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> Since Venezuela doesn't have the money to pay all its bondholders right now, investors would then be entitled to seize the country's assets -- primarily barre

> Since Venezuela doesn't have the money to pay all its bondholders right now, investors would then be entitled to seize the country's assets -- primarily barrels of oil -- outside its borders. Is there any historical precedent for a scenario like this?

smcl 9y ago
Yep - an Argentine tall ship was seized this way in Ghana: https://www.npr.org/sections/money/2012/10/22/163384810/why-a-hedge-fund-seized-an-argentine-navy-ship-in-ghana https://www.npr.org/sections/money/2012/10/22/163384810/why-...
- crdoconnor 9y ago
  ...and returned shortly thereafter.
  - lettergram 9y ago
    It appears they did pay $20 million though, which is pennies on the dollar, but still (probably) worth it.
    - sseveran 9y ago
      The funds involved made far more than $20M. https://www.nytimes.com/2016/04/25/business/dealbook/how-argentina-settled-a-billion-dollar-debt-dispute-with-hedge-funds.html https://www.nytimes.com/2016/04/25/business/dealbook/how-arg...
      - smcl 9y ago
        Yeh the hedge funds buying old Argentine debt second-hand for pennies on the dollar and then holding out for 100% was pretty ... yuck.
        seanmcdirmid 9y ago
        That’s typically what bad debt buyers do. The discount is on the chance of the debtor paying, not a new amount they are supposed to pay.
        smcl 9y ago
        I should've been clearer, I'm all over the place today and didn't finish my thought. I was referring to the "vulture funds", https://en.wikipedia.org/wiki/Argentine_debt_restructuring#Background_and_holdout_problem https://en.wikipedia.org/wiki/Argentine_debt_restructuring#B... who went a little further than that. Here's something from the linked article: " Upon default, Argentina's bondholders sued to be repaid 100% of their bonds' face value.[6][20][21] Among the bondholders were vulture funds, who had speculatively acquired US$1.3 billion of the bonds' total value on the secondary market for cents on the dollar after the 2001 default.[5][22] Vulture funds also owned a large quantity of credit default swaps (CDS) against Argentine bonds. This created a further incentive to not only trigger a default against Argentina; but also to undermine the value of the bonds themselves, as the CDS would pay out at a higher rate if the defaulted bonds decline to extremely low values.[22] "
        whatok 9y ago
        That entry is extremely opinionated and does not necessarily reflect reality in all cases. The part on CDS "incentives" highly depends on what CDS and bonds owned (a lot of CDS in this case used as a hedge) and a lot of people lost a lot of money on bad trades involving both.
        nradov 9y ago
        Could you edit the entry to be less opinionated?
        tomjen3 9y ago
        You can call the vulture founds, but the facts of the matter is that the original owners would rather recover some of their money, for sure, than lose all of them, and that they have somebody to sell to means ultimately lower borrowing prices for everybody.
    - crdoconnor 9y ago
      The ship was released after an ICJ ruling: https://www.theguardian.com/world/2012/dec/20/argentina-sailing-ship-ghana-release https://www.theguardian.com/world/2012/dec/20/argentina-sail... There was a change in policy after Macri was elected, and the bondholders ended up getting paid $6.5 billion, but that was just a change in policy, not a response to any kind of threat.
caiob 9y ago
I'm no anarchist nor know about all the technicalities involved, but at what point does Venezuela become vulnerable to invasions from countries which they share a border with (E.g. Brazil, Colombia)? I'm assuming if you don't have enough money to run a country, you certainly don't have enough to protect the border and power the military.
- dep_b 9y ago
  The thing is nobody wants to inherit this mess.
- caio1982 9y ago
  Why would any other south american country invade Venezuela at all due to defaults?
  - donatj 9y ago
    Oil. Venezuela has an ocean of the stuff. So much so they decided to base their entire planned economy on it, which didn’t exactly work out. Almost like an economy that can adapt on its own might be a better idea, but I digress.
    - caio1982 9y ago
      So does Brazil, the largest power in SA. We don't have this invasion surge thingy here, at least not since a while ago.
    - TremendousJudge 9y ago
      >Almost like an economy that can adapt on its own might be a better idea, but I digress. Works just fine in the US. Not like people are dying on the streets due to lack of healthcare or anything
      - donatj 9y ago
        Lived here my whole life, never seen anyone die in the street. Anyway a few people needing healthcare vs everyone literally starving, I know what I would take.
brudgers 9y ago
Military powers and economic interests rarely have compunction. Haiti payed reparations to France for freeing itself from colonization (and most of its people from slavery).[1] [1]: https://en.wikipedia.org/wiki/External_debt_of_Haiti#Independence_debt https://en.wikipedia.org/wiki/External_debt_of_Haiti#Indepen...
- deleted 9y ago
  [deleted]

smcl 9y ago

Yep - an Argentine tall ship was seized this way in Ghana: https://www.npr.org/sections/money/2012/10/22/163384810/why-a-hedge-fund-seized-an-argentine-navy-ship-in-ghana https://www.npr.org/sections/money/2012/10/22/163384810/why-...

