Friday, April 20, 2018

Venezuela is officially a basket case

It is hard to overstate the importance of the communique of US Treasury Secretary Steven Mnuchin. Today he made it official that the situation of Venezuela is dire, that there is no way it can get help as long as Maduro and Co. are in charge, but that there is a will to help massively if the conditions are right. Let's go by parts.

The attendees

The following countries were represented at the meeting: Argentina, Brazil, Canada, Colombia, France, Germany, Guatemala, Italy, Japan, Mexico, Panama, Paraguay, Peru, Spain, the United Kingdom, and the United States.

Of course, those are the usual suspects but this time we have JAPAN. I mean, the potential of the Venezuelan default, of its unstoppable drop in oil production and of its potential millions of economic refugees make this a world crisis. Note that China (and even less Russia) do not participate in such kind of meetings since having so many skeletons in its closet it stays clear from any closet elsewhere. Never mind that Chinese are not known internationally for their generosity...

The reason

The policies of the regime of President Maduro have consequences that extend beyond Venezuela’s borders, threatening regional stability and national security. 

No surprise here. And to drive the point:

Participants in the meeting agreed that the Maduro regime’s destruction of the economy has created a full-blown humanitarian crisis that is driving a major exodus of Venezuelan citizens.   They reviewed migration flows out of Venezuela to destination countries around the world, including a sharp acceleration in departures...

The rationale for holding that meeting now

President Maduro continues to refuse offers of international humanitarian assistance to address the health and welfare of Venezuela’s increasingly impoverished population.  His government instead has directed dwindling food imports to a government-run distribution network.  Participants reviewed how the government’s control over food distribution is a mechanism for social control, and they received a briefing – based on shared financial intelligence – on the known identities of corrupt individuals who are stealing from this program.

In case you still do not get it, there are enough hard proofs of corruption at the expense of the health of the Venezuelan people.  Basically, it is a soft way to say that the Maduro regime is committing violence against its own people at the level of crimes against humanity, bordering on the genocidal red line.

What to do?

Concrete actions are necessary to restrict the ability of corrupt Venezuelan officials and their support networks from abusing the international financial system. 

As I have written in the past, the extent of Venezuelan corruption, to which you add the money racked on drug trafficking, has created a laundering mechanism that threatens the stability of financial institutions. Not that Venezuela can send the world into a world crisis, as some within chavismo think they can, the Venezuelan oil is not that important anymore and the debt is not something so large that the financial system cannot digest it with a few burps; but allowing Venezuela to run as it does is a bad precedent for other countries and carries corruption everywhere.

What is to be done "someday"

Right now besides tracking international corruption there is little that can be done. Nobody is going to spend a drop of blood from a single one of its soldiers for a country that has had such an inept political class and such self inflicted wounds.  However the evolution of the situation is negative enough that the chavista bubble has got to explode at home sooner than later.  One way to put it is that the result of May 20 election is irrelevant, forces have been unchained that the regime cannot control anymore.  Any help can only be brought when a serious government is in place in Caracas the nature of which does not seem to matter much.

Looking forward, participants recognized that a government in Venezuela that warranted the support of the region, and was prepared to enact economic policies to reclaim Venezuela’s prosperity for its people, would receive the support of the international financial community.  

So, if you like, it is good news. If the opposition politicians show enough resolve and sacrifice it will be rewarded. And that is a must because, one, Venezuela is in a geo-strategic position; two, it does have oil that is still needed; and three, more importantly, it has a vast agricultural potential that is woefully underused in a world that needs more and more food.

And two warnings

First, a warning to those speculators as well as the Russians and Chinese.

Creditors, whether private or public, that provide new financing to the Maduro regime are lending to a government that lacks legitimacy to borrow in the name of Venezuela.  

It is not only that Goldman Sachs and such scum funds will not be helped if they insist on speculating on Venezuela and the bubble bursts, but the West will be of no help if China and Russia cannot recover their funds. No international trade organization of court of justice will rule in their favor because, well, the countries that matter do not recognize those claims as legitimate and at best for China and Russia, their due bills will be placed at the bottom of the pile. Example: Venezuela may have surrendered CITGO to Russia but the US administration will not allow that deal to be acted upon and Russia will lose a lot as it is forced to sell out to other companies cheaper than what it got CITGO for.

But the second warning is dire. The delays in the regime to make economic adjustments, their desperate grab to power to avoid jail will have long term consequences for the Venezuelan people.

Noting the decline in Venezuela’s petroleum output, and Venezuela’s defaults on external obligations, participants concurred that recovery will take time, and require significant external support.  Participating countries agreed to remain in coordination, such that the tools of the international community are prepared for swift deployment when circumstances warrant.

The time for the Maduro regime to go is NOW. More delays and help may not come because it will have become useless. You cannot help failed states, you take over them to rebuild, or you let them rot in quarantine.


  1. I can see a solution if the TSJ Legitimo continues with Maduro's trial and convicts him. At that point a political arrangement which includes the judges, Luisa Ortega, Ledezma, and Borges can lead to the formation of a transitional government in exile. The big step comes if and when the USA and other nations recognize it instead of Maduro, and Trump issues a presidential decree giving it control over all Venezuelan properties and bank accounts.

