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  HOME | Venezuela (Click here for more Venezuela news)

VenEconomy: They Squandered All Venezuela’s Money, Laughed Out Loud

From the Editors of VenEconomy

A refrain of the gaita song "La Grey Zuliana" by Ricardo Aguirre, very popular in the late sixties for the criticism made of the embezzlement of public money by the government back then, repeated "they squandered all the money and then laughed out loud…"

Almost 50 years later, with a government that came to power 17 years ago with its pledge to end corruption and make the culprits pay for it, this refrain is even more relevant than ever. And not only they squandered all Venezuela’s money and laughed out loud after doing so, but on top of that they destroyed the entire country.

Today Venezuela, with the public coffers all empty, oil prices at all-time lows and the productive apparatus destroyed, must face $10 billion in external debt service payments (capital and interest) this year, out of $2.23 billion due before the end of February.

Hence the despair of the Government that not only feels cornered as a result of the economic crisis and the popular rejection, but because of the lack of credibility from its once faithful international creditors. And that refrain of La Grey Zuliana ends "but they may be shooting themselves in the foot."

And this seems to have happened a few days ago when the communist People’s Republic of China – its "new" best business partner that provided a few billions of dollars in loans in exchange for oil at a discount – said that the "dollars tap" is now closed due to the instability shown by the government of Nicolás Maduro.

According to a report by Miami-based daily El Nuevo Herald, the request of the Venezuelan government to China so that it can restructure its huge debt and get a grace period for the service payments, not only was denied by the the Asian giant, but it was reportedly demanding Venezuela to increase the volume of oil shipments to 700,000 barrels per day, from more than 400,000 barrels per day, as payment for the nearly $45 billion in loans. Beijing argues that "the current crude oil shipments are insufficient to meet the repayment terms as a result of a decline in oil prices."

It is vital for the Maduro government to achieve this grace period, because that way it would be releasing a few thousands of barrels that may be sold for additional revenue. An additional revenue almost impossible to obtain because: first of all, PDVSA is not capable of increasing production due to its state of destruction; second of all, Venezuela has just pledged to freeze its oil output in an attempt to halt the decline in oil prices along with Russia, Saudi Arabia and Qatar.

Another desperate move from the Maduro government to find money is the sale of monetary gold of the international reserves that, according to Reuters and other sources, the Central Bank of Venezuela would be negotiating with German investment bank Deutsche Bank and Swiss banks. Over the weekend, Switzerland’s customs authority confirmed the import of 35,835 kilos of gold from Venezuela in January, valued at 1.27 billion CHF ($1.28 billion).

With the central bank international reserves at only $15.035 billion (through February 18), the Government has drained its capacity to pay off debt and import all the food, medicines and capital goods demanded by a country whose population is threatened with starvation.

Maduro, in an attempt to depict a less negative scenario, announced over the weekend, after "firing up" the so-called Oil and Petrochemical Engine, that he had reached an agreement with Russian state oil company Rosneft to ensure an investment of $500 million in the PetroMonagas joint venture. The point is that this investment would be at the expense of an increase in the shareholding of Rosneft in PetroMonagas to 40% from 16.6%, to the detriment of the shareholding of the Venezuelan State.

In sum, they squandered all the money, laughed out loud, destroyed the country and are now rummaging through the garbage and selling the pieces of Venezuela so that they can continue their unrestrained and corrupt "spending spree."

VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.

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