As 2017 ends the financial world is watching Venezuela as its circumstances become ever darker, wondering what will be the fall-out, and for whom.
On November 13, Venezuela’s Treasury hosted a meeting with the country’s bondholders, apparently to discuss restructuring. Very few of them showed up. According to a Bloomberg report, “little was announced and nothing was resolved.”
On Thursday, November 16, the International Swaps and Derivatives Association ruled that a “credit event” had occurred, especially with regard to the debt of Petroleos de Venezuela SA (PDVSA), the state-owned oil corporation. This means, in even plainer terms, that Venezuela has defaulted.
In the words of a headline in Foreign Policy early this year, Venezuela is “so broke it can’t even export oil.” It can’t afford the costs of routine maintenance of the tankers used to do so.
Meanwhile, merchants in Venezuela, trying to keep themselves and their businesses alive, have taken to demanding U.S. dollars in return for their goods. A practice that began with gourmet and design shops in Caracas, which have been charging in dollars for at least a couple of years now, is fast spreading, according to Reuters.
The left and the right have differing responses to the deteriorating situation in Venezuela. The left says, “This is what happens when a populist or pseudo-populist strong man runs a country.” The right says, “This is where socialist ideology leaves its hosts/victims.”
Left Wing View
Some on the left in the U.S. have taken to comparing our politics with Venezuela’s. Andrés Miguel Rondón, writing in the Washington Post, said that the career of the late Hugo Chávez, founder of the political regime still in charge in that country, paralleled that of President Trump. They both pretended to be populist and in each case the strong man “seemed not only immune to scandal, but indeed to profit from it.”
That tweet set off a longish comment thread, in which members of the anti-Trump “resistance” discussed what might work. Scandal, they generally agree, won’t. A commenter named Zach, using terminology familiar from the presidential campaign, said, “The deplorable portion of the [Trump] base is unreachable and not going to listen to any kind of reason. The [Rondón] article is speaking more to the people that got suckered in on the populist scam. Those people are reachable.”
Another television host who makes ample use of twitter, Joy Reid, picked up on the Rondón article as well. She says that its bottom line is, “scandal only drives his [Chávez’ or Trump’s] supporters deeper into the bunker.”
Reid also tweets that Venezuela doesn’t have racial and ethnic schisms to “nearly the same extent as the U.S., so the grievances of Chavistas are more purely economic.”
Right Wing View
The Foundation for Economic Education (FEE) says that “in just one generation Venezuela has gone from being the 20th richest country in the world to 2d to last.”
Breitbart, the news-commentary site associated with former Trump consigliere Steve Bannon, has credited The New York Times with some apt reporting on the famine conditions in the country, but adds that the Times has failed to “make any significant reference to the socialist ideology behind the country’s collapse that took hold with former President Hugo Chávez … and is now in the hands of Nicolás Maduro….”
Meanwhile, advocates of cryptocurrencies have taken to using the crisis in Venezuela as ammunition for their cause. Megan McArdle, for example, tweets, “a number of people have responded to my articles on bitcoin by arguing that what it’s really good for is transferring money out of Venezuela and China and similar places.”
A parody webpage has run the headline, “Fed Up with Oppressive Capitalism, Bernie Sanders Retires to Socialist Paradise Venezuela.”