Venezuela defaulted but leaders seem willing to rule at all costs

Venezuela has defaulted on two of its US dollar-denominated sovereign bond issues. S&P says that it expects Venezuela to default on other bond payments. This comes as absolutely no surprise. A further $420m of bond payments are already overdue: unless Venezuela finds some dollars in a hurry, these will also go into default very soon.

PDVSA, Venezuela’s state-owned oil company, has already been late on a payment and will also go into default.

A much, much bigger problem looming. Figures from the latest IMF World Economic Outlook database reveal that Venezuela is entering hyperinflation. The IMF forecasts that inflation will rise to 2,350% in 2018 and reach an astonishing 4,685% by 2022.

Venezuela needs massive international aid and help to reconstruct its wrecked economy. But first, Venezuela must agree to be helped.

The leadership in Venezuela have only been concerned about themselves as the people are starving and many forced into prostitution to earn money to survive.

In 1999, the social government fixed prices which drove forces behind the food shortages. Farmers couldn’t sell at low prices without going out of business because their cost of production was much higher. Importers couldn’t afford to ship in food, knowing they would have to sell at much lower prices than what they paid for at the port.

Venezuela and its state-run oil company, PDVSA, owe more than $60 billion just to bondholders. In total, the country owes far more: $196 billion, according to a paper published by the Harvard Law Roundtable and authored by lawyers Mark Walker and Richard Cooper.

Beyond bond payments, Venezuela owes money to China, Russia, oil service providers, U.S. airlines and many other entities. The nation’s central bank only has $9.6 billion in reserves because it has slowly drained its bank account over the years to make payments.

Recent Events

Nov 5-15 Venezuela’s government and opposition will resume efforts to hold dialogue, the third attempt in a year.

European Union ambassadors have agreed to ban the sale of weapons and surveillance technologies to Venezuela.

The US placed sanctions on Venezuela.

Oct 30- Nov 5 – Venezuelan lawmaker Freddy Guevara sought refuge in the Chilean ambassador’s residence in Caracas. The opposition and local media said that Sebin (Bolivarian National Intelligence Service) had surrounded Guevara’s house.

Oct 30- Nov 5 -Opposition parties to boycott elections. Three of Venezuela’s opposition parties: Justice First, Popular Will and Democratic Action, announced on Monday they will boycott municipal elections in December in protest against an election system they say is biased, and instead will focus on demanding reforms to the election board in anticipation of next year’s presidential poll.

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