Some very strange things are happening to Venezuelan political discourse. These days, our radical right-wingers sound more or less exactly like…Pablo Medina!
Check out Freddy Guevara’s line on the $6 billion in debt the republic owes this year:
“El planteamiento que hacemos es que se haga una auditoria pública a la deuda externa, tenemos que saber cómo se contrajo esa deuda, quienes se están beneficiando de ella y porque el gobierno tiene como prioridad asumir una deuda irresponsable en lugar de plantear una solución real para resolver los problemas de los venezolanos”, afirmó el coordinador nacional político adjunto de Voluntad Popular, Freddy Guevara.
Guevara invitó a los venezolanos a recordar y pensar el por qué si el ex presidente Hugo Chávez canceló la deuda externa en el año 2007, cómo es que a esta altura los venezolanos debemos pagar a finales de año 6 mil trescientos millones de dólares y para el año que viene cerca de 16 mil millones de dólares, solo en deuda externa.
“El régimen de Nicolás Maduro no solamente acabó con la producción nacional y se robó los dólares que habían para importar los alimentos y las medicinas sino que además contrajo una deuda mil millonaria y prefiere pagar los contratos, los guisos y los préstamos, en lugar de pagar las deudas que tienen con el sector farmacéutico al cual le deben 2.300 millones de dólares, por lo que actualmente hay escasez de medicinas en el país y que solo con una pequeña parte de ese dinero que hay que pagar a finales de 2015 se podría abastecer nuevamente al país con medicinas”, afirmó.
The kicker here is that he’s not talking about the Chinese fund, or any of the Russian bilateral deals, nothing like that. He’s not questioning some transparency black hole of a debt commitment. He’s talking about the regular old sovereign bonds the republic is supposed to pay this year. These are commitments submitted to and approved by the National Assembly: the most vanilla, above-board portion of our debt.
VP is, in other words, picking out the only transparent bit of Venezuela’s debt obligations and very directly telling creditors: if we get power, we won’t pay you.
I post this to underscore the importance of getting our head right around the question of state insolvency. If you misread the situation and think the Venezuelan state is broke the way the Greek state is broke, then yes, it makes good sense to question paying back your international debt. But Venezuela is very far from that kind of situation. Venezuela is a country that could re-establish rough fiscal balance relatively easily, with a couple of desk reforms on Forex and Gas pricing, alongside some new foreign loans – foreign loans, preferably, to be gotten from the people Freddy Guevara is now openly threatening.
This is the exact opposite of what we should be doing.
Opposition politicians need to be the adults in the room. They need to put on a suit and play the part of the sensible, technocratic alternative to a horrendously irresponsible government. They should be making the kinds of soothing noises that reassure powerful people whose backing they will need if they want to pull off some kind of orderly transition: people in Fuerte Tiuna, in Itamaraty, in Foggy Bottom and, yes, on Wall Street too.
Instead, they’re ranting in short-sleeved shirts and channeling Pablo Medina, a fire-breathing extremist whose idea of economic stewardship was agitating for debt default.
Look, right now, in Venezuela, there are two parties questioning the legitimacy of this debt: ¡Marea Socialista and Voluntad Popular!
Have they really thought this through?!
Caracas Chronicles 
The 2 Franciscos (FT/F-Rod) for Ven. Fin. Minister–easy peasy reform to Venezuela’s Economic Black Hole–a few desk reforms to forex, gasoline at international prices, Government shared with same agitating/thieving/conspiratorial Leftists, the Pueblo be damned, and those foolish BOA/ML private investors, faced with massive foreign debt/oil industry recuperation costs, and low oil pricing, pouring good money after bad into the continuing Black Hole.
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Estamos de acuerdo, pero te bajas del carro igual! porque esa cordura de quitar los controles no camina porque: (i) le quitas el mega guiso a los enchufados (que estan bien armados) y (ii) le dices a los venezolanos que son unos soberanos pelabolas que gana USD10 al mes (y bajando!).
Not gonna happen!
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Another important thing is to tone down the bellicose Guyana rethoric immediately.
Venezuela may indeed be the owner de jure of land until the shores of French Guyana, but this is not the right moment for the MUD to literally open yet a new front in the war.
I’m sure the MUD guys do that for internal consumption only, but in a globalized world in which anyone anywhere can read your tweets and discover what you think in a matter of seconds this is a very alienating, unpopular and controversial topic to bring into the discussion.
