6 ms·
Venezuela reveals $240B in debt it cannot pay (~$100B more than expected)
- tmaly 3mo agoIs this a "All your bases are belong to us" move with the oil?
- cs702 3mo agoAccording to the Financial Times, it will be the world’s largest debt restructuring.[a] Venezuela's economy has been a disaster for many years.[b] Surely I'm not the only one wondering: Where did all that borrowed money go? If any of it had been spent to buy goods and services inside Venezuela, it would have led to at least some business formation and activity. Instead, there's only been business destruction and constant crisis. It's kind of incredible that the country has nothing to show for all the money it borrowed. --- [a] https://www.ft.com/content/b7f25ca2-827c-40f9-ab1a-57067d8ec90d https://www.ft.com/content/b7f25ca2-827c-40f9-ab1a-57067d8ec... (paywalled) [b] https://en.wikipedia.org/wiki/Crisis_in_Venezuela https://en.wikipedia.org/wiki/Crisis_in_Venezuela
- hungryhobbit 3mo agoCorruption.
- throwitaway222 3mo ago[flagged]
- ceejayoz 3mo agoDefinitely doesn't happen under capitalism, right? Remind me again what the current President's net worth has done recently?
- throwitaway222 3mo agoI'm 100% fine with moving almost all government payments to a system where elected officials need to sign off before a payment is made. As long as he/she is willing to be responsible for the fraud that takes place. And I will walk Trump to jail when this happens, just as I walk the names I posted to jail too. And no, in PURE capitalism, it doesn't happen. It's just that we have too much socialist shit. In pure capitalism, every dollar that is lost to fraud is going to be looked at by investors and scrutinized. And besides it will have only affected the company that did it, not the country and not the voters and tax payers.
- ceejayoz 3mo ago> And no, in PURE capitalism, it doesn't happen. Just like PURE communism!
- throwitaway222 3mo agoPure Communism - as in marxism, the default is Elites make choices on where to allocate funding. Nowhere in that manifest is a checks and balances system. So yes, in pure communism, it is a direction to fraud. Not Capitalism.
- ceejayoz 3mo agohttps://www.reddit.com/r/whoosh/ https://www.reddit.com/r/whoosh/
- throwitaway222 3mo agoOk ok thank you for the levity, I'm a bit autistic with this stuff.
- brightbeige 3mo agoAt least your reply wasn’t written by AI
- cs702 3mo agoObviously, but $240B is a lot of money for a country with only 9M households, so, around $27K/household. It's an "accomplishment" of sorts to blow up in smoke that much money per household, with nothing to show for it. How the heck did they do that?
- 55555 3mo ago1. Dictator gets loans for his country 2. Dictator puts the money in his Swiss bank account 3. Government is overthrown 4. The populace has to pay off the debt Perhaps him being in custody will lead to some of the money being found and returned.
- seanmcdirmid 3mo agoIsn’t that how private equity works?
- joenot443 3mo agoI don't think there's a Swiss bank account in the world with room for $240b. There's no doubt Maduro enjoyed some taste of the froth, but this is a silly oversimplification.
- ErneX 3mo agoCorruption at every level of government. Everybody was getting a piece of it. Add to that mismanagement, stupid subsidies. Plus they had a huge oil windfall during the early Chavez years. All that money is gone, I wish it was just the money that was borrowed from abroad. They also spent billions to influence the elections of the other countries of the region. Chavez was also giving away oil for free in exchange of political support abroad. He even gave free oil for the buses of London because the mayor at the time was in good relations or something.
- nwah1 3mo agoLook up the lifestyle of Hugo Chavez's daughter, or the family of Tareck El Aissami, or the Narconephews affair, or the Cartel of the Suns.
- glitchc 3mo agoInto the pockets of the leaders. The people will pay for it through a cut of oil profits for the foreseeable future.
- BurningFrog 3mo agoIn a dictatorship, the money goes to the dictator and his friends.
