09-20-2017, 10:04 PM
*** 21-Sep-17 World View -- With Trump's sanctions in place, Venezuela expected to go bankrupt soon
This morning's key headlines from GenerationalDynamics.com
****
**** With Trump's sanctions in place, Venezuela expected to go bankrupt soon
****
![[Image: g170920b.jpg]](http://Media.GenerationalDynamics.com/ww2010/g170920b.jpg)
A member of the national guard fires his shotgun during clashes in Caracas, Venezuela, in July (Getty)
An economic analyst is advising Venezuela's government on ways to move
Venezuela's assets out of reach of American and other international
courts, if Venezuela defaults on its national bond payments, effective
declaring national bankruptcy.
Venezuela has met all its debt repayment obligations so far, but some
analysts are predicting that Venezuela will default on bond payments
before the end of 2017. Venezuela has an estimated $63 billion of
bond obligations.
The probability of default has increased substantially since August
25, when US president Donald Trump imposed sanctions that prevent
further borrowing, either by the Venezuelan government itself, or by
the nationalized state oil and natural gas company, Petróleos de
Venezuela, S.A. (PDVSA). With both the government and PDVSA severely
restricted in borrowing more money to make payments on existing debts,
it's believed that there will be a default. On August 31, the Fitch
Ratings service downgraded Venezuela's bonds from CCC down to CC, to
reflect the increased chance of default after the new sanctions were
imposed. Reuters (26-Aug) and Latin America Herald Tribune (31-Aug)
****
**** Analyst advises Venezuela on keeping its assets safe from creditors
****
A lengthy analysis by Mark Walker of Millstein & Co, co-authored by
Richard Cooper at Cleary Gottlieb provides a roadmap for Venezuela to
keep state out assets out of the reach of creditors. In particular,
it describes methods for keeping the assets of PDVSA, the nationalized
state oil company, away from its own creditors and the government's
creditors.
According to the analysis:
<QUOTE>"As the humanitarian, economic, financial and
political crisis intensifies in Venezuela, so too does the
complexity of the tasks the country must accomplish to reverse the
18 years of mismanagement and policy distortion that marked the
presidencies of Hugo Chavez and Nicolas Maduro. The difficulty of
reforming the economy in the aftermath of these failed policies is
compounded both by the need to carry out this reform in what is
likely to be a wrenching change in the political landscape and by
the fact that there are stakeholders in Venezuela with a strong
interest in maintaining the status quo. That said, Venezuela has
no other choice but reform and political change. The current
government has openly opposed the reforms necessary to stabilize
the Venezuelan economy and create the conditions for sustained
growth. It has lost legitimacy and credibility internationally as
well as domestically. The President and many of its senior
representatives are isolated from discourse by sanctions imposed
by the United States, and the acquisition and trading of new debt
is now prohibited by the same U.S. sanctions, with other countries
likely to follow. Accordingly, we start from the premise that the
only Venezuelan government that will be able to carry out a
restructuring of Venezuela’s liabilities is a government—which
could be a caretaker or transitional government—that demonstrates
a credible commitment to the necessary reforms and can undertake
binding obligations in a restructuring whose validity under
applicable laws is not subject to challenge."<END QUOTE>
It's good that Walker and Cooper get these assumptions out of the way,
because in my opinion the assumptions are unrealistic. In my opinion,
Venezuela's Socialist president Nicolás Maduro Moros will never
"demonstrate a credible commitment to the necessary reforms." This is
the psychopathy we see today in governments around the world --
Syria's president using Sarin gas and barrel bombs on innocent women
and children, the governments of Eritrea and Burundi using arrest,
rape, murder and torture at will of anyone who expresses opposition to
the government, or Burma's government using genocide and ethnic
cleansing to eliminate a million Rohingyas.
In my opinion, Maduro's government is headed in the same direction as
the governments of Syria, Eritrea, Burundi or Burma, and not in the
direction of "a credible commitment to the necessary reforms."
Walker and Cooper agree with that, but make an even more unlikely
assumption -- that Maduro will step down and give control to "a
caretaker or transitional government -- that demonstrates a credible
commitment to the necessary reforms."
So having said that, let's look at the actual proposal:
<QUOTE>"Accordingly, we see as the first step and priority in
any restructuring process the implementation of measures to
protect the country’s assets, particularly those vulnerable to
seizure, such as the proceeds from the sale of oil, while it
simultaneously commences discussions with the IMF, bilateral
lenders such as China and Russia and market participants -- a
process that will take several months at the least. Once the
nation’s assets are secure, Venezuela will be able to enter into
good faith negotiations with the official sector and its
creditors, use its scarce foreign exchange in the best interests
of the country and stop immediately the pursuit of dangerously
uneconomic transactions whose sole purpose is to avoid a bond
default. ...
