The Venezuelan financial tragedy

The Venezuelan financial tragedy can be summarized as follows: The country has received about $1.5 trillion during the last 15 years. However, this year it will require financing equivalent to 15-19 percent of the GDP, a debt that can only be paid by mortgaging the petroleum resources of the nation.     

How has it come to this? :

To get to this point the Hugo Chavez/Nicolas Maduro regime, under the tutelage of the Castro brothers, has committed three main crimes against the nation:

(1), They have stripped the Venezuelan Central Bank of much of its international reserves  and Petroleos de Venezuela of its oil income, in order to place the money in a non-transparent  parallel fund  called FONDEN. According to Economist Pedro Palma this fund has received up to $105 billion from these institutions. The money has been managed very discretionally, with no accountability  by four persons: H. Chavez/N. Maduro, Jorge Giordani, Rafaél Ramírez and Nelson Merentes. Much of the money has been utilized for partisan political purposes.   

(2), Due to the diversion of its income to FONDEN and to its contribution to social programs based on handouts, PDVSA’s  investment and maintenance have suffered so much that production has collapsed, the development of the Orinoco heavy oil is stagnant and industrial accidents have increased, with much loss of life and property, as never before in the history of the Venezuelan petroleum industry.  

(3),  The declining oil production of PDVSA now generates insufficient income, particularly since up to 40 percent of oil exports go under subsidy to ideologically friendly countries. This has forced PDVSA to increase its level of debt, which is now estimated at $60- 80 billion, and to commit future oil production to pay for the loans. Economist Pedro Palma estimates that PDVSA’s cash flow is very fragile and estimates income for this year below $50 billion.