early as next week.
Petroleos de Venezuela S.A., or PDVSA, failed to get investors to agree on a deal to push back debt payments by three years. The company said it is extending its deadline for a third time so investors can accept a deal by Friday night. This time, it warned that things could get messy.
"If the exchange offers are not successful, it could be difficult for the company to make scheduled payments on its existing debt," PDVSA said in a statement Monday night.
PDVSA owes $1.6 billion in principal and interest on October 28 and another payment of $2.9 billion is due on November 2 for a separate bond.
It's unclear if PDVSA may actually default or if it's trying to strong arm investors to take the deal.
"I don't think they've prepared themselves for a default, I think it's mostly just a threat. The concern is that they're starting to talk about it," says Siobhan Morden, head of Latin America fixed income strategy at Nomura Holdings.
In total, Venezuela is asking investors to "swap" $5.3 billion of bonds due in 2017 with bonds due in 2020, essentially allowing the government to push back payments.
But PDVSA hasn't been able to lure enough investors to accept the offering. It's led Standard & Poor's to cut its rating on PDVSA in mid-September to two notches above default.
PDVSA represents much more than just an oil company. It is Venezuela's lifeline. Oil shipments make up over 95% of the country's export revenue -- that's cash the government badly needs to pay for imports of food and medicine, which are in short supply.
Things have been so badly mismanaged that Venezuela's oil production hit a 13-year low over the summer after oil services provider such as Schlumberger (SLB) dramatically reduced operations earlier this year due to unpaid bills.
With the value of its currency also spiraling lower, many American companies have stopped tracking sales in the country.
Despite sitting on the world's largest oil reserves, Venezuela is running out of food, medicine and cash as its citizens go hungry. Things could get much worse if PDVSA defaults on its debt.
"They're running out of money and they're running out of runway, they need to sell bonds," says Russ Dallen, managing partner at Caracas Capital Markets, a firm based in Miami. "Venezuela is desperate for cash."
Its economy is projected to contract 10% this year while inflation could soar 475%, according to the IMF's latest estimates. China, the largest creditor for Venezuela, has stopped loaning more cash to the South American government.
Against that dire backdrop, the country's opposition-led Congress is trying to gain enough support for a presidential referendum vote to knock President Nicolas Maduro out of office. Over a million people protested in Caracas, the capital, one day last month. However, Maduro is fighting all efforts and chances of the vote happening are dim.
Maduro's government is low on cash, and some experts worry that even if PDVSA makes its upcoming debt payments, it will really squeeze the government's dwindling reserves. Venezuela's central bank has just under $12 billion in reserves, most of which is held in gold.
For now, there's no light at the end of the tunnel for Venezuela, which needs to sell oil to survive. It's prized possession is now at risk.
"There's already been an extreme collapse in the economy, and it would probably worsen if there's an interruption in oil exports," says Morden.
CNN Money, USA
China is cutting off cash to Venezuela
written by Patrick Gillespie
September 30, 2016
Venezuela can't pluck leaves off China's money tree anymore.
After pouring billions into Venezuela over the last decade, China is cutting off new loans to the Latin American nation. It's a major reversal of relations between the two nations, experts say. It also comes at the worst time for Venezuela, which is spiraling into an economic and humanitarian crisis.
"China is not especially interested in loaning more money to Venezuela," says Margaret Myers, a director at Inter-American Dialogue, a Washington research group that tracks loans between China and Latin America.
Since 2007, China's state banks loaned Venezuela $60 billion, according to the Inter-American Dialogue. That's more that it loaned to any other Latin American country. China is considered Venezuela's most important creditor.
Of that, Venezuela still owes China approximately $20 billion, experts say, and there's no sign that it can pay back the amount amid its crisis.
Venezuela pays back the vast majority of its loans to China with oil shipments. Last year, Venezuela's state-run oil company, PDVSA, shipped about 579,000 barrels of oil per day to China, according to the company's financial audit.
But this year, Venezuela -- which has the world's largest oil reserves -- has seen oil production crash to a 13-year low. Some of its service providers, such as Schlumberger (SLB), have dramatically lowered operations due to unpaid bills from the Venezuelan government.