    I understand Barboza is worried this may happen, and since he's a sold out politician he may act to try to block such an outcome.

  2. Anonymous11:46 AM

    Daniel I disagree with your statement regarding "not one drop of blood spent". Mnuchin's statement "swift deployment" to me is a veiled threat of military usage. In U.S. parlance of the English language, deployment rarely is utilized other than militarily.

    1. I think you need to keep up with the evolution of English language. Deployment covers many things, from tanks to aid after a natural catastrophe, and of course, financial and economic measures.
      Only leftists stuck in the past century think that the US only way to pressure is through military might. Times have changed. The US will not send marines, not even one, to Venezuela. And if they ever decided to use force, a few drones and air strikes would suffice to bring down a Venezuelan army composed of pig fat generals and scrawny hungry soldiers.
      If there is any war it will come from Colombia to stop the flow of refugees

  3. Anonymous4:21 PM

    Basket Case is a kind way of saying Shit Hole.

  4. Anonymous5:31 PM

    Something tells me that the powers that be are simply waiting to see whether or not Maduro makes it to May 20th, or postpones the "election" or holds it and then, depending on the outcome, acts.

    At this point, I'd say Maduro will want to continue the farce because that's the best choice for him.

    Postponing the farce may motivate other actors (military & civilian) to ask for him to step down rather than continue to suffer.

    Even if he "wins", I'm thinking it may be the most pyrrhic of victories.

    Anon 242

  5. Tom in Oklahoma6:23 PM

    I wish the statement had more "teeth" in it.

  6. Disagree with Daniel here. A quick, surgical military intervention, coordinated with some mid-level military malcontents and some opposition insiders is still an option on the table. And it's Kleptozuela's only hope to kick out the Genocidal Narco-Tyranny.

    At this point the civilized world is playing "wait&see": See what happens after the elections mega-fraud, and more importantly what happens with Nicaragua, Colombia, Mexico and Brasil.And Cuba now. Klepto-Cubazuela could be tolerated in the region for a long time IF it's the only major Chavistoide Communist pain in the neck. IF it's the only immigration 'humanitarian' crisis. (4 million people are GONE already, not many more to come, not millions more).

    But if Petro and the Mexican populist clown were to win, if Brazil doesn't get it's shit straight, and Nicaragua and Cuba continue to sell their leftist crap in the region, aided by China, Iran and Russia, that's intolerable. And Venezuela would be the first quick stop for the Marines. Too big geographically, too much oil, too many DRUGS going through.

    Therefore, I wouldn't rule out a fast but powerful DEA/CIA Seal Team 6 intervention. 2 weeks, a few drones and choppers, y listo. Well planned and coordinated. No "bay of Pigs" salopperie. Grabbing Cabello/Tarek/Padrino/Rodriguez would suffice to scare the pants off Kleptozuela's laughable 'military'.

    But if Colombia, Brazil and Mexico get their shit together, if Cuba starts modernizing and the region stabilizes, Kleptozuela is doomed for many more decades to come.

  7. Anonymous4:47 PM

    No Marines are coming... What is the upside to the US?
    Any photo of a policeman beating a suspect in Vz will be blasted around the world as proof of US evil.
    Pinochet is still a dirty word, Allende is a hero who just didn't get a chance to show how great he could have been.
    The left's greatest advantage is PR, evil grasping capitalists vs some cute little girl who only wants to eat. etc.. etc.. etc..

    The US is better off letting Vz fall to pieces as an example to others.. "don't go full commie, you never go full commie"

  8. Boludo Tejano4:49 AM

    President Maduro continues to refuse offers of international humanitarian assistance to address the health and welfare of Venezuela’s increasingly impoverished population.

    When I have come across US blogs posting about Venezuela, I have been repeatedly surprised at the comments who say that the mean old US should HELP Venezuela.Yup, Maduro really wants help from the Gringos- like machine guns for the colectivos. Not a very high knowledge of Venland here in the US.

  9. Daniel,

    I’ve been lurking here for a while and this is the first time I’ve felt compelled to write to you. I agree with many who think the special forces aren’t coming to Venezuela, no matter how much our own Mango Mussolini is dogging for a fight, any fight. I found Pence’s offer insulting at best. $18.5 million? Well I agree that help is necessary and it’s a moral obligation of all nations to assist those who were displaced by this economic and political disaster, the amount offered was not becoming of a great nation. Trump wants to spend double that to have a military parade to puff up his tragically tiny ego. And that’s only for a day. Cities spend more for their Independence Day fireworks. Chase makes more than that every second of every day in interest payments as do all large banks. We in the rest of the world need an actual plan to help, not offer tokens. Imagine if General Marshall said that the solution to Western Europe post WW2 was to send them $20K and a get well card. We have a duty to do better, and everybody at that meeting surely must have felt that too. Let’s hope they act. It wasn’t lost on me that he called them migrants, and not refugees. Those that are fleeing are most deserving of the legal definition of Refugees.

    My heart goes out to you in so many ways. I can’t imagine what I would do if it were to happen here or anywhere else for that matter. As time gets closer to May 20, I worry for your safety in a city seemingly gone mad with well deserved rage. Be safe and try to get through it unscathed. At least as much as possible that it.

    You guys are in my thoughts.


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