Caracas Chronicles

Victor Salmerón’s latest in El Universal left me rechecking my calendar to make sure we’re not in January 1989.

Las reservas internacionales, el tanque de divisas que permite otorgar dólares para importaciones, pagar deuda externa y respaldar la moneda, desciende vertiginosamente y culminó la semana pasada en 23 mil 350 millones de dólares, un nivel que representa una caída de 22% en lo que va de año y el monto más bajo desde el 30 de diciembre de 2004. De este monto, explican fuentes financieras, solo 1.600 millones de dólares están en efectivo, el resto son barras de oro y bonos que no permiten elevar la oferta de divisas en el Sicad y Cadivi de una manera importante.

Time was when this would not have been cause for undue worry: BCV could discretely cash out some of the gold it had stored at the Bank of England and ease the pinch, at least for a while.

But after Chávez’s brilliant gambit of physically repatriating BCV’s gold, any attempt to dip into those reserves – assuming they’re even still physically there – would involve a highly public, very visible, deeply humiliating climb-down, with actual trucks-full-of-gold filing out of Avenida Universidad headed to Maiquetía on their way to China.

For all intents and purposes, then, Venezuela has $1.6 billion left in Central Bank reserves – about two week’s worth of imports – and falling fast. [UPDATE: Plus, of course, whatever is scattered around BANDES, FONDEN, the Fondo Chino, and other para-statals that don’t publish their balance sheets. Hat Tip: Beelzebub Scatology Man.]

The government’s natural response is to try to borrow the shortfall; in this case, to re-edit the old SITME swap mechanism, where bonds are sold in bolivars in Caracas and buyers can then sell them on for dollars in New York. We know what a brilliant success that was, right?

Anyway, the borrow-the-difference route works…until it stops working. At some point our finances will get fucked up enough that no one wants to lend to us, even at the credit-card rates we’ve been offering for some time now. Shenanigans like refusing to pay holders of bonds issued by companies you’ve expropriated can only hasten the moment – but then, when the money’s just not there to pay up, whatchoogonnado?

One thing is for sure: keep walking down this path and you can only reach its logical llegadero: dollar expenditures far outstripping income, no liquid dollars left in reserves, no one willing to lend you more. February 1989.

Chavismo has always sustained itself on the fiction that the adjustment package of 1989 was an ideological choice rather than an arithmetic imperative. Welcome to the bajadita, bitches.