Knowing that a default is both inevitable and necessary, Venezuela
must have as its highest priority the objective of protecting
PDVSA’s cash generating assets located outside
Venezuela."<END QUOTE>
Maduro in "good faith negotiations"? I don't think so.
Anyway, Walker and Cooper suggest several methods from Venezuela and
PDVSA to effectively declare bankruptcy. They recommend that
Venezuela modify its existing Venezuelan Public Sector Revitalization
Law so that it will be recognized by the U.S. Bankruptcy Court as "a
collective judicial or administrative proceeding in a foreign
country," where "collective" means "one that considers the rights and
obligations of all creditors" in allocating PDVSA's assets. This
would mean, for example, that the law could not could not favor
Maduro's friends -- Russia and China, who are owed $37.2 billion --
over American and other Western creditors. This would require an
independent entity outside of Maduro's control allocating PDVSA's
assets among creditors and, once again, in my opinion Maduro would
rather eat mud than agree to anything like that.
As a last resort, Walker and Cooper advise that if all else fails,
then Venezuela should try to get the bankruptcy processed by a UK
court, taking advantage of English law which may be more lenient.
Finally, the Walker and Cooper paper returns to the assumption of a
transitional government:
<QUOTE>"Our premise, however, is that the current regime
cannot today restructure its debt and that the Venezuelan Public
Sector Revitalization Law will be enacted by a government that is
attempting to overcome a humanitarian and economic crisis of
historic proportions created by prior administrations. Far from
imposing sanctions, we assume that at such time U.S. policy will
be to promote a restoration of Venezuela’s economy and the revival
of its democratic"<END QUOTE>
So, the idea is that Maduro will agree to hand power over to an
independent transitional government, and the U.S. courts will be
extra-lenient, in order " to overcome a humanitarian and economic
crisis of historic proportions created by prior administrations. Far
from imposing sanctions."
Well, stranger things have happened. And even if Maduro doesn't
voluntarily step down, maybe Venezuela's army will finally force him
to step down, for the good of the country.
What the Walker and Cooper proposals really show is that Venezuela is
at a fork in the road. If Maduro steps down and lets someone else
govern, then some of the proposals discussed here could be
implemented.
It's tempting to say that never happens, but in fact Communist and Socialist governments did end peacefully in Cuba,
East Germany and Russia, and returned to at
least a semi-capitalist free economy.
The other alternative is that Maduro refused to step down, and the
streets are flowing with blood. Reuters and SSRN papers
****
**** Maduro tells Venezuelans to breed and eat rabbits
****
![[Image: g170920c.jpg]](http://Media.GenerationalDynamics.com/ww2010/g170920c.jpg)
Yum! Dinner!
Venezuela's Socialist president Nicolás Maduro Moros has inflicted
enormous pain and humiliation of the country's people, with empty
store shelves and shortages of everything from toilet paper to
medicines to vegetables, jailing owners of closed factories, jailing
bakers who make croissants or brownies instead of bread, accusing
Twitter of attacking his government, one of the highest murder rates
in the world, and an inflation rate of 33% per MONTH, forcing many
people to forage for food in garbage cans.
Now Maduro is announcing a "rabbit plan" to help out starving
Venezuelans. He announced on state television, "For animal protein,
which is such an important issue, a 'rabbit plan' has been approved
because rabbits also breed like rabbits."
However, the rabbit plan faced an early setback. Freddy Bernal, the
head of Maduro's food program, distributed baby rabbits to families in
15 communities, as a pilot project.
However, instead of eating the rabbits, people kept them as pets.
According to Maduro, "When he came back, to his surprise he found
people had put little bows on their rabbits and were keeping them as
pets, it was an early setback to Plan Rabbit."
Bernal is telling Venezuelans to get over their love of rabbits.
People need to understand "that the rabbit is not a pet, but two and a
half kilos of meat with high protein and no cholesterol put on the
table of Venezuelans." BBC and
Daily Mail (London) and VOA
Related Articles
KEYS: Generational Dynamics, Venezuela, Nicolás Maduro Moros, Hugo Chávez,
Petróleos de Venezuela, S.A., PDVSA, Fitch Rating, Freddy Bernal,
Mark Walker, Millstein & Co, Richard Cooper, Cleary Gottlieb
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- With Trump's sanctions in place, Venezuela expected to go bankrupt soon
- Analyst advises Venezuela on keeping its assets safe from creditors
- Maduro tells Venezuelans to breed and eat rabbits
****
**** With Trump's sanctions in place, Venezuela expected to go bankrupt soon
****
A member of the national guard fires his shotgun during clashes in Caracas, Venezuela, in July (Getty)
An economic analyst is advising Venezuela's government on ways to move
Venezuela's assets out of reach of American and other international
courts, if Venezuela defaults on its national bond payments, effective
declaring national bankruptcy.