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If Voluntad Popular are radical right-wingers, or right-wingers at all, or even center-right, then I’m a Stalinist.
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I am Marx himself !!! There are no right wing parties in Venezuela except maybe Vente Venezuela, Maria Corina’s party and I don’t think is even approved yet
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The thing is that both extremes are very similar in their level of rhetoric. Both fuck you nationalists and populists. They target the same audience.
Black supremacy groups often coordinated efforts with white ones in 50’s and 60’s US (really! look it up).
I tend to think that left and right indicate content of rhetoric, while center and extreme indicate level of regionalism against globalism. Economy is more affected by the latter dichotomy, as is almost any relevant aspect of political life.
Ironically, it is the former that makes politics relevant.
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Radical doesn’t mean extremist in this case. Radical change in politics just means changing the fundamental nature of government and society. Democrats would be considered radicals in an authoritarian system, for example. In this sense VP is a radical right-wing group in that they seem to want to change everything that Chavismo has accomplished in the last 15 years, while other parties like PJ or UNT want more moderate reforms. The lack of opposition consensus over the 2014 guarimbas is an example of this.
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Jesus!! VP is one of the parties further to left in the MUD at the moment. I don’t understand where the confusion comes from.
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just political positioning…look how much mileage the far left got in greek with voters by saying we’re not going to take any more austerity…while maybe irresponsible, they may be banking on the message “Venezuela’s $ for Venezuelan’s” as being clever and populist in its own right..with reality post-election being altogether different.
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Sure…until you take power and realize “wait, how come the people whose financial support I depend on hate me!?”
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Given how totally screwed up the country is and how out to lunch the opposition is, this is just inside baseball navel gazing. Until the people from the barrios say enough is enough none of this matters. I’m becoming resigned that it will be years before my wife and I see our family in Venezuela again.
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1. No audio link is included in the blogpost, nor in the Patilla article that is referenced. So, readers are subject to the opinion of the blogger and the sketchy facts of the Patilla journalist. Evidently readers are not supposed to come to their own conclusion without an FT filter.
2. Given number 1, FT peppers his blogpost with so many assumptions that I wonder about self-serving interests. Here’s one in the second part of the below-noted sentence:
VP is, in other words, picking out the only transparent bit of Venezuela’s debt obligations and very directly telling creditors: if we get power, we won’t pay you.
3. Demanding an audit, does not necessarily mean a questioning of the legitimacy of the (sovereign) debt, nor does it follow that it means Vzla won’t pay creditors. But the audit demands would inspire a little fear in those, oh, say from BoAML, who so glibly have an answer to life’s persistent questions, and who would wish to keep sovereign financial matters more sotto voce.
I’ll say no more for now.
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“VP is, in other words, picking out the only transparent bit of Venezuela’s debt obligations and very directly telling creditors: if we get power, we won’t pay you.”
I have a problem with that statement too. Let me check the contracts = I ain’t paying is stretching the envelope too far.
I read this part as:
“El planteamiento que hacemos es que se haga una auditoria pública a la deuda externa, tenemos que saber cómo se contrajo esa deuda (who asked for the money), quienes se están beneficiando de ella (how was it spent) y porque el gobierno tiene como prioridad asumir una deuda irresponsable en lugar de plantear una solución real para resolver los problemas de los venezolanos ( and before we ask for more we may or may not be able to manage well, how is the Cluster**** we live in gonna get on its way to being fixed.)
All of which is what someone should be doing, and no one is.
The subtext of course being “and we know Chavismo has plenty to answer about and heads are gonna roll if we ever get the chance”
AS to BofA preferring that details be kept sub rosa, gotta have more evidence there may be a fishy smell before you claim to see the nets.
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Populism strikes again.
That, and I ask why are you so surprised? VP is another leftist party in the all-leftist-party bunch in Venezuela.
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There is very little transparency in general about the size and structure and intended use of the financial debt the regime has assummed vis a vis third parties . The call is justified but for the whole of the countrys indentedness ,much of which is clouded in mistery. My guess is that the financial debt owed interntional private financial institutions is probably pretty clean in terms of legal formalities and the like because otherwise they would not have been granted. international financial institutions are very careful in doing things exactly right from a formal legal perspective and have hordes of lawyers go over the transactions before they are approved. If as likely Venezueal falls into default sometime next year or the following year then the negotiation is likely to involve a hair cut for the creditors who depending on the difficulties they see in collecting their money will agree to a large or small one . Because they are under the impression that oil automatically translates into instant money they will be ambitious about getting a small hair cut , however if the legal case can be made that there were some shady or questionable aspect which they overlooked then the hair cut will be bigger .so in this latter sense the call for some scrutiny might help later negotiations !!
