Speaking during a televised address this evening, Maduro announced that he was ordering a restructuring of all of the country’s foreign debt in a rare admission that Venezuela is facing financial collapse. Maduro named vice president Tareck El Aissami as head of the restructuring effort.
Maduro was careful to make clear that he had every intention of making a bond payment worth $1.2 billion due tomorrow, and that the restructuring effort that he announced would not affect that payment. Economists have been eyeing the payment nervously for months, since failure to make the payment on the due date–even resulting from an administrative error–would place the debtor, PDVSA, in default.
The president made the announcement by saying the following:
Tomorrow we have to pay $1.2 billion for the PDVSA 2017 bond, I’ve ordered that payment to be made first thing tomorrow morning, and starting from then I’m declaring a refinancing of Venezuela’s external debt.
Restructuring of any debt, an in particular sovereign foreign debt, is a complicated affair. However, Maduro did not provide any details regarding his announcement. It’s not clear exactly which debt he is referring to, or what his plan is if the debt holders refuse or are otherwise unable to restructure.
Maduro blamed his decision on what he calls a “global financial dictatorship” headed by the United States, and the fact that the White House placed financial sanctions on Venezuela back in August. Maduro was defiant, saying:
But they will never suffocate us. We will never surrender to the U.S. empire.
Regime Cracking Down on Individuals Who “Incite Disobedience” by Calling for Protests
Attorney general Tarek William Saab announced today that his office is conducting investigations on individuals suspected of having committed crimes against the state like conspiracy and inciting disobedience by calling for anti-government protests this year.
Saab revealed that at least some of the targets of the investigations are political figures–likely National Assembly deputies–because he said that he would make a request before the Supreme Court to launch impeachment proceedings against an unspecified number of individuals. Saab said that these individuals were “cowards” who were being “controlled remotely by an entity outside” of Venezuela.
The individuals likely to be targeted were involved in organizing and calling for the anti-government protests that shook the country from April to July of this year.
Saab said that the crackdown was necessary in order to ensure that “there is order because people want peace”.
Econometrica Claims Hyperinflation Spiral Underway
The Econometrica firm announced today that, according to its calculations, Venezuela has officially entered a hyperinflation spiral. If true, this would be the first time in its history that the country has felt the effects of hyperinflation. According to the firm, the inflation rate for October was 50.6%, placing the country above the 50% monthly inflation threshold outlined by economist Phillip Cagan.
Econometrica pointed out that Venezuela has never faced an inflation rate this high.
According to the firm, Venezuela has spent years fostering the perfect environment for the rise of hyperinflation, namely the injection of currency into the market as well as a decrease in the amounts of good and services available due to decreases in production and imports.
Guerra: Bs. 500,000 Bills Within a Year
National Assembly deputy and economist Jose Guerra reacted to the introduction of the Bs. 100,000 bill into circulation today by pointing out that it is a sign of the inflationary crisis affecting the country, and predicted that Venezuelans would be handling Bs. 500,000 notes within a year.
Speaking in an interview on Union Radio earlier today, Guerra said:
They’ve announced the Bs. 100,000 bill already that I proposed a long time ago. We’re heading down the path towards the Bs. 200,000, Bs. 500,000 and Bs. 1,000,000 [bills]. That is the road to perdition, that of Germany in the 1920s.
As for a timeline, Guerra estimates that the government would be forced to introduce a Bs. 500,000 bill by June of 2018, and that at the time of its introduction the bill would be worth approximately what the Bs. 100,000 is worth today: slight over $2.00.
Guerra pointed out that the root cause of the inflationary crisis is the government’s total inability to manage the economy properly. He argued that the government’s complete lack of understanding of even elementary economic principles was on full display as evidence by its inability to craft any meaningful policy. He explained:
As the situation gets worse, the government does not show signs of having a plan. What we’ve seen from the [Constituent Assembly] is posturing: they say that we have to increase price and exchange controls. Others say that we have to free the economy and solve the issue of frozen prices. They don’t know what to do.
Guerra pinned the root of the inflationary crisis on the Banco Central de Venezuela‘s (BCV) monetary policy, which is focused on printing money in order to fund the government.
Questions/Comments? E-mail me: firstname.lastname@example.org
Keep in touch on Facebook! In Venezuela