Venezuela has met all its debt repayment obligations so far, but some
analysts are predicting that Venezuela will default on bond payments
before the end of 2017. Venezuela has an estimated $63 billion of
bond obligations.
The probability of default has increased substantially since August
25, when US president Donald Trump imposed sanctions that prevent
further borrowing, either by the Venezuelan government itself, or by
the nationalized state oil and natural gas company, Petróleos de
Venezuela, S.A. (PDVSA). With both the government and PDVSA severely
restricted in borrowing more money to make payments on existing debts,
it's believed that there will be a default. On August 31, the Fitch
Ratings service downgraded Venezuela's bonds from CCC down to CC, to
reflect the increased chance of default after the new sanctions were
imposed. Reuters (26-Aug) and Latin America Herald Tribune (31-Aug)
****
**** Analyst advises Venezuela on keeping its assets safe from creditors
****
A lengthy analysis by Mark Walker of Millstein & Co, co-authored by
Richard Cooper at Cleary Gottlieb provides a roadmap for Venezuela to
keep state out assets out of the reach of creditors. In particular,
it describes methods for keeping the assets of PDVSA, the nationalized
state oil company, away from its own creditors and the government's
creditors.
According to the analysis:
<QUOTE>"As the humanitarian, economic, financial and
political crisis intensifies in Venezuela, so too does the
complexity of the tasks the country must accomplish to reverse the
18 years of mismanagement and policy distortion that marked the
presidencies of Hugo Chavez and Nicolas Maduro. The difficulty of
reforming the economy in the aftermath of these failed policies is
compounded both by the need to carry out this reform in what is
likely to be a wrenching change in the political landscape and by
the fact that there are stakeholders in Venezuela with a strong
interest in maintaining the status quo. That said, Venezuela has
no other choice but reform and political change. The current
government has openly opposed the reforms necessary to stabilize
the Venezuelan economy and create the conditions for sustained
growth. It has lost legitimacy and credibility internationally as
well as domestically. The President and many of its senior
representatives are isolated from discourse by sanctions imposed
by the United States, and the acquisition and trading of new debt
is now prohibited by the same U.S. sanctions, with other countries
likely to follow. Accordingly, we start from the premise that the
only Venezuelan government that will be able to carry out a
restructuring of Venezuela’s liabilities is a government—which
could be a caretaker or transitional government—that demonstrates
a credible commitment to the necessary reforms and can undertake
binding obligations in a restructuring whose validity under
applicable laws is not subject to challenge."<END QUOTE>
It's good that Walker and Cooper get these assumptions out of the way,
because in my opinion the assumptions are unrealistic. In my opinion,
Venezuela's Socialist president Nicolás Maduro Moros will never
"demonstrate a credible commitment to the necessary reforms." This is
the psychopathy we see today in governments around the world --
Syria's president using Sarin gas and barrel bombs on innocent women
and children, the governments of Eritrea and Burundi using arrest,
rape, murder and torture at will of anyone who expresses opposition to
the government, or Burma's government using genocide and ethnic
cleansing to eliminate a million Rohingyas.
In my opinion, Maduro's government is headed in the same direction as
the governments of Syria, Eritrea, Burundi or Burma, and not in the
direction of "a credible commitment to the necessary reforms."
Walker and Cooper agree with that, but make an even more unlikely
assumption -- that Maduro will step down and give control to "a
caretaker or transitional government -- that demonstrates a credible
commitment to the necessary reforms."
So having said that, let's look at the actual proposal:
<QUOTE>"Accordingly, we see as the first step and priority in
any restructuring process the implementation of measures to
protect the country’s assets, particularly those vulnerable to
seizure, such as the proceeds from the sale of oil, while it
simultaneously commences discussions with the IMF, bilateral
lenders such as China and Russia and market participants -- a
process that will take several months at the least. Once the
nation’s assets are secure, Venezuela will be able to enter into
good faith negotiations with the official sector and its
creditors, use its scarce foreign exchange in the best interests
of the country and stop immediately the pursuit of dangerously
uneconomic transactions whose sole purpose is to avoid a bond
default. ...
