Sunday, November 05, 2017

I do not want to want to restructure the debt

This is pretty much what Maduro has in mind when he talks of restructuring the huge Venezuelan debt, huge enough that a default would at the very least send shudders through the markets (though it has been previsible enough that I am sure many have taken their precautions long ago).

I'll be as brief as possible.


The real problem of Maduro is that electoral cheating is not enough to get reelected next year. For this he needs to distribute some goodies to his hard core shrinking base so that they will be able to make effective the necessary electoral blackmail and cheating.  You just cannot say that a given polling center has 90% participation when there is no picture of at least half a dozen people loitering in front.

Unfortunately Maduro &CO. misjudged badly the effect of the rather moderate US sanctions.  What they do is to block access to new loans to pay old ones. Oh, Wall Street is full of sharks willing to issue new debt at exorbitant interests to pay some of the old ones and still leave a little bit of electoral cash for Maduro (I am looking at you Goldman Sachs).  But US loan sharks are pretty much tied down, as well as those elsewhere who have no qualms in dealing with loan sharks.

For some reason Maduro thought that Russia had deep pockets but apparently not. Or he run out of collateral for Russia, which we must remember is a mafia economy and thus they make loan sharks look tame.  China will only do as much as they need to do to guarantee payment of their own loans, but they had it with Venezuelan thieves and laziness and misrule. Corruption in China is kid's play compared to the one in Venezuela; and yet they are starting to crack down.

The reason to risk electing an unconstitutional constituent assembly (CA) was in part due to the need to have someone to vouch for new loans since the mean National Assembly (NA) would not approve them unless the regime allowed for the parliamentary supervision of how those new funds would be spent. Imagine that!  Civilians monitoring corrupt generals and drug traffickers!  ¿Habrase visto

But then again a new problem arose for Maduro. The conditions under which the CA was "elected" and the massive fraud exposed within hours made that no serious country with serious cash in hand would recognize it, and even less any decisions that this garbage would make.

It seems that the recent October 15 "success" came at a prize and the regime will not be able to make its scheduled payments for the rest of the year.  See, it is not enough to buy votes, you also need to pay those that commit electoral crimes.  Expensive business all of that....

What is a hard working narko-korrupt autocrat to do?

Blackmail comes to mind.

First a series of wild declarations, including the stunning statement that the debt is not Maduro's. 

So it had gotta be from Chavez, no?  The narko-revolution starting to liquidate Chavez and his heirs? The potential makes the mind reel. (1)

Then came  the order to convoke to Venezuela the bond holders to discuss things.  Summoned would be a better word.  And the vice president Tareck El-Aissami would be in charge of the negotiation. Well, the summons does make sense: Tareck is on the shit list of DEA and more so he cannot travel outside the country.

However it is predictable, even to the regime, that attendance will be sparse and that at any rate they will try to gently explain to the narko-dictatorship that, well, "you need to put a little bit of order in your house before we even consider risking the wrath of the SEC" (translation: we will need to be more than loan sharks to shoulder the legal risks if you really want more money).

So, to bring the blackmail in full force the regime is now openly talking of not paying, adding real threats against the NA for its final dismissal or "so you negotiate with us and the CA or we will not pay you a penny".

How this all will pan out is too early to say, but it is not going to end well.  And the first victims are already in the list, starting with the vice president of the NA, Freddy Guevara (in the ever going destruction of Voluntad Popular of Leopoldo Lopez).

The gambit of Maduro reeks of desperation but I suppose that his mafiosi structured mind makes him and his gang willing to take the risk.  After all if it works they will reap huge benefits. And if does fail, they are already getting pretty good at repression and people getting used to starve Cuban style.

Meanwhile, they are not taking ANY sensible measure to ease the crisis, NOT ONE.  Which of course does not help when you wast to refinance your debt..... 

Thus I guess that in fact Maduro does not want to negotiate any restructuration, he just wants surrender from the bond holders if they want to recover at least part of their loans (because it is clear that default is coming and that they will have huge losses no matter).


