Moody's Pegs Venezuela In "Deeper Phase" Of Financial Insolvency
Content adapted from this Zerohedge.com article : Source
Authored by Zainab Calcuttawala via OilPrice.com,
Venezuela is now in a "deeper phase of economic stress," Moody's Investor Service said on Wednesday, according to The Oil and Gas Journal. 
Falling oil production and tough economic sanctions have increased pressures on the nation's financial capacity. Mismanagement and underinvestment in the country's oil and gas industry is causing defunct facilities to produce low quality oil that does not meet the requirements of its usual buyers.
Moody's sees "a negative feedback loop between declining production across all economic sectors, accelerating scarcity of hard currency, and an economic policy mix defined by price controls and forced discounting that exacerbate supply shortages and hyperinflation."
Venezuela's production is falling faster than higher barrel prices can fill the revenue gap, the credit rating agency added.
"The fall in production will only exacerbate cash-flow stress,"Moody's research note reads.
"While oil prices have rallied in recent months, the decline in oil production will more than offset the would-be increase in dollar inflows from oil exports. This has negative implications for both debt repayment capacity and Venezuela's already grim economic outlook."
Hyperinflation will continue at the 4000 percent level through 2018 due to the financial deterioration.
President Nicolas Maduro is still intent on milking the digital currency fad to help alleviate the cash shortage and circumvent U.S. sanctions. After proposing an oil-backed national cryptocurrency called the petro, Maduro is now calling for an OPEC-wide one that would also include other large producers.
Speaking to media in Caracas after a meeting with OPEC's secretary-general Mohammed Barkindo, Maduro said earlier this week,"I will make an official proposal to all OPEC members and non-OPEC states to work out a joint cryptocurrency mechanism backed by oil."
Some 5 billion barrels of crude have been set aside to back the petro, which would be priced at $60 a piece, Russian Sputnik reports, adding that the first batch of petros to be sold will be of 100 million coins. The price per coin is tied to the price of Venezuelan crude.
Good news for cryptocurrency
Bad news for the Petro Coin
Well Venezuela is experiencing the wonders of socialism.
Socialism doesn't exist. Neither does capitalism. If you think they do, you are under the spell of Money Power Matrix programming.
A private monopoly on society's money is completely contrary to capitalism. PERIOD.
It is a Money Power Monopolist Mega-Corporate Fascist system - AND THAT AIN'T CAPITALISM.
"Socialism" doesn't exist either. It is the thin veneer for gullible people that covers AN AUTHORITARIAN SYSTEM, TO ONE DEGREE OR ANOTHER.
PERIOD, AGAIN.
Just use your eyes instead of relying on the Money Power Monopolist Mega-Corporate Fascist Empire financed propaganda.
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
~Lord Acton
@zer0hedge This guy is straight posting comments from the real source. He is straight plagiating. I really don't understand why you keep rewarding this copy-paste comments. I mean some of them are good, but they are obviously not his. For example this comment is from All risk no reward, see it here
I will just leave this here. I will also upvote his punk-ass, so everyone can read this. I will upvote myself a bit, so you can surely read this.
You are totally right, this is a shit! :(
That this promising economic model, which has become a modern example of institutes and universities as an example of economic emulation of the Third World countries, turned over years into a model to study but as an example of failure and failure.
"Venezuela is a clear example of lost and wasted economic opportunities. The national economy is dependent on oil extraction, 50 percent of GDP comes from oil exports, and 95 percent of it is oil," explains economist Hankal Gatorsia, an economist at the University of Caracas. Of the export revenues come from oil, and therefore the national economy lacks any form of real diversity, the production base is monolithic and narrow, and the total dependence on oil industries, and thus the country is dependent on the changes taking place in the international oil markets, Saw a slight oil price spiral of violent internal reactions occur, it has emerged as a sharp decline in the national foreign currency reserves from $ 49 billion in 2009 to ten billion dollars in just the middle of this year as a result of the decline in oil prices. "
For many experts, the failure of Venezuelan leaders to create real diversity in the national economy helps to reduce the role of oil in the national economy, and allows diversification of the mechanisms of output and multiplicity, making the country subject to economic mechanisms that can not control or direct them on their own permanently, Enter cycles of prosperity followed by periods of economic stagnation, eat a lot of accumulated wealth and achieved in the stages of high growth.
There is no doubt that this spiral has intensified in recent years with the increasing challenges facing the world oil markets, whether due to oversupply in the global market, the entry of other non-OPEC producers into the market, or the emergence of the rock oil phenomenon and its challenge For the traditional oil industry, and these factors eventually resulted in the Venezuelan economy paralyzed and unable to produce outside traditional frameworks.
However, the economic researcher Daniel Dae does not deny that the lack of diversification of the economic base of Venezuela and its exclusivity in oil production, and the total reliance on oil revenues to finance the development process, has led to significant distortions in the economic structure, and led the country to the dire situation that has reached it.
"The dependence on the oil-rent economy has created a range of negative phenomena, both in making other activities that do not achieve the profitability rates achieved by the extraction of oil, is not socially attractive to the private sector, whether by investors or workers, Finance of oil export operations, the process of diversification of infrastructure did not give due attention. "
Daniel Day noted that the most serious, which led the Venezuelan economy to its present state, is that the process of relying on a single economy supplier - oil - has created widespread opportunities for the spread of corruption in the top echelons of the state and the depletion of a significant part of GDP either through complex and intertwined mechanisms From corruption, or through the apparent waste of public funds in failed and useless development projects. "
From the point of view of this economic researcher, restricting the production process in a main production sector dominated by the state leads to raising the rates of corruption in the national economy under a number of false claims and names, which are often taken from the preservation of public funds the society.
