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When Venezuela comes to default

Когда Венесуэла дойдет до дефолта

According to Dolar Today, a tracking quotes on the illicit market, the dollar on the black market Caracas falls to 2 291 385 bolivars. The depreciation of the Bolivar has occurred against the background of rapid growth of inflation in Venezuela. Inflation in the country in may in annual terms amounted to 24 600%, according to the national Assembly.

In may, inflation in the country amounted to 110%. The threshold of hyperinflation, when currency depreciates over the month by 50%, Venezuela stepped in late last year.

The country has long been lacking commodities. Venezuela is experiencing an acute shortage of food, hygiene products, medicines. According to The Wall Street Journal, 80% of the core products it is impossible to find even in the capital city of Caracas.

The Metropolitan Caracas from mid-may free transports passengers. Such a step, according to Reuters, the leadership of the metro in the capital of Venezuela was forced to go due to the fact that out of paper, on which was printed the tickets.

Sources in the leadership of the metro of Caracas told the news Agency that the paper is for tickets purchased abroad. However, for more than a year, the government did not allocate currency for this purpose, and paper supplies came to an end.

From Venezuela continues active migration of the population. Felipe muñoz, appointed by the authorities of Colombia by the administrator of the border with Venezuela, recently reported that, according to him, more than a million people moved from Venezuela to Colombia over the past 15 months. According to him, about 250 thousand is returning Colombians, and 819 thousand Venezuelans who are going to stay on a permanent basis” in Colombia.

Evaluation of the UN Agency for refugees, Venezuela only at the end of last year left more than 1.5 million people.In addition to Colombia, refugees travel to Peru, where at least 300 thousand Venezuelans in Chile — more than 160 thousand.

While the Venezuelan government continues stubbornly to deny a humanitarian catastrophe.

Economic prosperity

Recently re-elected President of Venezuela, Nicolas Maduro has promised the country’s early economic prosperity. “Whatever it takes, I will devote my life to the country’s economic recovery, I will make an economic revolution that will shake the world” — beautifully said the Venezuelan leader.

Almost simultaneously with celebrating the 22 may elections his victory by Nicolas Maduro, the United States announced new sanctions against Venezuela.

Us citizens and legal entities is prohibited any transactions with the public debt of Venezuela, and also the duty of the national oil Corporation PDVSA, for six months, in fact in a state of default.

In addition, the United States banned the purchase of Venezuela of any assets. Us sanctions impose a ban on the use as collateral of debt of Venezuela and shares in all companies, where the country owns more than 50% of the shares.

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As said us Treasury, these measures deprived of the possibility of Maduro to sell state assets for currency, and the payment of subsequent import.

New US sanctions against the oil industry of Venezuela have limited there production, noted in the article The Wall Street Journal. Due to sanctions from the United States falling foreign exchange revenues of the country from oil sales, agrees the Dean of the faculty of economic and social Sciences (FASN) Ranhigs Alexander Chichin.

So, Venezuela, the country with the world’s largest oil reserves, is experiencing a severe oil crisis. According to the statistical review of world energy from BP, the proven oil reserves in Venezuela reach 303,2 billion barrels, or 17.9 percent of the global total. In second place is Saudi Arabia with reserves of 266.2 billion barrels. The Kingdom produces about 8 million barrels a day more than Latin American countries, where production fell to a minimum over the past 30 years due to inefficient management of the sector and the economic crisis.

In Venezuela, oil production declined in may by 50 thousand barrels in relation to the April — to 1.36 million barrels, reported recently by the International energy Agency (IEA)

The experts previously predicted that considering the latest news and sanctions prey in the middle of this year will fall to 1 million barrels per day.

The “poor” economy in the world

According to estimates from Bloomberg, formed on the basis of the forecast of inflation and unemployment for the next year, Venezuela is the most miserable economy in the world for the past four consecutive years. The index of the “unhappiness” of Venezuela 1872 equal points, that is, in 2018, the situation in Venezuela gets worse at least three times — in 2017 Venezuela scored 499,7 points.

The unemployment rate in Venezuela has exceeded 20%, dramatically increased crime.

“The last three years, the country’s Central Bank does not publish data on GDP and inflation, and different sources estimate them differently. Hyperinflation forces the government to constantly increase the minimum wage: only this year, the Central Bank has done it three times. Currently the minimum wage is 2.5 million bolivars, which is not enough, for example, to buy three kilos of meat a month. The dollar is growing with cosmic speed: in 2013, the dollar could be bought for 17 bolivars, in 2016 — in millions of bolivars,” says Chichin.

“Comes to default”

In November last year, the International rating Agency Standard&Poor’s downgraded the rating of Venezuela in foreign currency to the level of SD. Then, the Agency observed in the so-called “selective default,” meaning that the Republic failed to pay hosbond.

Other rating Agency “the big three” — Fitch — downgraded the sovereign rating of the country to the level of “With”. This means a high risk of failing to meet government debt obligations. “Taking into account payments that have not previously been made on sovereign bonds relating to the thirty-day grace period, Fitch believes that this makes the debt default is highly likely,” — said the Agency.

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Inter-American development Bank (IDB) recently announced the suspension of issuing loans to Venezuela in connection with the failure to pay Caracas $88,3 million the Total debt of the Bolivarian Republic before ICBMs is $2.01 billion overall, the external debt of Venezuela is estimated at $132.15 billion

“Venezuela now too many system unresolved problems and the main one is the inability to service a huge external debt that exceeds the commitments of all its neighbors in the region” — the analyst of “ALOR broker” Alexey Antonov.

The situation with public debt will inevitably deteriorate and will likely reach the default, says Chichin.

Yet experts see no solution to the crisis.

Attempt to replenish the Treasury through the introduction of a certain national cryptocurrency Petro — absolutely pointless, says the analyst of “Finam” Alexey Korenev.

“Nicolas Maduro, obviously, inspired by the success of bitcoin, decided that issue their own cryptocurrencies will be enough, and released 100 million cryptocurrencies Petro tied to the price of oil (the cost of Petro is tied to the price of a barrel of oil and $60 per token, but subsequently it was decided to sell it at a discount, which could be up to 60% — “Газета.Ru”). However, he did not realize that the growth of bitcoin prices provided by its high liquidity and huge momentum. But it is Petro? Risks associated with investing in the Venezuelan cryptocurrency prohibitive, and investors understand it,” says Koren.

To help the country can only structural economic reforms and in General a radical change of public policy, said Alexander Bakhtin, Director of the Moscow branch of “BCS Prime”.

To disperse the country’s economy needed a comprehensive reform package, long-term work on restructuring the external debt and the adoption of crucial decisions until the addition of the current government from powers, agrees the General Director of “Mani Fanny” Alexander Shustov.

A large part of sympathizers of Venezuela States see the solution to its economic problems is one way to ask for help from the IMF, said Antonov. Earlier the Financial Times reported that, according to the calculations of the Fund, Venezuela may require about $30 billion of financial aid per year.

However, in this case, the current government will have to either go, or recognize their actions ineffective, and completely reoriented diplomatic relations with hostile towards her country, sums up the Antonov.

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