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.