This Reuters article by Mehrdad Balali suggests that Venezuela’s recession and tumbling oil prices (perhaps both, it isn’t that clear) have driven “concerns” that Venezuela may default to on its foreign bonds.
Media hype that Venezuela could default on its foreign bonds started before any dramatic fall in oil prices. On September 5, 2014, an article by Venezuelan economists Ricardo Hausmann and Miguel Angel Santos depicted Venezuela as being on the brink of default. Oil prices were then over $90 a barrel. The English language press lapped it up. They’ve been helped along by credit rating agencies with a record of stunning incompetence, political bias and very dubious integrity – a record the “free press” routinely ignores.
It is said you can’t do controlled experiments in history, but in this case one was provided that exposed the total absurdity of the default claims. Oil prices nosedived since early September when the Hausmann-Santos article came out, and are now at about $50 per barrel. Venezuela economy relies massively on oil revenues. If it was on the edge of a financial cliff with oil prices over $90 per barrel (see chart 1 here) then it would have been pushed over the edge by now – long before prices reached $50 per barrel.
Mark Weisbrot explained in this article which was published in Fortune Magazine that Venezuela can very easily pay off both principal and interest on its foreign bonds over the next three years with prices at $55 per barrel throughout that period. But don’t expect an analysis based on arithmetic to carry much weight with an outfit like Reuters that claimed Venezuela was running out of coffins because of homicides.
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