Venezuela, also known by Sean Penn and Oliver Stone as the socialist paradise, is expected to endure a torrent of defaults in the coming months after the government failed to make a $200 million payment on Monday. With even more debt defaults on $60 billion worth of international bonds on the horizon, the oil-rich nation is likely to exacerbate its current crisis, leading to more misery for the population.
In early November, President Nicolas Maduro announced that the government will begin to “refinance and restructure” all of its foreign debts, which total approximately $150 billion. How it will achieve this remains to be seen – ostensibly, it will take more than giving creditors colorful gift-bags containing Venezuelan chocolates and coffee.
The South American country has spiraled out of control. Food shortages, power deficiencies, a 2,600% inflation rate, massive debt loads, and an oppressive socialist leading the country are just some of the problems inflicting Venezuela.
Venezuela Defaults on Debt Payments
S&P Global Ratings announced Monday that Caracas defaulted on its debt. The credit rating agency said in a statement that Venezuela failed to make $200 million in interest payments on two of its government bonds. The payment, which was due last month, had been proffered a 30-day grace period.
This is in addition to the other $420 million in interest payments on other sovereign bonds that are already overdue. Experts say that these debts will also be in default in the coming weeks.
Venezuela is crippled by $200 billion in total loans. A sovereign default by Caracas would make it the largest in history, followed by Greece’s restructured $200 billion. After slightly recovering on fears of default, Venezuelan bond prices tumbled to mere cents on the dollar. A $2.5 billion bond that is due in October 2018 shed one-fifth of its value.
In international finance, if there are enough holders of a specific bond that demand complete and instant repayment, then investors holding other Venezuelan bonds can make the same request. This is dangerous for Caracas because the state has very little money to pay all the current bondholders. In such a case, investors would then be allowed to seize Venezuela’s assets, mainly oil.
Bondholders are unsure what to do.
The Maduro leadership told investors at a meeting in the nation’s capital that it plans to tackle its pecuniary challenges. Analysts are befuddled how the government could achieve such a feat in the middle of sanctions, travel bans, asset freezes and potential embargoes on oil exports. The government has yet to submit any proposals to restructure its debt.
The government said in a news release about the meeting:
It served to ratify our full intention to continuing complying [sic] with our commitments, despite the obstacles generated by the Trump administration and their Venezuelan political allies who seek to attack our country.
They have not achieved it, they will not achieve it. The positive climate in which this refinancing process began indicates that we will continue to build the state of wellbeing that the people of Venezuela deserve.
The only source of income in Venezuela is oil.
The Fall of Caracas
Caracas has fallen. The socialist experiment has failed once again. Venezuela is now coming to grips with a humanitarian crisis. How did all of this happen? It’s simple: socialism.
The ruling socialists began with production quotas and price controls, which then created shortages of essentials, like bread, toilet paper, cornstarch, and water. In a blink of an eye, citizens couldn’t get their hands on anything, causing 75% of the population to lose 19 pounds in 2016. Venezuelans had no other choice but to consume cats, dogs, pigeons, and zoo animals.
The shortages quickly affected hospitals. Doctors and nurses did not have the supplies and equipment to treat their patients.
If the people were fortunate enough to find food or even medical supplies, they certainly did not have the money to purchase it. The inflation rate in Venezuela is closing in on 3,000%, eviscerating any of the bolivar’s value. The world hasn’t seen such a currency crisis since the Zimbabwe dollar about a decade ago.
With morale crashing, the Maduro regime thought it could control the people by raising the minimum wage 15 times in four years, giving civil servants a pay hike and paid holidays, and instituting forced labor in the farming sector. Refusal to work was met with swift punishment.
Caracas would later accuse bakeries of launching a “bread war.” Using this as justification, the state attempted to improve optics by prohibiting long lines at bakeries. Since it was impossible to enforce this, the Venezuelan authorities essentially nationalized the bread industry. Bakeries were mandated to sell bread at 6 a.m. They were forced to use 90% of wheat supplies to bake bread and coerced to utilize a maximum of 300 sacks of wheat per month. Failure to comply resulted in bakeries being expropriated and managed by the Committees for Supply and Production (CSAP) in the name of winning the bread war.
When announcing these measures, Maduro told a cheering crowd:
They will pay, I swear. Those responsible for the bread war will pay and, later, don’t go and say that it is political persecution,” Maduro told a crowd last week. “Even our lord Jesus Christ put bread into the Our Father.
Venezuela is a socialist land, but it is no paradise. The media will almost certainly omit the fact that this is the result of socialism. College students will continue to claim that this isn’t real socialism. Senator Bernie Sanders (I-VT) will remain silent on Venezuela. But this is what you get when you mix socialism, a totalitarian government, and a crazed leader: a nationwide catastrophe. Everyone suffers.
What do you think about Venezuela? Let us know in the comments section!
Remember to check out the web’s best conservative news aggregator Whatfinger.com -- the #1 Alternative to the Drudge
Also check out newcomer ConservativeNewsDirect.com