Venezuela Squandered Oil Riches, Now Faces Default
Venezuela Squandered Oil Riches, Now Faces Default
In CNN Money, AS/COA's Christopher Sabatini outlines three options for the Venezuelan government to avoid default and meet economic demands.
If you ever had a desire to invest in oil rich Venezuela, you may want to hold your money.
The government, first under the self-proclaimed revolutionary government of President Hugo Chávez and now under his handpicked successor Nicolás Maduro, has managed to squander one of the longest, greatest oil booms in history, not just misspending the oil windfall that at one point reached $133 per barrel, but also destroying the country's domestic economy.
As a result, Venezuela teeters on the edge of default on its debt.
Venezuelan benchmark sovereign bonds are now trading at 22 cents on the dollar--a shocking, sad situation for any petro-state, now made urgent with oil selling at around $60 per barrel.
The risk of default stems from the broad economic disaster wrought by the past 15 years of revolutionary government. At more than 60%, Venezuela has the highest inflation rate in the region, a result of government profligacy that produced a fiscal deficit reaching 12% of GDP and public debt at 26% of GDP by 2012. Part of this has gone to the government's popular social missions that provide free access to health care and education to the poor as well as subsidized food through state stores....
