alt Hacker NewsVenezuela reveals $240B in debt it cannot pay (~$100B more than expected)
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Come to think about it, Venezuela owes me a billion dollars too. I forgot to send the invoice. Silly me.
Most 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:)
Such 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.
Guess that's what happens when your entire economy almost only relies on a single economic resource
They 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-cas...
> 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?
They 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
Who 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.
According 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.
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[a] https://www.ft.com/content/b7f25ca2-827c-40f9-ab1a-57067d8ec... (paywalled)
This 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-57067d8ec... - quote stolen from another comment
Smart 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.