- SilverElfin 3mo agoIt’ll be hard to know where it goes, but there’s a reason why people like Putin are billionaires. They siphon off funds from the state to themselves. And no one is in a position to stop them or even look into what’s going on. Venezuela was allegedly planning to invade a resource rich neighbor before the Trump administration’s actions, as part of a long standing territorial dispute, and I think that was partly so Maduro could keep the support of the population but also partly to deal with the financial problems. So their leaders definitely knew these issues were building up.
- ErneX 3mo agoTo be honest that was a huge bluff. There’s no way the decimated Venezuelan army after so many years of corruption could even threaten to invade anybody. Not downplaying the seriousness of the whole thing but even Venezuelans knew that was a distraction.
- JumpCrisscross 3mo ago“Investors have previously estimated that Venezuela also owes $30bn-$50bn to oil companies and trade creditors for unpaid invoices and more than $20bn in legal claims awarded to companies after Chávez’s regime expropriated their property. Venezuela has also been estimated to owe $10bn-$20bn to China in debts that Caracas previously paid from oil exports but is believed to have stopped servicing, about $6bn to Russia, and $4bn to development banks” (FT).
- cs702 3mo agoThe legal claims from expropriation, I get that... but everything else was actually borrowed. Whether the form was debt issuance or unpaid accounts payable, the rest actually was borrowed. It's kind of an "impressive accomplishment" in my view.
- JumpCrisscross 3mo ago> doesn't matter if the form was debt issuance or unpaid accounts payable, it was borrowed It matters by whom it was lent. Caracas telling China to fuck off is pretty easy right now. Less so if it’s an American investor. If anyone has an outline of to whom the other hundreds of billions are owed, I’d be curious to see it.
- cs702 3mo ago> If anyone has an outline of to whom the other hundreds of billions are owed, I’d be curious to see it. Me too. That's one of my questions. The other questions I have are about the shocking misuse of funds.
- legitster 3mo agoVenezuela had one of the largest government sectors compared to their GDP. Their solution to every economic problem was create lots of government busywork jobs funded by oil exports and loans. Their crude is really only valuable to a handful of countries, the US being the main one. They could really not afford to have worsening relations with the US right as the fracking boom took off. As their domestic industry shrank, they had to import more and more resources from other countries.
- ErneX 3mo agoIt’s not only the money borrowed, it was also the biggest oil windfall it ever had during the Chavez early years. Where did it go? They stole it.
- adjejmxbdjdn 3mo agoSmart move to acknowledge this and go for the debt restructuring while the current U.S. president sees Venezuela as his major foreign policy win. The government will be able to leverage that to get the U.S. government to push for far more favorable terms for Venezuela than it ever would have otherwise.
- deleted 3mo ago[deleted]
- sourcegrift 3mo agoLike him or hate him, Venezuela has been quite literally a fabulous win.
- outside1234 3mo agoLiterally nothing has changed except for the names though?
- panick21_ 3mo agoYeah, slightly changed market for something that didn't matter that much to begin with. Its was a successful military operation. A fabulous win is WW2, ending the Cold War or things like that.
- rurp 3mo agoFabulous win in what ways, and for who? I'm genuinely asking, as I haven't followed the country much. From what I have read the same corrupt repressive regime, the one that ran the country into the ground, is still in place while the democratic opposition that had shown some life in recent years has gone silent.
- watwut 3mo agoYeah, but did you considered that democracy was never a goal? Republican party is in full swing to destroy American democracy, why would they seek to create one in Venezuela? Bribes and oil were the goal. Consolidation of allied dictator was goal. That worked.
- millipede 3mo ago> On top of that comes what is owed to oil companies and suppliers, claims stemming from expropriations under Chávez and the outstanding loans from China and Russia. It seems like China or Russia would expect to be paid not in dollars, but in Oil Wells and Refineries. Why would they accept restructuring of the debt instead of repo'ing the assets?
- dylan604 3mo agoIf Venezuela used Enron math, then repo'ing the assets could get tricky. Are we sure the same assets haven't been leveraged more than once? Does Russia and China show up with their armies to see who gets it?
- stickfigure 3mo agoI expect Russia won't be collecting anything.