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1) Liquidation of historical chavismo is keeping apace. This week it was the turn  of Ameliach, outgoing Carabobo's governor who was looted of his own hoarded loot.  Giordani was the first one, but on October 15 we saw the dismissal of Vielma, Cardenas, Aristobulo and Mata. 




10 comments:

  1. One thing is certain, the brains behind the regime always intended on racking up as much debt as possible and defaulting Their intent has always been complete financial ruin for Venezuela. Likely they will in the end allow all their oil fields and other potential future income streams be awarded or sold out of this desperate financial ruin. This will complete what they are after a country no one wants, a country that no one cares to help. They can rule over it forever producing and shipping drugs and feeling like Lords over their sheep.

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  2. Anonymous11:43 AM

    Socialism always fails. But at least the people intended well when they voted for their own demise. Their good feelings about themselves can keep them warm.

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  3. well said: 'It seems that the recent October 15 "success" came at a prize and the regime will not be able to make its scheduled payments for the rest of the year. See, it is not enough to buy votes, you also need to pay those that commit electoral crimes. Expensive business all of that....'

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  4. An interesting article in the WSJ this morning centered around that the intent of "restructuring" is to hoard a few dollars for another month and hand them out prior to the upcoming elections and deal with the default afterwards.

    Creditors know that Venezuela has the collateral to pay it off but given the sanctions in place, a deal will likely not become a reality. This leaves Maduro & Co. in a bit of a pickle because creditors can call upon the "repo man" and start confiscating Venezuelan oil upon arrival and demand payment for its release. Thus, Maduro will be forced to pick between using $ for imports or pay the ransom note.

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    Replies
    1. Not necessarily. Maduro will hand over the oil fields to Russia who will reap the rewards in exchange for funding the regime as needed and making the key people very wealthy. The default is all part of the plan as if they just had handed them over then no one would allow that. But if things are so bleak that they are forced to sell the assets in terms of the oil fields to Russia or miss payments to them giving them in default to Russia then the rest of the world will have to go suck eggs. Everything the regime has done to look incompetent has been part of the masterplan and all has gone as planned.

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    2. Sorry not all went as planned as Russia was suppose to gain Citgo in default but the USA put a stop to that.

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  5. It ain't "Maduro" this and Maduro that. He's just a puppet of some Cubans and follows orders or advice of a bunch on variously inept and/or corrupt politicians, economists and crooks.

    It ain't even Cabello or Diosdado or Rodriguez who are in charge. Those are just some of the prominent payasos of that neo-tropical narco-kleptocracy. Maduro haz zeero plans, zero clues about macro or micro economy, debt oir refinancing or defaults, NPI. Nada. Zilch. Que le pregunten al cobde del guacharo, lui il en sait bien plus que cette bande de LADRONES DE RANCHO.

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  6. Anonymous3:36 PM

    Been watching last week with keen interest. I do not see how events are not coming to a head. Default(s), The Bond Market. 1) A five billion dollar decision is coming Monday for derivitive holder IVSA. This is obvious just stalling a credit default swap that will cost the insurance companies. So far, only Russia is rerstructurinng. It is only three Billioin. .

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  7. Anonymous4:36 PM

    The figures are not spot on because it really doesn't matter but if the debt is $150B and today's rate is approx 50,000 Bolivars (FUERTE)!! to the dollar then the debt is around 7,800,000,000,000,000 Bolivars. Something to tweet.

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  8. You cannot forget that this regime has done everything by design to look incompetent. They have purposely put in currency controls and policies to get Venezuela massively in debt such as to justify treating the people like dogs. Blame it on the USA. They always intended on a big debt, no reserves and default. All part of the grand plan. Nothing will change in terms of leadership. It is now a dictator and the only way to replace it is to have an uprising that the people have shown will not happen. The regime next stage is to drive out anyone with a brain, feed the bare minimum to the rest and live like kings off the oil and drug royalties they will get when the default allows them to put the oil production I to the hands of the Russians. The true puppet masters from the start.

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