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It’s very likely that most/if not all the foreign debt is amply legally covered, so that the creditors have Venezuela by the short hairs, any creditor of which upon default can attach Venezuela’s international assets, so needed to transport/refine their virtually only hard-currency money maker. That the debt was acquired via outsized commissions, and the proceeds were squandered/stolen, is another matter.
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and it’s the outsized commissions that would sit uncomfortably with an F-Rod and his main cheerleader, F-Tor. So by all means, F-Tor: shoot the messenger (Guevara).
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and by commissions, I’m also including bonuses upstream.
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My guess is that it wont get to that but that negotiations will be difficult , if you cut the means whereby acountry can support itself then simply it starves and there is nothing to distribute , the creditors know that , remember that the oil belongs to the purchaser so that it cant be seized , you can try and attach the payment but there are countries where attachments are difficult , the ships dont have to belong to the seller , the refineries once they lose their crude feed are worth almost nothing , the negotiation will deal with the size of the hair cut and the lenght of the extention to the payment terms . Its in creditors interest that the countrys oil industry keeps going and maximizes its business growth and income and for that you need to provide for the oil industry to get rescued and restored to a well run operation . that takes investments !!
Dont know that default can be avoided , my guess is thats very improbable unless you starve the country which wont be politically easy . If there is a default maybe going to the IMF will be easier than going directly to a negotiation with the creditors for more loans !!
I did the math on how much venezuela can make in the next 3 years assumming 1.6 mbd of exportable oil , a price of 55$ per bl , some 15$ per bl production cost ( probably much higher) and a debt service of 10 to 11 b$ per year , in that scenario , Venezuela would recieve gross some 31 billion $ per year which after deducting production costs and paying the debt service leaves about 12 billion to cover all other import and govt costs which is very niggardly and bound to create a lot of trouble . Is that doable ??
Wonder the math that supports FRods calculations , maybe i missed something !!
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Current production max at 2.4mm/da. (Faja production at a loss), 800m internal consumption, 500m China already-paid exports, 200m min. Petro-Caribe, 100-200m imports of light oil/refined products at international market prices–all ballpark figures, subject to some adjustment, but leaving Venezuela very little to keep from starving, much less being able to service its international debt, and explaining why international reserves are falling off a cliff.
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More specifically: 2.350 kbd x 365 days = total yearly production of 584 million bls, less, internal market sales of 750 kbd = 1.600 kbd of exportable crude oil which if sold at $55 per bl = 32.120.000.000 $ of yearly revenue , less yearly costs of production/refining etc of approx 12.800.000.000 $ (15 $/bl X 2.350.000 kbd) and less about 10.300.000.000 $ of yearly debt service = 9. 220.000.000 of net revenues . Further assumming other income from from domestic sales , higher sale revenues from export sale of bls of refined products = 2.780.000.000 $ then that results in an estimated total yearly disposible income of 12 billion $ to cover all of the countrys import needs and govt operating costs . This assummes no discounted sales to allied countries nor retention of price of oil sold to China to pay for Chinese Fund.
This is a back of the envelope calculation so if someone thinks it needs correction , be welcome to it .
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Well, OK, assuming no China Fund oil payments on debt already incurred (the Chinese will be very happy with this), no Petro-Caribe giveaways (the Castros will also be very happy), a $55/bbl average price, which might work if Iran for awhile can’t ramp up fast enough (current Ven. price around $45/bbl.), and that your $15/bbl production cost includes the monthly imports of light crude/refined products at intl. market prices, you have a grand total, after intl debt service, of $12 bill.for 30mm inhabitants, or $400/inhabitant/year, for food/medicenes/industrial production-agriculture-etc import needs–surely enough for F-Rod to shill some intl. private investor bonds (sarcasm intended).
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Assuming for the sake of argument your 12$ BB is a “realistic” number, then no, not going to be enough without some major pain. Some of that pain will need to be dealt with by subsidies and other drains so that the patient doesn’t die on the table, or worse, become a zombie.
It is hard to imagine that the current leadership would insist on driving off the default cliff before admitting they need help, but also perhaps the Chinese/Russian wellsprings still have life. At this point it’s not whether or not they plan to whore out Venezuela, it’s question of price.
