Venezuela has lasted longer and descended further without the final collapse than I ever imagined.
But a Judge has now allowed the seizure of Citgo, which is their major source of foreign exchange (i.e. income).
Venezuela has a very very heavy crude oil, rather like tar. Only a special kind of refinery can refine it to usable products. Many of those are in the USA, owned by Citgo. The loss of Citgo is also the loss of where they can refine their oil. Those same refineries make the lubricants needed to pump the oil. Lose lose…
This is highly likely to lead to default on outstanding debt and even more collapse into bankruptcy. It is going to get far worse for the people of Venezuela before it gets better. They import almost everything they need, and almost all of their export earnings are from oil, that now is subject to seizure too, and can’t be sent anywhere but the USA, really.
I don’t see any way the economy can do anything but halt.
U.S. Judge Authorizes Seizure of Venezuela’s Citgo
Creditor Crystallex is the first to win a judgement authorizing its seizure
By Andrew Scurria and
Updated Aug. 9, 2018 7:03 p.m. ET
A U.S. federal judge authorized the seizure of Citgo Petroleum Corp. to satisfy a Venezuelan government debt, a ruling that could set off a scramble among Venezuela’s many unpaid creditors to wrest control of its only obviously seizable U.S. asset.
Judge Leonard P. Stark of the U.S. District Court in Wilmington, Del., issued the ruling Thursday. However, his full opinion, which could include conditions or impose further legal hurdles, was sealed. A redacted version is expected to be available at a later date.
The court order raises the likelihood that Venezuela’s state oil company, Petróleos de Venezuela SA, will lose control of a valuable external asset amid the country’s deepening economic and political crisis. The decision could still be appealed to a higher, federal court.
Many other creditors of Venezuela are also circling Citgo, but Crystallex is the first to win a judgment authorizing its seizure. Crystallex had argued that Citgo was ultimately owned by PdVSA, which is an “alter ego” of Venezuela that is liable for the South American country’s debts. The judge’s decision in favor of Crystallex allows it to take control of shares of Citgo’s U.S.-based parent company, the first step toward a sale of the company.
Venezuela and its various state-controlled entities together have $62 billion of unsecured bonds outstanding, with approximately $5 billion so far in unpaid interest and principal. Analysts estimate that the government has approximately $150 billion total in debt outstanding to creditors around the world.
Venezuela and its state-controlled entities including PdVSA began missing bond payments last year and have since spiraled into a widespread default. U.S. sanctions bar creditors from engaging the Venezuelan government in any kind of restructuring or buying new debt.
This video does a very good job of explaining the reason this is a very big deal and what the impacts ought to be:
How bad is it already in Venezuela? It’s so bad that the people are emigrating to Ecuador, and in numbers too large for stability. (It is pretty bad when Ecuador looks good and you are willing to cross Columbia to get there in large numbers).
Ecuador declares state of emergency over Venezuela migrant influx
More than 4,000 migrants are arriving in Ecuador each day in an attempt to flee the ongoing crises in Venezuela.
9 Aug 2018
Ecuador has declared a state of emergency in three northern states after a large influx of migrants from crisis-ridden Venezuela entered the country via Colombia.
The move is intended to help establish the infrastructure to support the new arrivals, who do not have humanitarian refugee status in Ecuador, as they do in some other Latin American countries.
The Ministry of Foreign Affairs and Human Mobility said in a statement on Wednesday that in recent days, the number of Venezuelans arriving daily had risen to 4,200 and a contingency plan is needed to assist them.
At that rate, Venezuela would be empty in about 20 years. But that’s just the folks leaving Columbia after their escape. If as many stay in Columbia, it becomes 10 years. If you allow for some going to Brazil and other countries, we’re down closer to 5 years. How many years has this been going on already?
A number of Latin American countries are introducing special measures to cope with migration from Venezuela, which is led by President Nicolas Maduro and is suffering from ongoing political, social and economic crises.
In August, former Colombian President Juan Manuel Santos, granted 440,000 Venezuelan refugees temporary residency permits, which allow them to study, work and get medical care in Colombia.
Brazil declared a state of emergency in May and briefly closed its northern border with Venezuela on Tuesday.
Argentina has taken in some 31,167 Venezuelans under a law that allows foreign nationals to remain in the country “when there are exceptional reasons of a humanitarian nature”.
How will this end? Only once the Police & Military are not being paid and are missing meals too. I doubt much oil will be reaching Citgo in receivership, or cash headed back. Don’t know how much money is in their treasury, but did hear an astounding figure for the present inflation rate. Essentially their currency is dust. Maduro doesn’t seem to “get it” that printing more paper is not going to feed soldiers and the jig is up.