crdoconnor 9y ago
...and returned shortly thereafter.
- lettergram 9y ago
  It appears they did pay $20 million though, which is pennies on the dollar, but still (probably) worth it.
  - sseveran 9y ago
    The funds involved made far more than $20M. https://www.nytimes.com/2016/04/25/business/dealbook/how-argentina-settled-a-billion-dollar-debt-dispute-with-hedge-funds.html https://www.nytimes.com/2016/04/25/business/dealbook/how-arg...
    - smcl 9y ago
      Yeh the hedge funds buying old Argentine debt second-hand for pennies on the dollar and then holding out for 100% was pretty ... yuck.
      - seanmcdirmid 9y ago
        That’s typically what bad debt buyers do. The discount is on the chance of the debtor paying, not a new amount they are supposed to pay.
        smcl 9y ago
        I should've been clearer, I'm all over the place today and didn't finish my thought. I was referring to the "vulture funds", https://en.wikipedia.org/wiki/Argentine_debt_restructuring#Background_and_holdout_problem https://en.wikipedia.org/wiki/Argentine_debt_restructuring#B... who went a little further than that. Here's something from the linked article: " Upon default, Argentina's bondholders sued to be repaid 100% of their bonds' face value.[6][20][21] Among the bondholders were vulture funds, who had speculatively acquired US$1.3 billion of the bonds' total value on the secondary market for cents on the dollar after the 2001 default.[5][22] Vulture funds also owned a large quantity of credit default swaps (CDS) against Argentine bonds. This created a further incentive to not only trigger a default against Argentina; but also to undermine the value of the bonds themselves, as the CDS would pay out at a higher rate if the defaulted bonds decline to extremely low values.[22] "
        whatok 9y ago
        That entry is extremely opinionated and does not necessarily reflect reality in all cases. The part on CDS "incentives" highly depends on what CDS and bonds owned (a lot of CDS in this case used as a hedge) and a lot of people lost a lot of money on bad trades involving both.
        nradov 9y ago
        Could you edit the entry to be less opinionated?
        tomjen3 9y ago
        You can call the vulture founds, but the facts of the matter is that the original owners would rather recover some of their money, for sure, than lose all of them, and that they have somebody to sell to means ultimately lower borrowing prices for everybody.
  - crdoconnor 9y ago
    The ship was released after an ICJ ruling: https://www.theguardian.com/world/2012/dec/20/argentina-sailing-ship-ghana-release https://www.theguardian.com/world/2012/dec/20/argentina-sail... There was a change in policy after Macri was elected, and the bondholders ended up getting paid $6.5 billion, but that was just a change in policy, not a response to any kind of threat.

caiob 9y ago

I'm no anarchist nor know about all the technicalities involved, but at what point does Venezuela become vulnerable to invasions from countries which they share a border with (E.g. Brazil, Colombia)? I'm assuming if you don't have enough money to run a country, you certainly don't have enough to protect the border and power the military.

dep_b 9y ago
The thing is nobody wants to inherit this mess.
caio1982 9y ago
Why would any other south american country invade Venezuela at all due to defaults?
- donatj 9y ago
  Oil. Venezuela has an ocean of the stuff. So much so they decided to base their entire planned economy on it, which didn’t exactly work out. Almost like an economy that can adapt on its own might be a better idea, but I digress.
  - caio1982 9y ago
    So does Brazil, the largest power in SA. We don't have this invasion surge thingy here, at least not since a while ago.
  - TremendousJudge 9y ago
    >Almost like an economy that can adapt on its own might be a better idea, but I digress. Works just fine in the US. Not like people are dying on the streets due to lack of healthcare or anything
    - donatj 9y ago
      Lived here my whole life, never seen anyone die in the street. Anyway a few people needing healthcare vs everyone literally starving, I know what I would take.

brudgers 9y ago

Military powers and economic interests rarely have compunction. Haiti payed reparations to France for freeing itself from colonization (and most of its people from slavery).[1] [1]: https://en.wikipedia.org/wiki/External_debt_of_Haiti#Independence_debt https://en.wikipedia.org/wiki/External_debt_of_Haiti#Indepen...

deleted 9y ago
[deleted]