
Venezuela’s Behind on Its Debt and Facing Two Huge Bond Payments - JumpCrisscross
https://www.bloomberg.com/news/articles/2017-10-23/venezuela-s-behind-on-its-debt-and-facing-two-huge-bond-payments
======
nimbius
On August 25, 2017, US President Donald Trump issued an executive order
limiting the government of Venezuela's ability to access certain types of
international financing. This would certainly curtail the governments ability
to ease the pressure of bond payments.

[https://www.usatoday.com/story/news/politics/2017/08/25/exec...](https://www.usatoday.com/story/news/politics/2017/08/25/executive-
order-trump-imposes-new-round-venezuela-sanctions/601667001/)

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.

~~~
JumpCrisscross
> _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_...](https://en.wikipedia.org/wiki/Elections_in_Venezuela#Voting_system)

~~~
ProAm
> 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...](https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man)

~~~
JumpCrisscross
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.

~~~
r00fus
The answer could be both. The problem is the lack of coverage on the ground.

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JumpCrisscross
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.

~~~
briholt
They need to keep the capital flowing in order to fund the police/military
that prop up the authoritarian regime.

~~~
baursak
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](https://www.youtube.com/watch?v=YUYWrPiUeWY)

~~~
briholt
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.

~~~
baursak
Really? Do you have some examples of those gross distortions? So far it seems
like she has an anti-capitalism slant, but that's hardly something unique or a
dis-qualifier nowadays.

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waynecochran

          On Friday, the government-run oil giant PDVSA owes $985 million. 
    

Maybe an ignorant question... who do they owe... who own's these bonds?

~~~
jonwachob91
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.

~~~
whatok
"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.

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rebuilder
Article autoplays video with audio. Just so you know. Incredible that
Bloomberg treats their readers so poorly.

~~~
erichurkman
Off topic, but if you're using Chrome, change chrome://flags/#autoplay-policy
to 'Document user activation required'.

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El_Montanero
Scary times ahead for Venezuela. It's too bad it will be the average person
paying the price for the corrupt few.

~~~
dogruck
The scary times have already arrived for Venezuela, tragically.

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neilwilson
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.

~~~
jimmywanger
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.

~~~
njarboe
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).

~~~
wwosik
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.

~~~
njarboe
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.

