President Donald Trump signed an executive order on Friday imposing economic sanctions on the Venezuelan government. Here are some explanations of why the United States decided to escalate tensions with our South American country, and how the actions could hurt our economy and reduce power to President Nicolás Maduro.

The fourth round of sanctions announced Friday by the Trump administration is the strongest ever. Washington has barred US financial institutions from making new financial deals with the Venezuelan government or state oil giant Petróleos de Venezuela (PDVSA). This includes any type of transactions with certain existing bonds held by the Venezuelan public sector and the payment of dividends to the Venezuelan government. Likewise, Citgo, the US subsidiary of PDVSA, is prohibited from sending dividends to Venezuela, as well as negotiating two bonds issued recently by the Venezuelan government to avoid the growing financial strangulation.

In recent weeks the Trump administration has imposed sanctions on 30 senior officials, including Maduro.

In the United States, there is a growing notion that Maduro's government is heading for a dictatorship. In March a critical point was reached when the Supreme Court of Justice assumed the legislative powers of the National Assembly, controlled by the opposition. Although the sentence was overturned amidst a storm of international criticism, the measure triggered street protests, which lasted four months, and the repression of the government left dozens dead.

The protests have disappeared since the beginning of the month of the Constituent Assembly, made up entirely of supporters of the government, who proceeded to go after Maduro's opponents. In the last three weeks, the all-powerful Constituent Assembly dismissed the General Attorney, assumed the legislative powers of Congress and created a "truth commission" that many fear will be used to attack the opposition. Several mayors of the opposition were dismissed and ordered to be captured by the Supreme Court, which controls the ruling party.

US officials hope that by raising the pressure on Maduro, he could lose the support of his last remaining followers, both civilian and military, the latter a key piece that historically has been the arbiter of political conflicts in Venezuela.

The new sanctions will make it more difficult and expensive for the Maduro government to resort to the necessary external financing, which raises the possibility of having to suspend payments on the external debt service.

The government and PDVSA have about $ 4 billion in debt payments due before the end of the year, but they only have $ 9.7 billion in international reserves, which are largely made up of gold bullion that is difficult to trade Immediately to get cash.

Venezuela has proven to be a reliable payer, prioritizing bond payments to foreign capitalists while Venezuelans go hungry and suffer amid widespread shortages of food and medicine.

Caracas also has the option of turning to Russia and China, the allies that in the past have supported it to cover some financial gaps.

          

Reflecting strong lobbying by the US oil industry, Friday's announcement did not include suspension of imports of Venezuelan crude, which is crucial for both the South American nation's economy and US refineries.

However, sanctions will make it more difficult for Venezuela to raise cash, and oil production - which is already at its lowest level in more than two decades - It is likely to fall further. Many foreign suppliers still operating in Venezuela may also decide that financial risk and reputational damage have grown too much to do business with the Maduro government.

This is the first time that the United States has applied sanctions aimed at the Venezuelan economy as a whole, although it is not clear how quickly these measures will be felt on the streets. Secretary of Treasury  Steven Mnuchin said the actions were designed to not generate more misery our Venezuelan people.

However, the economy is already facing widespread shortages, a three-digit inflation and a strong recession, it is bound to suffer an impact sooner or later.

@jonsnow1983

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