Reuters’ headline to this article by Corina Pons and Eyanir Chinea claims that “Venezuela puts debt service before food imports as cash dries up: sources”
To make Reuter’s bias and double standards more obvious, consider the headlines when an international courts order Venezuela to pay over a billion dollars to Exxon. They don’t read “Court forces Venezuela to put Exxon Before Food Imports”. Speaking of international courts, Reuters does not even pretend to address the consequences for Venezuela if the government opted not to pay bondholders. If Reuters wants to argue for a strategic default – which can certainly be justified in some cases – it has not even begun to explain why the benefits would outweigh the costs for Venezuela today. It simply pretends the costs don’t exist in order to slam Maduro’s government.
The root cause of Venezuela’s economic problems over the last few years is a multi-tier exchange rate system that sells most dollars for far less than they are worth in local currency. That hasn’t been done to please foreign bond holders. It is supposed to give Venezuelans cheaper access to imports for necessities. Unfortunately, it has fueled illegal currency speculation and fraud and led the government to tightly ration dollars.
You can rationally argue (I certainly would) that the Venezuelan government has made a huge mistake in maintaining its exchange rate system. You cannot make a credible case that the government is putting the needs of rich foreign investors above the interests of the Venezuelan majority by maintaining that system. There is no popular outcry for devaluation and a unified floating exchange rate, quite the contrary as Reuters must know. Assuming the reporters are not completely uninformed, they must also know that Maduro’s government has long put off raising gasoline prices out of fear over the impact it would have on his key constituents – the poor, not foreign investors.
This article says that “concerns Venezuela could default on foreign debt have pushed its yields to the second highest of any emerging market nation.”
The “concerns” are driven by malicious, one-sided reporting that appears aimed at driving up borrowing costs. The “concerns” are not driven by rational economic arguments as both Mark Weisbrot and Francisco Rodriguez (who is hostile to Maduro’s government) have shown. The default panic spread by the New York Times editorial board, among many others (including Reuters), makes rolling over bonds – i.e. paying off principal by issuing new bonds – much more expensive than it should be.
Reuters should also dispense with the charade that quoting Venezuelan officials provides balance. As Reuters is well aware, there are US-based critics of US foreign policy (like the Center for Economic and Policy Research) whom readers would take much more seriously.
ZNetwork is funded solely through the generosity of its readers.
Donate