Even though there is hunger, could Venezuela be servicing religiously its debt because of who the bondholders are?

Sir, even though Venezuela is suffering lack of food and medicines, it is doing all it can to pay its foreign bondholders. Andres Schipani quotes Bank of America’s Francisco Rodriguez in that “Venezuela could continue paying bondholders for longer than it keeps paying Maduro’s salary”, “Maduro’s Venezuela on the brink of default" February 12.

Could it be that all these bondholders are in fact the same usual local friends of the government and who in these bonds have just found another way to further exploit this poor-rich country? I mean it is hard to visualize any ordinary reasonably responsible investor, no matter how big the spreads, putting money in Venezuelan bonds while knowing without doubt that the resources raised by debt will be wasted just the same way as the greatest oil-boom in history has been wasted.

The world needs a sovereign debt restructuring mechanism (SDRM) but, for that to serve us citizens any useful purpose, and not even be counterproductive, it must begin by establishing clearly the differences between bona fide lending and odious credit.

@PerKurowski ©

If Britain’s monarchy received 97% of all export revenues, would you just be arguing strengthening your institutions?

Sir, Francisco Rodriguez, the chief Andean economist at BofA Merrill Lynch Global Research, one who provides investors with advice on whether to lend to Venezuela or not, one who has often recommended financing the Bolivarian Revolution, because the interest rates were attractive, writes that Venezuela’s “system could work very well when commodities prices (oil) were on the upswing but became problematic when oil prices started declining” "Lessons from Venezuela at a time of economic unease”, November 12.

The solution Rodriguez suggests, not only for the current government but also for “the country’s opposition if it manages to reach power”, “is probably to be found in a mixture of institutions that gives broad authority to the executive branch to make economic adjustments when these are necessary, but places effective limits on its political authority through a strong and autonomous judiciary and other bodies to hold power to account”.

As if that is possible in a country in which the government is the recipient of over 97 percent of the nations exports.

If in Britain the monarchy received over 97 percent of that nations exports, would you be arguing strengthening the institutions, or getting those revenues out of the governments hands and into the hand of British citizens?

Let me assure you that in Venezuela when oil prices are on the upswing, we citizens become less and less relevant to the governments; in fact we turn into a nuisance to them.

Now when oil revenues and borrowing capacity is dropping dramatically, the Government might even need all those young Venezuelans who they forced to migrate in order for them to have a chance of a better future.

There is but one way to give our nation a chance for a sustainable better tomorrow, and that is distributing all the net oil revenues among all the Venezuelans; and so that governments serve us instead of serving themselves.

PS. I am supposing that the title was placed by FT. We Venezuelans all know that the tragedy our country is facing goes worlds beyond "an economic unease"

http://theoilcurse.blogspot.com

@PerKurowski ©

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?

@PerKurowski

And when are investors to sue Blackrock and Pimco because of these experts lack of due diligence?

Sir, I read Camilla Hall and Luc Cohen reporting “Six banks sued over trustee roles” June 19.

What­? If Pimco or Blackrock had had any of those executives really deserving huge bonuses they hold they have, they should have know that if regulators authorized banks to hold securities rated as AAA, against a so meager 1.6 percent in capital, meaning they could leverage their own capital 62.5 times to 1, something very bad was going to happen, and so they needed to be very alert.

And so in this respect I ask, when are the Pimco and the Blackrock investors going to sue Pimco and Blackrock for the lack of due diligence?

If expert companies can try to get out of their buyer’s beware responsibility, why should not the small investors try?

We need to establish a worthier purpose for our banks than just avoiding a default

Sir Ken Lewis the Chairman of Bank of America in “Markets alone will not lead to a green future” June 6 says that “the private sector needs a stable and predictable regulatory environment with a bias towards clean energy and the green economy”. By doing so, perhaps unwittingly, he points out the major failure of our current bank regulations, which is that they are biased exclusively towards eliminating the risk of bank defaults, as if that is the only risk with the banks for the society. In fact the risk of the banks not doing their part in the development of the society is much more serious than the risk of having to go through a bank crisis.

In this respect instead of applying minimum bank capital regulations base solely on risks of default, most often as measured by the credit rating agencies, we need to give more purpose to banking, perhaps by starting to think in terms of units of risk of defaults per environmental hazard avoided or per decent job created.