- alephnerd 3mo ago> It seems like China or Russia would expect to be paid not in dollars, but in Oil Wells and Refineries. Why would they accept restructuring of the debt instead of repo'ing the assets? Because a number of those assets are still owned by other countries that paused FDI due to Trump's Venezuela sanctions in 2018-19. For example, India was Venezuela's largest oil exporting customer following Maduro's election with it's state-owned (ONGC, Indian Oil, Oil India) and private sector (Reliance) majors being given sweetheart extraction deals that India had to freeze due to sanctions. Brazilian players like J&F Group also did the same thing with Venezuela's ONG industry as did Spanish players like Reposol. Now that the Venezuela sanctions regime is over, those assets which were continued to be owned by those countries are being restarted by those countries. The biggest winners of Maduro's capture was basically Brazil, India, and Spain as their companies were able to restart operations minimizing China's near monopoly in Venezuela after the expanded sanctions regime kicked off in 2018 while being nimbler than American players who essentially have to start from scratch.
- mmooss 3mo agoWho lent them the money? Did the government of Venezuela have good credit? It's the creditor's fault as much as - or in this case, arguably more than - the debtor's. The same applies to some business and personal debt: Sometimes good loans go bad; life has risk; sometimes it's obvious ahead of time. Either way, both parties take on the risk and both are responsible for the outcome. When the creditor is significantly more sophisticated/capable than the debtor - as an extreme example, a credit card company extending credit to someone addicted to gambling - I think the creditor is much more responsible. Another example is Wall Street banks extending credit blindly to real estate investment, causing the 2008 recession. In government finance, it's a very well-known, well-used tactic for wealthy countries or banks to extend credit to other countries that are unlikely to pay it off (due to limited revenue or competence), eventually giving the creditor significant control of the debtor country. The West used to do it effectively and probably intentionally; China has been doing it more recently. The debtor is starved for capital and won't turn it down; eventually they can't pay and another country has their finger on a trigger at all times: they can call in the loan and bankrupt the debtor at will.
- ErneX 3mo agoI know China gave one loan of 50 billion in exchange of future oil production. It was a terrible deal at the time, because they fixed the price of the barrel to a price way lower than market. And when the Chinese noticed their money was being basically stolen they stopped giving loans, fortunately.
- chollida1 3mo agoMost of this debt will be forgiven or given a significant haircut. The legal term is odious debt and it has a long history of debt taken out by dictators being forgiven once the dictator has been removed. The IMF will normally make a ruling on this as to if the debt is odious or not but given how a few big hedge funds that normally go after discounted debt have recently dumped a chuck of Venezuela's debt the writing is on the wall as they say. I'm not a government credit expert but what analysts are saying to expect 60-75% of the debt to be restructured, not forgiven, in terms of a 50% hair cut. The debts owed to oil companies secured by oil infrastructure is less likely to be written off as Venezuela will need foreign help to rebuild their oil infrastructure form these same companies, giving them a fair bit of leverage here:)
- ck2 3mo agoThey should send a 14 sentence MOU to US administration and get $300 Billion So where is all their money going right now into the middle-east? Is the President taking a cut? Investigations in 2027 are going to be bonkers
- nyxtom 3mo agoThat's it? That's only like 3 months of OpenAI/Anthropic
- alephnerd 3mo agoVenezuela's GDP (ie. it's yearly economic production) is around $111B. This is a very large debt load and extremely difficult to pay off.
