Socialism always promises heaven and gives hell...
In the early hours of Thursday, November 2, the Maduro regime certified its latest failure with what they promised would never happen: technical default. With his usual arrogance, Maduro issued a “decree” demanding “the refinancing and restructuring of the debt as of November 3.” That is, default.
The bad news for investors or high-yield hunters is that the likelihood of being swindled again is almost 100%.
Chavez once said “put me oil at zero and Venezuela will not suffer,” and Maduro stated that “a revolutionary government with economic power as the one I preside has plans to surpass any situation arising from any price of oil.”
Reality has now kicked in.
Venezuela was not destroyed by low oil prices, but by high socialism.
Socialism has led Venezuela to an unparalleled economic disaster . No, it’s not “the price of oil.” Venezuela is the only OPEC country that has fallen into default, depression, and hyperinflation. It’s not oil, it’s socialism.
The management disaster is spectacular and the greatest example of the devastating effect of socialism is the state-owned oil company. PdVSA, the national oil company, has gone from being one of the most efficient and profitable twenty years ago, to end up importing oil.
Although Venezuela has the largest reserves of crude oil in the world — 296 billion barrels — the country began importing oil last year. Its production is less than 2.7 million barrels per day, a drop of 20% in less than two decades, while the Chavez.Maduro regime multiplied its workforce by five, to 175,000 “workers”.
Brutal cost increases, spectacular worsening of production, collapse in margins and plundering of the cash to pay for subsidies led the company from being one of the most profitable and with the best balance sheet in the world to borrow more than 43 billion US dollars.
This disaster is not because of low oil prices, it is a reflection of the reality of what socialism does. No oil producing country shows such atrocious figures, not even close.
In fact, if anything can be said about the fall in oil prices is that the vast majority of producing countries have managed it admirably, with GDP drops that ended being much lower than feared, keeping their reserves in foreign currency at comfortable levels, and adapting to the new reality quickly and efficiently. Almost all, except Venezuela.
The True Economic War in Venezuela: the Chavez-Maduro Regime Against the People
Venezuela had 12,700 private companies when Chávez took power, according to Conindustria. Today there is less than one-third of that figure. To the economic destruction, the regime added the assault on private property with expropriations of more than 690 companies in twelve years. Today, those expropriated companies are technically bankrupt and those that survive are zombies producing less than half of the figures prior to the confiscation.
As always happens in socialism, the first thing was to deny reality. “Investors should not worry about the debt repayments of 2017 and 2018,” said Rafael Ramírez. And indeed, they should not have worried. They should have panicked. One of the largest investment banks in the world, which bought $ 2.8 billion of bonds is now facing the false “restructuring” decreed by Maduro.
Maduro “decrees” restructuring as if it were a miracle. But it is another nail in the coffin of the regime. Economic destruction is not only not changing, it is getting worse.