Reuters on Venezuela: “Socialist bluster”, looming default, and other loose ends

There is useful information in this Reuters article but some comments are worth making: The headline is “Venezuela to restructure foreign debt, default looms as possibility”

Reuters reports

President Nicolas Maduro vowed to make a $1.1 billion payment on a bond maturing on Thursday, but also created a commission to study “restructuring of all future payments” in order to meet the needs of citizens.

Venezuela has few avenues to do that though because of sanctions by the United States that bar American banks from participating in or even negotiating such deals.

US sanctions were welcomed by the US-backed (and therefore EU and Canada backed) opposition which largely helps explain the opposition’s defeat in regional elections on October 15. The articles below are from three of the top newspapers in Venezuela at the time Trump announced sanctions.

La Mesa de la Unidad apoya sanciones de Estados Unidos

MUD apoya las sanciones económicas de EEUU hacia Venezuela

MUD respalda sanciones económicas de EEUU contra el país 

The Reuters article says that default  “would likely make countries less willing to do business with Venezuela, aggravating shortages of food and medicine and creating further problems for its all vital oil industry that is already hobbled by under-investment.” 

It’s true that the costs of default for the Venezuelan economy could outweigh the benefits – probably even now according to a note Torino Capital just put out in response to Maduro’s remarks. The money saved by no longer paying bond holders might be more than offset by lost revenues as foreign assets and even oil shipments are seized (and price discounts demanded of Venezuela to offset the risk of oil shipments being seized).

It is always worth remembering that the international media and credit rating agencies were hyping looming default since early September 2014 – a time when oil prices on which Venezuela depends were over $90 a barrel and nobody was saying a deep sustained collapse in prices was imminent. Francisco Rodriguez of Tornio Capital was one of the few economists (along with Mark Weisbrot) who refuted those claims. Since December of 2015, oil prices have averaged about $50 per barrel – underscoring the irrationality, and malevolence in some cases, of the default hype since 2014.

Reuters says

Wall St. for years pumped billions of dollars into Venezuela by way of bond purchases, passing off the revolutionary rhetoric of the ruling Socialist Party as bluster that belied an iron-clad willingness to pay its debts.

Anti-socialist bias gets the better of Reuters here as Wall Street is depicted a seeing through the hypocrisy of socialist “bluster”.  A rational government of any ideological stripe defaults when it thinks the benefits outweighs the costs, not otherwise.

Reuters adds

Critics say Maduro’s decision to put debt above imports has taken a huge toll on the population.

Child malnutrition has reached the scale of a humanitarian crisis in four Venezuelan states, according to a May 2017 report by Caritas Internationalis, a Rome-based non-governmental organization with links to the Catholic Church. Medicine shortages have also left children dying of preventable diseases.

Officials say ideological adversaries are exaggerating problems for political effect.

The misreporting of the Caritas study was even criticized by a blog that is basically the English language voice of the Venezuelan opposition – so it’s hardly just Venezuelan officials who have picked up on huge exaggerations.

Jacob Wilson also uncovered tremendous deceit in the way the media have covered one widely cited report (from an opposition aligned source) about food insecurity in Venezuela.  The study produced two very contradictory statistics: that 93% of the population had lost 19 lbs but that only 25% said their nutrition level was insufficient. The 93% figure was has been very widely reported but “according to a broad LexisNexis search, the 25 percent deficient figure has never been reported in English-language newspapers.”

In this piece I pointed out similar findings about the way the media has reported polls in Venezuela. Not only does it stick to an opposition-aligned pollster (Datanalisis), but it also ignores results from Datanalisis that reveal political weaknesses in the opposition.  The media has also completely ignored the failure of Datanalisis to foresee massive opposition abstention in the October 15 regional elections. 

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