Knowing that a default is both inevitable and necessary, Venezuela
must have as its highest priority the objective of protecting
PDVSA’s cash generating assets located outside
Venezuela."<END QUOTE>
Maduro in "good faith negotiations"? I don't think so.
Anyway, Walker and Cooper suggest several methods from Venezuela and
PDVSA to effectively declare bankruptcy. They recommend that
Venezuela modify its existing Venezuelan Public Sector Revitalization
Law so that it will be recognized by the U.S. Bankruptcy Court as "a
collective judicial or administrative proceeding in a foreign
country," where "collective" means "one that considers the rights and
obligations of all creditors" in allocating PDVSA's assets. This
would mean, for example, that the law could not could not favor
Maduro's friends -- Russia and China, who are owed $37.2 billion --
over American and other Western creditors. This would require an
independent entity outside of Maduro's control allocating PDVSA's
assets among creditors and, once again, in my opinion Maduro would
rather eat mud than agree to anything like that.
As a last resort, Walker and Cooper advise that if all else fails,
then Venezuela should try to get the bankruptcy processed by a UK
court, taking advantage of English law which may be more lenient.
Finally, the Walker and Cooper paper returns to the assumption of a
transitional government:
<QUOTE>"Our premise, however, is that the current regime
cannot today restructure its debt and that the Venezuelan Public
Sector Revitalization Law will be enacted by a government that is
attempting to overcome a humanitarian and economic crisis of
historic proportions created by prior administrations. Far from
imposing sanctions, we assume that at such time U.S. policy will
be to promote a restoration of Venezuela’s economy and the revival
of its democratic"<END QUOTE>
So, the idea is that Maduro will agree to hand power over to an
independent transitional government, and the U.S. courts will be
extra-lenient, in order " to overcome a humanitarian and economic
crisis of historic proportions created by prior administrations. Far
from imposing sanctions."
Well, stranger things have happened. And even if Maduro doesn't
voluntarily step down, maybe Venezuela's army will finally force him
to step down, for the good of the country.
What the Walker and Cooper proposals really show is that Venezuela is
at a fork in the road. If Maduro steps down and lets someone else
govern, then some of the proposals discussed here could be
implemented.
It's tempting to say that never happens, but in fact Communist and Socialist governments did end peacefully in Cuba,
East Germany and Russia, and returned to at
least a semi-capitalist free economy.
The other alternative is that Maduro refused to step down, and the
streets are flowing with blood. Reuters and SSRN papers
****
**** Maduro tells Venezuelans to breed and eat rabbits
****
Yum! Dinner!
Venezuela's Socialist president Nicolás Maduro Moros has inflicted
enormous pain and humiliation of the country's people, with empty
store shelves and shortages of everything from toilet paper to
medicines to vegetables, jailing owners of closed factories, jailing
bakers who make croissants or brownies instead of bread, accusing
Twitter of attacking his government, one of the highest murder rates
in the world, and an inflation rate of 33% per MONTH, forcing many
people to forage for food in garbage cans.
Now Maduro is announcing a "rabbit plan" to help out starving
Venezuelans. He announced on state television, "For animal protein,
which is such an important issue, a 'rabbit plan' has been approved
because rabbits also breed like rabbits."
However, the rabbit plan faced an early setback. Freddy Bernal, the
head of Maduro's food program, distributed baby rabbits to families in
15 communities, as a pilot project.
However, instead of eating the rabbits, people kept them as pets.
According to Maduro, "When he came back, to his surprise he found
people had put little bows on their rabbits and were keeping them as
pets, it was an early setback to Plan Rabbit."
Bernal is telling Venezuelans to get over their love of rabbits.
People need to understand "that the rabbit is not a pet, but two and a
half kilos of meat with high protein and no cholesterol put on the
table of Venezuelans." BBC and
Daily Mail (London) and VOA
Related Articles
- Venezuela's mestizo president Hugo Chavez dies of cancer (06-Mar-2013)
- Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise (29-May-2016)
- Venezuela's Socialist government arrests bakers because of bread shortage (20-Mar-2017)
- Zimbabwe, Venezuela, Puerto Rico - three amigos in Marxist economic destruction (01-Jul-2016)
- Venezuela economy close to collapse as Maduro orders jailing of factory owners (15-May-2016)
KEYS: Generational Dynamics, Venezuela, Nicolás Maduro Moros, Hugo Chávez,
Petróleos de Venezuela, S.A., PDVSA, Fitch Rating, Freddy Bernal,
Mark Walker, Millstein & Co, Richard Cooper, Cleary Gottlieb
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
