6 ms·

No it didn't. The foreign debt didn't move an inch. If you needed to sell 1.5 billion oil barrels to repay your foreign debt at $65/barrel, you still need to se

by IMTDb 8y ago

No it didn't. The foreign debt didn't move an inch. If you needed to sell 1.5 billion oil barrels to repay your foreign debt at $65/barrel, you still need to sell 1.5 billion oil barrel to repay your foreign debt. No change there. On the other hand, all the debt that was issued in bolivars is basically void since a loaf of bread is now worth more than several millions bolivars. All savings are lost, pensions are worth nearly nothing and anyone who trusted the Venezuelan government by buying bonds and/or financing their projects by lending bolivars is fucked. This moves allow Venezuela to technically erase around 1/3 of it's debt, hoping that will allow them to not default on the part that is due in foreign currencies, but scarifying it's own population in the process. Fun times.

axilmar 8y ago
> No it didn't. The foreign debt didn't move an inch. If you needed to sell 1.5 billion oil barrels to repay your foreign debt at $65/barrel, you still need to sell 1.5 billion oil barrel to repay your foreign debt. No change there. If you could produce so much oil, then you wouldn't have the debt in the first place. So the debt actually went up by the Bolivar devaluation, because now Venezuelans must create 20 times the value they created before in order to repay the debt.
- IMTDb 8y ago
  They definitely can produce so much oil. Venezuela produces around 2 million barrels / day and are ranked no1 by proven oil reserve (https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves https://en.wikipedia.org/wiki/List_of_countries_by_proven_oi...) . So 1.5 billion barrels is completely in their range over several years ! No one said they need to repay the debt tomorrow, as long as they do not default on the foreign debt (which is the whole point of the move) they can restructure it and repay it at their own pace. The issue comes from the fact that during the last weeks/month, oil production has significantly dwindled due to political turmoil. Instead of defaulting on the foreign debt, they sacrificed their own population. They do not need to create 20x the value they created before. The USD price of a Kilogram of coffee did not change at all, so any amount of coffee they would be selling now will contribute the exact same amount towards foreign debt reduction than the same amount produced 3 month ago: they don't suddenly need to produce 20x more. On the other hand, if they did sell a significant amount of coffee 3 month ago and saved the profits in bolivars for their old days, or to invest in modernising the farm, their savings just got divided by 20.
  - JoeAltmaier 8y ago
    Isn't it sulfur-laden oil, of no interest in the market unless there's a demand shortage? And in the current market, there's slumped demand, so they can't give it away. Also, renovation of the Venezuelan infrastructure was paid for but not accomplished (graft/corruption). So they're in a hole for efficient production? Finally, food production: they divided up farms and gave small holdings to the workers, who unfortunately had not the education, equipment nor capital to run them. So food supplies tanked, resulting in foreign exchange being used principally to import food. All this added up to, a total fail of the regime to pay for their socialist experiment? Never mind games with imaginary points (currency valuation). The country can't feed itself nor make its own food nor trade its resources for food. They're in a big hole.
    - curtisblaine 8y ago
      Their socialist experiment was unsustainable from the start, to be fair. They effectively killed their internal economy by capping the price of staple goods, driving business to failure and closure in the process.
      - 49para 8y ago
        That is just because they used the wrong version of Socialism. They just need to switch to a working version and they should be good. /s
        gameswithgo 8y ago
        like denmark, germany, etc?
        antidesitter 8y ago
        Denmark and Germany are not socialist.
        8y ago
- jjeaff 8y ago
  The debt is denominated and must be repaid in USD. Nothing changed in Venezuela except some fantasy exchange rates than no one cares about except a handful of government cronies who are allowed to take advantage of those rates when they want to buy USD from the government using bolivars.
  - stickfigure 8y ago
    This should be the top comment in this subthread. The 95% devaluation doesn't really change anything - unless you were specially connected, you couldn't change bolivars for USD at the official exchange rate. At most this devaluation just brings the official rate back in line with the black market rate, which is the real exchange rate because that's the only rate at which you can actually exchange currency. Folks holding bolivars (and creditors, and pensioners) were already screwed. This just makes it official.
    - nerfhammer 8y ago
      Ordinary people aren't legally allowed to exchange bolivars for foreign currencies at all.

by IMTDb 8y ago

axilmar 8y ago

> No it didn't. The foreign debt didn't move an inch. If you needed to sell 1.5 billion oil barrels to repay your foreign debt at $65/barrel, you still need to sell 1.5 billion oil barrel to repay your foreign debt. No change there. If you could produce so much oil, then you wouldn't have the debt in the first place. So the debt actually went up by the Bolivar devaluation, because now Venezuelans must create 20 times the value they created before in order to repay the debt.

IMTDb 8y ago
They definitely can produce so much oil. Venezuela produces around 2 million barrels / day and are ranked no1 by proven oil reserve (https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves https://en.wikipedia.org/wiki/List_of_countries_by_proven_oi...) . So 1.5 billion barrels is completely in their range over several years ! No one said they need to repay the debt tomorrow, as long as they do not default on the foreign debt (which is the whole point of the move) they can restructure it and repay it at their own pace. The issue comes from the fact that during the last weeks/month, oil production has significantly dwindled due to political turmoil. Instead of defaulting on the foreign debt, they sacrificed their own population. They do not need to create 20x the value they created before. The USD price of a Kilogram of coffee did not change at all, so any amount of coffee they would be selling now will contribute the exact same amount towards foreign debt reduction than the same amount produced 3 month ago: they don't suddenly need to produce 20x more. On the other hand, if they did sell a significant amount of coffee 3 month ago and saved the profits in bolivars for their old days, or to invest in modernising the farm, their savings just got divided by 20.
- JoeAltmaier 8y ago
  Isn't it sulfur-laden oil, of no interest in the market unless there's a demand shortage? And in the current market, there's slumped demand, so they can't give it away. Also, renovation of the Venezuelan infrastructure was paid for but not accomplished (graft/corruption). So they're in a hole for efficient production? Finally, food production: they divided up farms and gave small holdings to the workers, who unfortunately had not the education, equipment nor capital to run them. So food supplies tanked, resulting in foreign exchange being used principally to import food. All this added up to, a total fail of the regime to pay for their socialist experiment? Never mind games with imaginary points (currency valuation). The country can't feed itself nor make its own food nor trade its resources for food. They're in a big hole.
  - curtisblaine 8y ago
    Their socialist experiment was unsustainable from the start, to be fair. They effectively killed their internal economy by capping the price of staple goods, driving business to failure and closure in the process.
    - 49para 8y ago
      That is just because they used the wrong version of Socialism. They just need to switch to a working version and they should be good. /s
      - gameswithgo 8y ago
        like denmark, germany, etc?
        antidesitter 8y ago
        Denmark and Germany are not socialist.
        8y ago
jjeaff 8y ago
The debt is denominated and must be repaid in USD. Nothing changed in Venezuela except some fantasy exchange rates than no one cares about except a handful of government cronies who are allowed to take advantage of those rates when they want to buy USD from the government using bolivars.
- stickfigure 8y ago
  This should be the top comment in this subthread. The 95% devaluation doesn't really change anything - unless you were specially connected, you couldn't change bolivars for USD at the official exchange rate. At most this devaluation just brings the official rate back in line with the black market rate, which is the real exchange rate because that's the only rate at which you can actually exchange currency. Folks holding bolivars (and creditors, and pensioners) were already screwed. This just makes it official.
  - nerfhammer 8y ago
    Ordinary people aren't legally allowed to exchange bolivars for foreign currencies at all.