"The concentration of national wealth in one source of production, such as oil, leads to excessive state intervention in the management of that source, marginalization of other community forces, especially the private sector, which loses its ability to move real and the positive addition of the national economy, Its depletion erodes the economic foundations of society. "
But Professor Hambro Hardy, a professor of political sociology, believes that the risks of adopting a national economy on a single economic resource, and not diversifying sources of national income, have a negative impact on society's ability to long-term social maturity.
"The diversification of the productive base allows for the creation of many social forces capable of building a healthy and healthy relationship between each other and between them and the decision-making center. This is in itself a fairer, more balanced and more equal society. Concerning the distribution of national wealth. All these qualities disappear or decline in societies with a single production base.
He pointed out that in the Venezuelan case, the dependence on oil led to the domination of the state on the overall production process, private initiatives fell, and reduced opportunities for creativity and real participation of young people, and this leads not only to waste the opportunity to expand the scale of production in society, To waste the opportunity to increase the levels of social wealth and raise the level of per capita income, through the transfer of society to a new stage, based on the balanced development of various productive sectors, which Venezuela has failed to achieve so far.
However, this imbalance in building a real development strategy in Venezuela depends on oil as a platform for further productive diversification, not as the sole breadth of the national economy, accompanied by a range of foreign economic policies that many experts describe as the best.
Dr. Amilda Ehron, Professor of International Relations, believes that Venezuela's economic crisis has not stopped at the limits of dependence on oil, but has also been exacerbated by the accession to the camp of extinct economies of the international community, both for the mercy of its leaders and for their intellectual rigidity or international accusations of supporting terrorism.
She adds to the "economic", that the Venezuelan crisis could have been tackled
From wealth to poverty In the midst of mounting economic collapse, Venezuela's economic story is shortened. The country, which occupied the headlines in the 1970s as an economic success story, continues to occupy headlines and the media today, but for various reasons.
The increase in the number of hungry people, the high mortality rate of the shortage of medicine, unprecedented inflation rates of some 4,000 per cent, loud demonstrations against government policies, dead and wounded as a result of the excessive security grip on the protesters, arrests in the opposition and a president clinging to power no matter how devastated Economic development of his country, that is Venezuela the second decade of the 21st century in the media.
In fact, Venezuela's economic story looks a little strange. How can a prosperous economy until 2012 lose a third of GDP in five years? To what extent is the state of economic insolvency and the inability to repay external debt, amounting to $ 150 billion, an indicator of the imminent economic collapse of a heavy oil state?
In fact, the Venezuelan economic crisis is deep and complex, perhaps two centuries back, when a series of military dictatorships during the period 1830-1935 caused widespread hunger among the Venezuelan people, a state of political instability and a loss of domestic and international confidence.
However, the opportunity was a chance for Caracas to overcome this odious history. By the 1970s and soaring oil prices Venezuela, like many oil countries, was in a strong financial position. According to the Central Bank of Venezuela, the period from 1958 to 1977 saw a GDP growth rate of 250 percent.
It is a staggering number of standards, and may not have been achieved by many other oil countries. The rate of growth has coincided with other economic successes, notably a low inflation rate, a strong currency and an expansion of Venezuelan cities.
thanks for sharing sir
Venezuela is instructive for all those who don't believe that the unfunded liabilities that are allegedly untouchable will get the axe.
Venezuela has tried the let's starve business and people with jobs to support the parasites strategy. Did I say strategy?
Amazingly there seems to be a problem. Probably just reactionaries..
Sad that a country with such people can't figure out how to govern itself. Who are the producers and who are the socialist looters? That might answer a few questions, I just don't know. The Latino types sure do have a thing for the strongman dictator. Never learn.
It would be of even greater interest to see what actually a 1/2 ounce of silver could get you in the black market- if you didn't get killed in the process
well he is going to be elected in a landslide next month...only name on the ballot..but hey who cares ..he owns the press...but he is starting to lose the army....when they go ..he is done....they are leaving by the thousands every day now.....wont be long till its all over.When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
~Napoleon Bonaparte
"Let the American people go into their debt-funding schemes and banking systems, and from that hour their boasted independence will be a mere phantom."
~William Pitt, (referring to the inauguration of the first National Bank in the United States under Alexander Hamilton
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Anyone who sees this can do the same, i refollow anyone!
@Zer0hedge..bro Since they have to deliver an agreed volume to China (borrowed money, long gone) a higher price won't help them in any way. I'm not sure they delivering even that amount.
Maduro will now use his last card: war with Guiana, as ridiculous as it sounds. After that (or even just before) he is gone.Venezuela is instructive for all those who don't believe that the unfunded liabilities that are allegedly untouchable will get the axe.
Venezuela has tried the let's starve business and people with jobs to support the parasites strategy. Did I say strategy?
Amazingly there seems to be a problem. Probably just reactionaries...thank you for sharing with us..
Is this crisis the solution to the venezuela government steps?