Should the Almighty deign to throw us a bone and the oppo gets in the drivers seat then maybe we have a shot of living with that $12BB.
Even given the deplorable state of the distribution of necessary parts, services and materials needed to re-activate the economy so that the $12BB gets larger over time regardless of oil, the industrial park in Venezuela can get moving relatively quickly if certain policies are modified.
Venezuela does have certain natural advantages that are more than oil based. Port locales, the Orinoco, the Caribbean coast and natural stopping point between North and South. These can be leveraged rapidly in some cases to help the economy get going. There still are other natural resources left, which if husbanded correctly will help wean us from the curse of Oil.
Before I’m accused of being a navel gazer or that all of that is good but just wait to see who will work, let me say that, de entrada I understand it won’t be easy or quick.
But I still think it can happen faster than many may think.
Should Venezuela achieve some modicum of stability and guarantee of judicial fairness as well as relative political calm, then the capital return to the country could become staggering. If folks that left begin to return, it will be almost like the programs put in place to send us far to learn as much as we could and bring back the knowledge to be greater.
Because let’s face it, these last 16 years have kind of been like the Vargas tragedy multiplied by a large factor and happening countrywide.
And yet, there is still hope
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“FT peppers his blogpost with so many assumptions that I wonder about self-serving interests”.
Exactly. I’ve wondered about that too. And don’t mention his beloved, flawless, impenetrable Smartmatic, or he goes on a fit of ad hominem straigh-up insults, like calling bloggers “ass-holes”, when his name is not even in the mix.
Then he’ll try to censor this blog with stupid IP blocks, when he doesn’t like your independent opinions on something, even insulting respectable bloggers like Gustavo Coronel.
I don’t believe any of FT’s crap here either. VP and Guevara are calling THE most important reason for Kleptozuela’s Disaster: Massive Theft and Galactic Corruption. Nothing wrong with that. That should be the main point of attack: Chavez promised to end Corruption, above all, and it’s worse than Ever, by far. Should be the #1 campaign item, along with escasez and colas.
Much more pertinent and useful than the inapplicable, convoluted Macro-Economic or Political strategy theories that this insulting Torito clown spits out here, criticizing the good guys.
Freddy Guevara is fighting in Vzla , in the thick of the battle, risking his neck. He’s pretty much the best our country has to offer, with Leopoldo, and VP. Anything else this FT bully dude could do on this “anti-chavista” blog, except take some excerpts out of context, clearly misinterpreting, comfortably from Europe or the USA?
Great idea: Criticize the Opposition for calling attention to Corruption, our main problem; plus defend future Fraud, Chavezmatic election machines, another big problem, as we’ll soon see in December’s fiasco.
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“These days, our radical right-wingers sound more or less exactly like…Pablo Medina!”
“Radical Right Wingers”..Leopoldo’s right hand man and his party. Sounds like Masburro himself.
No wonder Greece and Kleptozuela are where they are.
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a.k.a., I got nothing, so I’ll shoot the messenger…
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Precisely your specialty, except with x-rated insults.
And yes: we’ve got Corruption, not “radical right-wingers” more or less not exactly, that is.
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If you have a rational exchange rate and raise the price of gasoline much of the incentive for the worst of the corruption will dissapear . if you have a govt that works under modern meritocratic systems with checks and controls as exist in most civilized countries then the corruption falls to a very controllable level. Making corruption into a cartoon monster doesnt explain much , you have to understand what causes it and try and attack it at its roots , it will never disspear but at least it will become much less destructive than it now is.
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“If you have a rational exchange rate and raise the price of gasoline much of the incentive for the worst of the corruption will dissapear .”
This would eliminate the massive amounts of cash which leaves treasury and goes straight into the hands of powerful Chavistas/militars. This is an extremely important first step. Do this, and you have breathing room financially to attempt to reform this total mess of a state and society.
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Here comes the angry mob hungry for blood! Chop the heads of those Wall St. pigs they scream while waving their torches and shattering windows!
It ultimately always boils down to pointing fingers at debt holders. It would be good for someone to honestly answer one question. Is Venezuela’s problem a debt problem? Hypothetically, will defaulting on all its debt really achieve something? Will the country be magically fixed if all the debt is wiped out? The amount currently being used to pay debt, is it really that large compared to GDP? Food for thought.
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