Caracas Chronicles

We all know it by now: Venezuela  faces economic sanctions by the US that make day-to-day financial transactions extremely complicated for the government, in general, and for oil giant/dumpster fire PDVSA in particular. The US has also contemplated imposing further sanctions banning PDVSA from making any transaction in US dollars.

This could severely impair PDVSA’s already compromised operations. Involuntary default on its external debt is just the start. PDVSA has been close to defaulting recently just because the third rate Chinese and Russian banks that it uses to make international wire transfers take many days and in some cases weeks to process them.

None of these actions are coherent. None of them betray even an inkling of an understanding of the depth of the shit they’re in.

So, how’s the government preparing to face this complex scenario? Well, we recently covered the sheer lunacy reached by Finance Minister Ramón Lobo who wants to solve the severe cash shortage in the country by going after the portus willing to give you cash back for swiping your card. Plainly, Oil and Mining Minister Eulogio del Pino saw Lobo’s press conference and thought “hold my beer.” From now on, his ministry will publish the Venezuelan oil basket price in yuans instead of dollars.

Facing a major financial crisis, Eulogio decides his response is going to be to stick a regla-de-tres on the empire. Of course, he knows oil is ultimately quoted in dollars worldwide. He understands this childish calculator trick does exactly nothing to change that. But he’s hoping you don’t.

On the other side, the WSJ recently reported that PDVSA informed oil traders that it would not receive or send any payment in US dollars. The company took the chance to convert all of its cash holdings into euros and ordered its partners in joint ventures to follow suit.

It appears that PDVSA is either closing or emptying all of its US dollar-denominated accounts instead of creating a backup mechanism in case further sanctions are brought to bear. That would be the rational thing to do. But what they seem to be doing is self-sanctioning before the sanctions actually do come down, suffering in advance all the negative consequences that not having access to dollars and dollar-denominated accounts will have on its operations and already disastrous accounting.  

Anti-imperialist posturing is now so deeply ingrained that the government can no longer tell it apart from proper fiscal planning.

On top of this, Maduro recently announced the suspension of Dicom auctions (the umpteenth failed alternative currency system enabled by chavismo to beat DolarToday — and by the way 23,744 — hello!)

Instead, the government is announcing a basket involving the aforementioned yuan, Indian rupees and Russian rubles to denominate its forex trade in.

This is nonsense and plainly won’t work. Still, the parallel exchange rate took a steep hike in response, following the suspension of future DICOM auctions.

None of these actions are coherent. None of them betray even an inkling of an understanding of the depth of the shit they’re in.

It’s hard to avoid the conclusion that the reflex to anti-imperialist posturing is now so deeply ingrained that the government can no longer tell it apart from proper fiscal planning. Their grasp of basic finance is so thin and their arrogance so vast that these actions may end up accelerating a default rather than forestalling it.

But it’s impossible to take any comfort in their bumbling, because the consequences of these decisions will be born by sick and starving Venezuelans, not by the amoral criminals who make them. It’s sickening.