Mary O’Grady writes on more to come from the ALBA deadbeat zone:
Venezuela Heads to a Default Reckoning
Amid bills for imports and debt servicing, and shrinking dollar liquidity, something has to give.
Venezuelan bond prices swooned last week on renewed speculation that the government of President Nicolás Maduro might soon default on as much as $80 billion of foreign debt. The yield on the government bond due in 2022 hit a six-month high of 15.8% on Sept. 9. David Rees of London-based Capital Economics, who last year warned of the risks of falling oil prices to Venezuelan solvency, told Bloomberg News by telephone that “the bond market is finally beginning to wake up.”
That may be true. It’s clear that the foreign exchange that Venezuela earns from oil exports cannot pay its import bills along with debt service. There are dire shortages of industrial and consumer goods as well as services. Something has to give and odds are that allowing the required adjustment to the economy won’t be the government’s first choice.
Nearly 1 million [corrected] barrels per day (almost one third of the daily 2.3 million barrels of crude OPEC says Venezuela produces) don’t generate revenue: 300,000 bpd go to Cuba, some 100,000 bpd are smuggled into the Colombia by insiders, and 650,000 bpd are sent to China to pay debt. This is even more disastrous when considering how the Venezuelan economy has become more dependent on oil after foreign capital leaves the country and productivity plummets.
I think you mean “1 million barrels per day.” Having said that, I wonder how of some Dilma Roussef’s campaign funders would react to a Venezuelan default… You know, the Workers’ Party “worked” very hard to get those deals 😛
Rodrigo, yes. Correcting it right now.
And you’re right about Dilma, too.