Socialist president Nicolas Maduro has led a regime that mismanaged Venezuela's resources and pushed the economy into a crisis, experts say. China has now run out of patience.
"The Chinese have allowed the Venezuelans to be stupid," says Derek Scissors, a resident scholar at the American Enterprise Institute who tracks Chinese investment around the world. "The Chinese don't want to allow the Venezuelans to be stupid anymore."
China's Foreign Ministry did not respond to a request for comment. Venezuela's finance ministry did not respond either.
Like the government, Chinese companies too are losing interest interest in Venezuela. Since 2010, Chinese companies have invested $2.5 billion a year on average in projects in Venezuela. In the first half of this year, they only invested $300 million, according to AEI.
Scissors emphasizes that the data can change if China hands gives even one big loan to Venezuela before the end of the year. However, he too agrees China is in no mood to dole out more money.
That souring sentiment played out last year when the China Railway Engineering Company halted construction on a "bullet train" it had been working on in Venezuela. The train's construction sites, once a sign of blossoming relations, now sit abandoned.
China long saw Venezuela as one of its top allies in Latin America, experts say. In exchange for cash and infrastructure developments, China wanted a secure source of oil for years to come.
But China's ambitions have hit the reality of the crisis in Venezuela, where inflation is expected to skyrocket 700% and the economy is projected to shrink 8% this year, according to the IMF. Its currency has plummeted in value and many experts believe Venezuela could default on its debt.
With dwindling revenues, Venezuela can't pay for many imports of food and medicine, causing massive shortages in those items. Some Venezuelans, who can, are even traveling to the United States to buy basics like toilet paper and tuna fish.
Amid widespread protests for Maduro to resign, his government must now push on without China's help.
"In the specific case of Venezuela, it's true that [the Chinese] are not willing to continue acting as the lender of last resort," says Mauro Roca, a Latin American economist at Goldman Sachs. "The country is already in a deep crisis, but things can unravel even more."
Bloomberg News, USA
written by Sebastian Boyd
July 4, 2016
It’s been almost two years now since the renowned Harvard economist Ricardo Hausmann caused a stir in his native Venezuela by posing an uncomfortable question.
Why does a country that’s so starved for cash keep honoring its foreign debts? In other words, how does it justify shelling out precious hard currency to wealthy bondholders in New York when it can’t pay for basic food and medicine imports desperately needed by millions of impoverished citizens? “I find the moral choice odd,” Hausmann concluded.
He was, predictably, skewered by the administration back in Caracas -- President Nicolas Maduro labeled him a “financial hitman” and an “outlaw” on national television -- but today the question feels more urgent than ever. Prices for oil, Venezuela’s lifeblood, have fallen almost by half since Hausmann first spoke out and the country’s cash squeeze has deepened dramatically. The chaos has reached unprecedented levels -- food rationing, looting, mob lynchings, collapsing medical care -- yet through it all, bond traders have received every dime they were owed, billions and billions of dollars in all.
“There are two worlds,” said Francisco Ghersi, a managing director of Knossos Asset Management in Caracas. “The world of the bondholders and the world of what’s happening in Venezuela.”
The 21st century has produced a slew of government defaults across the globe, from Argentina to Ecuador to Ukraine. In almost every instance, the country in crisis hit the default button long before the situation got as dire as it has in Venezuela. The only similar case that economists point to is Zimbabwe back in the early 2000s. But even that comparison is flawed, says American University professor Arturo Porzecanski, because Venezuela was significantly wealthier than Zimbabwe before crisis struck and so the South American country’s collapse has been of a much greater magnitude.
What makes this pay-the-debt-at-any-cost approach all the more curious is that it comes in a country run by self-proclaimed socialists who have railed for the better part of two decades against foreign capitalist powers.
There are endless theories, spawned in part by Hausmann’s public pronouncement, as to why the Maduro administration has stuck so doggedly to this policy. The main ones fall into three rough categories.
Food Riots
The first of them is an argument that’s been floated publicly by high-ranking government officials themselves. It states that Venezuela can wait it out till oil prices rebound. Why rock the boat, the thinking goes, if salvation is potentially just weeks away? (Prices have been rallying of late, climbing to near $50 a barrel.)
