Stuck in a death spiral, Venezuela is borrowing money at any cost

[Eugene]

Source: Washington Post

Stuck in a death spiral, Venezuela is borrowing money at any cost

By Nick Miroff June 8 at 5:00 AM

You don’t need to be an economist to recognize the sad, self-destructive pattern of Venezuela’s financial collapse. If you’ve ever had a friend or family member gripped by gambling addiction or a drug problem, you’ve seen it. You know where this typically ends.

At the pawnshop.

Last week, Goldman Sachs acquired $2.8 billion worth of bonds issued by Venezuela's state oil company at just 31 cents on the dollar, paying $865 million for the securities. Now Venezuela is looking even more desperate, offering $5 billion worth of bonds at 20 cents on the dollar through a Chinese brokerage, according to the Wall Street Journal, whose reporters have been tracking the country’s attempts to secure emergency cash.

That is the kind of financing typically available to people with trembling hands trying to negotiate through bulletproof glass.

The latest sale would raise $1 billion in cash but leave Venezuela on the hook for more than $11 billion in payments through 2036, according to this calculation by the Caracas Chronicles blog. The hugely discounted bonds are so obscure that apparently they’re being sold through some sort of unusual, off-market arrangement, further underscoring their risk.

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Read more: https://www.washingtonpost.com/news/worldviews/wp/2017/06/08/stuck-in-a-death-spiral-venezuela-is-borrowing-money-at-any-cost/

[GatoGordo]

1. Maduro's English language mouthpiece, Venezuela Analysis, touts 345% pay raises this year!

"According to Maduro, the latest salary increase means Venezuelan teachers have seen their wages bolstered by 345 percent since the start of the year. According to estimates released by the opposition-controlled National Assembly Friday, inflation hit 127.8 percent in the first five months of 2015.

The estimate was released by opposition legislator and economist Angel Alvarado, who said inflation was largely driven by currency printing, devaluations of the Bolivar Fuerte and import restrictions.

No official inflation data has been released for this year. In 2016, annual inflation hit 274 percent... according to central bank figures handed to the International Monetary Fund in April."

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https://venezuelanalysis.com/news/13176

The problem being, that Maduro's "financial analysis" is as fake as his hair color. His governments version of things are quite rosy. However, inflation is expected to top 1900% in 2017

Read

"Venezuelan consumer prices rose 800 percent in 2016 while the economy contracted by 18.6 percent, according to preliminary central bank figures seen by Reuters, the sharpest contraction in 13 years and the worst inflation reading on record.

The extended slump in oil prices has turned the OPEC nation's once-prosperous oil-boom economy into a mirror of the latter day Soviet Union, with rampant product shortages leading leaving to skip meals and wait hours in food lines.

President Nicolas Maduro's government blames the situation on an "economic war" led by political adversaries with the help of the United States. As problems mounted, the central bank has stopped releasing quarterly and monthly economic indicators."

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http://www.cnbc.com/2017/01/20/venezuela-2016-inflation-hits-800-percent-gdp-shrinks-19-percent-document.html