- mmooss 3mo agoThis seems really about handing Venezuela back to Western oil companies, apparently by legitimizing the oil company claims and putting Venezuala in their power as their bankrupt debtors. How does all this help the Venezualan people? How is it a good deal for them? Venezuala likely should default on much of the debt and finance themselves through their own oil. Financial Times: [0] “Investors have previously estimated that Venezuela also owes $30bn-$50bn to oil companies and trade creditors for unpaid invoices and more than $20bn in legal claims awarded to companies after Chávez’s regime expropriated their property. Venezuela has also been estimated to owe $10bn-$20bn to China in debts that Caracas previously paid from oil exports but is believed to have stopped servicing, about $6bn to Russia, and $4bn to development banks” But notice that one of the first acts of the new government was to pass laws handing Venezuala's most valuable asset by far, their oil, to foreign companies. Imagine the US, Russia, Norway, or Saudia Arabia doing that. Even if that wasn't a politically disasterous idea - one with a proven track record worldwide - it's hardly the top need of the Venezualan people. They don't seem to be people served by the new government - the Venezualans aren't the people who put the government in power, for one thing. Control over countries and their oil, including via debt, an old, well-established strategy, long used by the West. It's been abandoned until Trump has seemingly returned to it - as if the oil companies are hoping to relive their most powerful era. Notice also that Trump's attacks have been on the leading oil producing countries outside US influence: Venezuala and Iran, and Nigeria. (Yes, the first two are also long-term political enemies - you might consider that the oil, inability of US to control them, and enemy status might not be coincidental.) [0] https://www.ft.com/content/b7f25ca2-827c-40f9-ab1a-57067d8ec90d https://www.ft.com/content/b7f25ca2-827c-40f9-ab1a-57067d8ec... - quote stolen from another comment
- alephnerd 3mo ago> handing Venezuela back to Western oil companies... Before the 2018 sanctions and after the American expropriation in the 2000s, the biggest foreign players in Venezuela's ONG industry were Spanish (Reposol), Indian (ONGC, Indian Oil, Oil India, Reliance), Chinese (Sinopec, CNPC), and Russian (Rosneft). The Spanish and Indian players kept operations at a minimum during the sanctions regime, but quickly scaled up after Maduro was captured.
- mlmonkey 3mo agoSuch a shame that a country with the world's largest proven oil reserves is so much in debt and poverty. Lesson for the rest of the world is: you go against the USA, prepare to suffer. Of course, s/USA/China/ or s/USA/Russia/ above in a few years time.
- ErneX 3mo agoWe are not in the shithole we are because “we went against the USA”. The US was our biggest business partner. Our problem was we elected a coupster moron that destroyed our economy. It was our own doing.
- jauntywundrkind 3mo agoSounds like we were maybe made for each other (alas alas alas).
- ErneX 3mo agoWe are geographically close and we always had good relations that were beneficial for both before these thugs came to power. The so called revolution just ruined Venezuela and caused the biggest exodus in the hemisphere. Maduro being captured and jailed was a blessing and something we’ve been hoping to happen for many years.
- mlmonkey 3mo agoYou skipped the part where the "coupster moron" and his buddies pissed the US off by nationalizing oil industry and kicking the American companies out. That's what I am referring to.
- ErneX 3mo agoWe already nationalised the oil industry in 1976. You must be referring to something else. And who do you think was extracting oil these years there? Chevron is one of them.
- dist-epoch 3mo agoThey should do an Argentina. Every 10 years or so Argentina defaults on it's debt. The next day banks/hedge funds line up to loan it money again. The ways of finance are mysterious. > The country has defaulted on external sovereign debt nine times since independence: in 1827, 1890, 1951, 1956, 1982, 1989, 2001, 2014, and 2020. Three of those defaults occurred since the year 2001. https://maseconomics.com/argentinas-recurrent-defaults-a-case-study-in-sovereign-debt-and-hyperinflation/ https://maseconomics.com/argentinas-recurrent-defaults-a-cas...
- TMWNN 3mo ago>Every 10 years or so Argentina defaults on it's debt. The next day banks/hedge funds line up to loan it money again. >The ways of finance are mysterious. James Grant's Bagehot and Liaquat Ahamed's 1873 both talk about how, no matter how often South American and Middle Eastern countries in the 1860s and 1870s defaulted on their debt, European investors lined up to loan them more money. (In especially egregious cases like Egypt, British and French experts took important jobs at the insistence of the lenders to curtail the extravagant spending; while corruption decreased, the experts were very well-paid.)
- pu_pe 3mo agoArgentina's interest rate is ~30% right now. So I would argue both the investors and the Argentinian government are aware of how risky these loans are.
- GL26 3mo agoGuess that's what happens when your entire economy almost only relies on a single economic resource
- yiggnewer 3mo ago[dead]
- conductr 3mo agoCome to think about it, Venezuela owes me a billion dollars too. I forgot to send the invoice. Silly me.
- uslic001 3mo agoAnother failed communist country.
- aaron695 3mo ago[dead]