The evidence of economic war against Venezuela

“Forbidden to see the obvious.” This written on a street mural comes just at the right time to inform those who ignore the continued economic aggression that Venezuela has suffered in recent years. The statement can legitimately be taken as for or against the economic decisions taken by President Nicolás Maduro. All economic debate is welcome. However, ignorance of the set of actions orchestrated from multiple areas against the Venezuelan economy detracts from any kind of analysis. Ignoring what Venezuela is facing in the form of permanent multi-pronged economic aggression is an act of deliberate irresponsibility.


It would also be a partial and biased analysis. It would be the same as analyzing the Mexican economy without considering that the United States is the neighbor to the north. Or supposing that a country has a sea despite not having one. How should we read a study based on false premises and assumptions, obscuring a good part of what is actually happening?

The appropriate thing is to have an integral view in order to have an accurate diagnosis, and, based on it, to make the recommendations that each one considers appropriate. None of the evidence presented below should be considered as excuses that serve to hide other structural imbalances of the Venezuelan economy. For many geopolitical reasons, Venezuela is subject to a constant harassment that we need to know in detail. Here is a list of these irrefutable examples.

1. The Country Risk Analysis granted by financial rating agencies is unfair and unwarranted given Venezuela’s compliance with its external debt payments. In the last four years Venezuela has honored its payment commitments for a total of $73.359 billion. And yet its Country Risk assessment has continued to rise. There have been 32 months in the last 14 years in which the Country Risk on Venezuela has risen despite the increase in the price of oil. The EMBI + [the Emerging Market Bond Index] is JP Morgan’s index of dollar-denominated sovereign bonds issued by Third World countries. EMBI is the most widely used and comprehensive “emerging market” sovereign debt benchmark. Currently, the Country Risk, as determined by JP Morgan, is at 4,820 points, which is 38 times that is given to Chile despite both countries having a similar debt / GDP ratio.

2. The word “default” is used against Venezuela without regard for its real meaning. Two recent examples show this. Despite Venezuela having met payments on its the external debt, Fitch Ratings said that Venezuela had a “selective default,” and Standard & Poors lowered its Venezuela rating from CC/C to SD/D (selective default). Another less recent example: in February 2016, Bloomberg claimed that Venezuela had a 76% probability of entering into default within a year. And so we could continue with thousands of examples that confirm that ratings against Venezuela are not based on economic rationality.

3. Donald Trump issued an executive order (based on a previous executive order by Obama) against Venezuela. Reading it in detail shows that it is an explicit boycott, having the purpose of blocking Venezuela’s relations with US companies, restricting Venezuela’s ability to make external debt payments and with its opportunities to refinance it.

4. In recent years much of the international financial system has promoted a blockade on Venezuela’s financial operations. They have limited the actions of many of Venezuela’s public and private institutions to make payments to suppliers, receive payments, execute transactions, manage investment portfolios, fulfill financial obligations and access international sources of financing. International banks (Citibank, Comerzbank, Deutsche Bank) have unilaterally canceled contracts with Venezuela. Since July 2017, the payment agent for PDVSA bonds, Delaware, reported that its bank, PNC Bank, refused to receive funds from the state oil company. In August 2017, Novo Banco (Portugal) stated it found it impossible to carry out business operations in dollars with Venezuelan public institutions due to the blocking of intermediaries. The company Euroclear, in charge of handling a significant part of Venezuela’s bonds, states that an important part of these bonds’ transactions, $1.2 billion, are in the process of “revision,” due to pressures made by the US Office of Foreign Assets Control(OFAC). The Bank of China Frankfurt has not been able to carry out a payment of commitments with the Canadian mining company Gold Reserve for $15 million.

5. There have been blocks on Venezuela’s payments for food and other basic goods. For example, in the third week of November, more than 23 payments for $39 million in food were returned because the suppliers’ intermediary banks would not accept Venezuelan payments. Similar situations have occurred concerning medicines (insulin, anti-malaria drugs), seeds, international travel of Venezuelan athletes (Wells Fargo Bank prevented the operation), communication (the Dutch Bank Rabobank denied payment for TeleSUR operations alleging sanctions by the OFAC).

6. The escalation in the “parallel” illegal exchange rate for the Bolivar has no actual parallel with any real Venezuelan macroeconomic statistics. This black market exchange rate has multiplied 1,410 times since August 2014 to the present; while the amount of bills and coins has multiplied by 43, the amount of liquidity multiplied by 64, and the implicit exchange rate by 141. Not even neoclassical orthodoxy serves to explain the behavior of this political weapon of economic destruction, used to create an excessive increase in inflation.

We could add to this list of examples of economic war on Venezuela all the attempts by Mercosur to isolate Venezuela, the sanctions of the European Union or Canada, and the closing of airline routes to Venezuela by Avianca, Aerolíneas Argentinas and others. In addition to that, we must add the dramatic drop in the price of oil from 2014 to 2016, from an average annual price per barrel of $88 to $35.

This reality of economic war is undeniable.


Translated by Stansfield Smith

Source: RT


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