August 19, 2015

The Bolivarian Revolution in Venezuela is generating great opportunities… for speculators and Vulture Funds.

I refer to Kadhim Shubber’s and Andres Schipani’s “Future of debt repayments in doubt as oil slide precipitates surge in five-year CDS”, August 19.

It says “No big oil-producing country has felt the pain of the price crash as acutely as Venezuela, where crude sales account for 96 per cent of exports.”

Sir, it is much worse than that, because that 96 percent of exports goes directly into the coffers of a very centralized government, which de facto dooms Venezuela to become, sooner or later, a failed-state.

And we then read “Francisco Rodríguez, a Venezuelan economist at the bank [of America], reckons Caracas still has some fuel and estimates some $61bn in state-owned assets could be sold to plug the holes. “Venezuela could continue paying bondholders for longer than it keeps paying Mr Maduro’s salary,” he says, alluding to parliamentary elections in December”

I wonder how would you feel if you lived in an absolutely disastrously governed country, and an investment advisor, from a reputable bank, was advising your government on how to scrape the bottom of the barrel in order for it to survive as long as possible? This advisor has placed himself completely in an après-nous et vous-le-deluge mode. Would a private citizen of such country, or of any country, look with sympathy at this adviser and his employer? I think not… I sure hope not!

What is Venezuela to do when its utterly inept government has used up that $61bn to plug the holes, which includes serving creditors/speculators… and perhaps therefore a bank economist earning a bonus?