In Praise of Hugo Chavez and Venezuela (Not By Me): Venezuela Cash Crunch
Numerous sources claim Venezuela will default as soon as tomorrow. The timeline now does not matter much. Perhaps it takes another month. At this point what does it matter? Venezuela is in ruins.
Bloomberg notes Venezuela's Cash Crunch Means Waiting Five Months to Get Paid.
Petroleos de Venezuela SA, the state-owned oil company that controls the world’s largest crude reserves, has been hit hard by low prices and U.S. sanctions that are increasing the risk of default on the country’s debt. Output plunged, and refineries were forced to shut because of recurring breakdowns or a lack of domestic crude to process. On Friday, a principal payment is due on some of PDVSA’s notes.
While the financial and political crisis has already wrecked the economy, a default by PDVSA could make things even worse if the experience of another oil exporter in South America is any guide. In an August 2016 report, the chief economist at Torino Capital LLC said Venezuela risked following the same pattern as Ecuador, which was forced to offer bigger discounts on its oil exports to lure buyers in 2008 after it was unable to pay debts.
Finances are so tight that a PDVSA refinery on Curacao can’t afford to buy enough oil to process. The tanker Tulip, loaded with U.S. crude, has been drifting offshore since May awaiting payment. At the end of last year, PDVSA owed $42 billion.
More than $2 billion of the company’s debt is coming due in the next few days, and investors are showing less confidence that funds will be transferred.
In Praise of Venezuela
Who is it that is in praise of Venezuela? Here is your answer:
For US readers who may not recognize the name, Jeremy Corbyn is the Labour Party leader in the UK and head opponent of Prime Minister Theresa May.
Here is the complete Tweet in context.
Beware of Socialists and their promises. Here is an unfortunate one to watch: "Jacindamania": Labor Takes Over New Zealand, New Gov't Blasts Capitalism, Promises to End Poverty .
Mike "Mish" Shedlock