Totally agree Douglas! The only way to keep on servicing debt would be to maintain the domestic chaos, given that credit from headquarters and int´l suppliers dried out. Analysts keep on insisting Venezuela has enough money not to default, but the truth is that a) it is not in international reserves (95% of the holdings are gold bars), b) it is not in the Fondo Estrategico (US$1.500 million is about one five of october`s debt service), and c) it is impossible to assess of the flow is enough because the Central Bank does not publish the balance of payments since IIIQ 2013. So how can they be so sure Venezuela`s got the money?
Now, that does not mean default is imminent. Money can be raised by selling assets at a large discount (i.e. CITGO), issuing more private debt at 15% in US$, or cashing in future oil shipments to China. Is this any better?
Analysts also point out that Venezuela has just a little problem with its relative prices, it is all a matter of inducing a large devaluation, in order to bring them to equilibrium levels (and keep on servicing debt). That would imply forcing a colossal contraction on internal demand, without any benefit (it is too late for Maduro to reinvent himself and change expectations) further than widening current account surplus to pay debt.
Miguel Angel Santos
Miguel Angel Santos is a senior research fellow at Harvard’s Center for International Development.