Dime a quien no le defaulteas y te diré quien eres

Michael-Douglas-image-michael-douglas-36314420-1499-992Over on Project Syndicate, Ricardo Hausmann and Miguel Angel Santos have a fun riff on the state of the debate on whether Venezuela will go into default in the coming months.

Because, viéndolo bien, Venezuela is already in default with regard to a huge range of obligations. 

Cancer patients? Check. Food importers? Check. Car-makers, airlines, PDVSA suppliers? Check, check, check. Bolivar holders? You got it. People who wanna know the inflation rate? Yup. Anyone who owns a finger print? Um hm.

That’s pretty much everyone.

Well, not quite everyone.

The one hold-out?

Wall Street.

That’s more or less the one constituency Bolivarian Socialism is still upholding its commitments to. 


19 thoughts on “Dime a quien no le defaulteas y te diré quien eres

  1. Don’t forget Sidetur, which about a year ago, served as kind of the default-watch kickoff.

    It was only $100 million when they had money. What will they do now they don’t have any and owe 50 times more? Talk about a Cassandra moment.


  2. Well, defaulting on bonds would wreak such havoc in such a small amount of time, that I am guessing that Maduro and Co would really rather not go there. Not paying importers? well, they’ll whine and protest, and so will their customers, but you can always spin the truth, and a populace willing to believe iguana conspiracies behind blackouts might be willing to swallow escuálido-driven economic wars or what not. You can live not payin your debt to your local grocer, to the doctor, your accountant, but not your bank. The bank will hunt you down!

    So no, they will not default on those bonds, they´ll default on us (they already have), and until we find a way to stop them, or a backbone, they’ll simply keep at it.


  3. …its own employees. Big Fat Check on that one too.

    So yes, your point really cuts through all the bolivarian revolutionary poetry that is flying around these days.


  4. Ripe with irony. One fine point, however: you have to acknowledge that any emergency of large scope requires triage. And if the government where populated with other than doctrinaire schmucks there could be something positive to all this: some of the victims of the divisas drought are in fact “lost causes” and the drought might convince the regime to take a few useful measures by cutting off the bloat. Unfortunately this is too much to wish for.


  5. – Una trampa en la que se suele caer es cuestionar defectos del sistema y no el sistema en sí. El problema no es pagarle o no a Wall Street, el problema es el control de cambio y de precios, que el Estado no puede liquidarle a nadie a 6,3 ni a 12. Es el exceso de liquidez que incrementa la inflación. La discrecionalidad en el uso de la renta petrolera, más un largo etc.

    -Un default no es simplemente dejarle de pagar a Wall Street, de manera que ellos pierden y nosotros ganamos, no. Un default tiene consecuencias graves sobre un país y su población. Pregúntenle a Argentina (que sin embargo se agarró a un boom de la soya, nosotros nos agarramos de China hasta que dejemos que nos colonicen).

    -Poner en una balanza pagarle a Wall Street o pagarle a los demás no es algo que me parezca lógico. Es un argumento parecido al de ” no subamos la gasolina hasta que no paremos los regalos a Cuba”.


    • Hmmm, well then no medication, no flour, no car batteries, no anything of anything except paying debt. I don’t remember who but some analyst once wrote that default makes sense IF the consequences brought about by political risk (social uprising, turmoil) could have a larger impact than those of default. So ask yourself: what is the likelihood of a widespread riot due to shortages and inflation?


  6. Were the Venezuelan opposition clever they could they could introduce legislation to replace that silly horse on the Venezuelan flag ( I forgot, which way is it ‘now’ facing, .. left or right?) with the bronze statue of this guy, (http://thecryptojournalist.files.wordpress.com/2011/10/wall-street-bull-bowling-green-park-nyc-manhattan.jpg) the symbol of Wall Street. The image of that bull should be seen everywhere in Venezuela as a reminder of how much Wall Street loves the Chavista’s! How else could THEY afford those fancy penthouse lofts overlooking Central Park without, …without Hugo and the boys? And, …and, every time anyone sees the Venezuelan flag, which is everywhere and everyplace, people will be reminded of MUD’s plan/campaign to replace the horse with the bull. Madison Avenue would be proud! Since taking office the Chavista’s have paid and paid and paid on those lovely bonds. Here:)…(http://www.bloomberg.com/news/2013-01-30/chavez-s-681-bond-returns-buoy-goldman-andes-credit-correct-.html) 681% ! Wall Street never had it s good.