The next argument is something of a conspiracy theory born in part out of the opaque nature of the country’s finances. It posits that close associates of the administration are major holders of the country’s bonds and that the government fears it’d lose their much-needed support if the payments stopped coming in. Efforts to obtain comment from government press officials on this and other aspects of the story were unsuccessful.
The third theory, and it’s one that ties back into the first idea, states that even though Venezuela lost access to international capital markets a long time ago, a default could still deepen the government’s cash squeeze by triggering legal action from creditors that would undermine the country’s ability to export. If fewer petro-dollars flow into the country, the savings from the default could be washed away, making the situation on the ground even worse.
It’s frankly hard to imagine what a further deterioration would look like. After shrinking an estimated 7.5 percent in 2015, the economy is forecast to post an even bigger contraction this year. Food shortages are now so acute, and lines outside stores so long, that spontaneous protests are popping up everywhere. In one episode in the 500-year-old coastal city of Cumana, hundreds were arrested and a middle-aged man was shot to death, one of three fatalities at food-related demonstrations in June alone. There have been so many vigilante justice-style lynchings -- more than 70 in the first four months of this year -- that the supreme court has banned Venezuelans from sharing video recordings of the gruesome events on social media.
Default’s Benefits
To Hausmann and to legal experts who have studied the country’s oil operations, the risk of angry creditors blocking exports after a default is actually small. The way that PDVSA, as the state oil company is known, structured sales contracts makes it difficult for them to be interrupted by a legal challenge, according to Francesca Odell, a partner at Cleary Gottlieb in New York. What Hausmann and others see instead from a default is the opportunity to free up a big chunk of cash that could be re-directed toward imports.
The government is due to make $1.5 billion in foreign debt payments in the second half of this year. Include PDVSA’s tab and the figure swells to $5.8 billion. It’s a staggering sum of money in a nation that has bled its hard currency reserves down to just $12 billion. And while few, if any, bondholders would embrace a default, they certainly wouldn’t be caught off-guard by it. For the better part of the past 18 months, the government’s benchmark bonds have been trading under 50 cents on the dollar, a price that in essence signals to a debtor: “We’re prepared for a restructuring, go ahead and do it if you must.”
“It’s fairly shocking that they have decided to service the debt over all else,” said Risa Grais-Targow, an analyst at Eurasia Group in Washington. “But I do think the commitment is fairly strong.”
Venezuela’s bonds due in 2027 fell 0.37 cents to 48.48 cents on the dollar as of 2:24 p.m. today in New York.
Maduro, the man handpicked by the late Hugo Chavez to succeed him, has spoken frequently about his determination to keep paying the debt. In a speech back in May, he proudly explained how the country had doled out $36 billion to creditors -- “a huge amount of money” -- over the previous 20 months. The payments were made, he went on to say, “with dignity, without accepting preconditions from anyone, maintaining the country’s independence despite the pain.” These are references to multilateral lenders like the International Monetary Fund and World Bank, institutions that are despised by the Latin American left.
As long as Maduro continues to pay, there will be investors willing to own the debt. Venezuela’s bonds are among the highest-paying investments in emerging markets, offering today an average yield of 26 percent. That’s in dollars -- in a world where many developed-nation bonds are yielding close to zero (or even less). And since Chavez swept into office 17 years ago, the country’s bonds have handed investors a total return of 517 percent.
“It is one of the most miserable, mismanaged, hopeless countries on the planet,” said Jan Dehn, head of research at Ashmore Group Plc, which manages $50 billion of emerging-market assets. “But that doesn’t mean you can’t make money.”
Hausmann, meanwhile, is more incensed than ever.
In a recent interview, he called the government’s insistence on paying the debt, coupled with a church’s claim that it rejected offers of international aid, “a crime against humanity.” There’s a history here, it should be noted, between the professor and the Chavistas. Some two decades ago, he served in the business-friendly government that Chavez tried to overthrow in a coup attempt that effectively launched his political career. Perhaps that explains some of the enmity between the two sides. Regardless, this is what Hausmann wants to ask the folks on the other side: How can they sleep at night? “It’s beyond belief.”
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