  7. The Chavez world is one where appearances are everything , where something is important because its eye catching and visible so great atttention must be given to proyecting an impression on others that you are in control , succesful , on top of things .!! A govt failure to pay its debts to the financial world is a highly visible emblematic event , a strong signal of failure , of incapacity , of ..weakness so it must be avoided at all costs , not paying other debts, debts which are less visible , less damaging to ones public image can be ignored or posponed but never a non payment which showcases your failure as a regime , which makes you lose face before the world . A financial default is such an event , one the regime dreads.!! Thus its more acceptable that the regime default on its obligations to the general population ( whom you can manipulate with slogans and fantastic stories of plots ) or to non financial creditors ( who can be extorted to wait in the hope of getting their money later) than you appear as defaulting on those highly visible international debt obligations .


  8. Argentina defaults, strengthens price controls, inflation spikes yet says “It’s no Venezuela.” Maduro’s son is advising Argentina. I didn’t know he had a son. Check this out:


    Maduro’s Son

    The son of Venezuela’s current president, Nicolas Maduro, visited Argentina last month and met with lawmakers allied to the government to explain Venezuela’s experiences with price controls,…..


  9. What I have read is the José Guerra analysis, that goes something like: “If the Goverment defaults, then imports will stop completely and Wall Street will just start to confiscate oil ships to pay the debts. Which will make the current scarcity look like the good old days”.

    Which is why they will cough up the dough in October, since defaulting implies a complete stop to their gravy train.


  10. What we are seeing here is the credit death spiral that plagues countries, corporations and consumers alike.

    Curious thing that happened back in 2008-2010. As funds grew tighter, people continued to adjust inadequately and make sufficiently hard choices since the expectations of future revenue were higher than what reality could provide. Bear Stearns, Greece, Joe (or Jose) Public. All the same.

    So they would trim the respective fiscal apparatus while seeking money from whatever creditors they could find. At the consumer level, they drained HELOCs, ran up credit card debt and borrowed from family members to maintain their asset status quo, even if it wasn’t sustainable. Corporations borrowed from governments. And governments printed more money…(not that Venezuela is doing that right?)… in a race to the bottom in terms of trade.

    For those that couldn’t survive, they ultimately turned to lenders of last resort (Payday loans, bad equity terms from hedge funds, or other CBs or *cough* China) at rather poor terms. Either they lived, or they died. Bankruptcy, foreclosure, and loss of soberania was pretty common. One oddity that always struck me at the consumer level, though, is not how people attempted to cling to assets they could no longer afford, nor was it their rage at the bank with whom they had broken the contract and foreclosed (and the banks didn’t want the over-valued properties to begin with!). It was how they were much more desperate to hang on to their cars, despite being more liquid and less over-valued, than their houses.

    See, it all came down to the ability to maintain working capital. Sure, they might lose their source of shelter, but as long as they could keep revenues/working capital coming in, they could try and maintain something resembling the status quo, despite its now-diminished status.

    I think this applies directly to Venezuela. China may end up owning the house, but it is Wall Street that keeps the working capital flowing in. You keep your car so you can go to work, and find someplace else to live.

    I don’t see a bond default in the immediate future, and they haven’t mortgaged everything to the lenders of last resort, though that may be in the near future. Sustainable? no. Adjustments? They might think they’ve done enough, even though its apparent they haven’t. Maybe one year more, or two, or even more if oil prices stay high. Eventually, however, they will be over-leveraged. The interest works against you when you pay credit with credit.


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