BUSINESS INSIDER: Traders Are Scared As Hell Of Whats Happening In Venezuela - by Linette Lopez Venezuelan investors are abandoning ship en masse after the government indicated that it would not take immediate measures to stop the country from sinking deeper into chaos. This week the Venezuelan government reiterated that it would not devalue its currency, giving it more bolivars for every dollar. It does not want to do that because the country already has the highest inflation rate in the world, at 64%. The official exchange rate is 6.3 bolivars per dollar, but the black-market rate sits at 113.62 bolivars to the dollar. Investors did exactly the opposite. They are abandoning Venezuela at a stunning rate. The countrys debt maturing in 2027 has fallen to a six-year low of 55.1 cents, according to Bloomberg, down 14% in a month. This is, in part, due to a global economic shift. Oil makes up 95% of Venezuelas exports, and the commodity has gotten absolutely crushed in the past month — down 28%. Some accuse Saudi Arabia of keeping the price low to compete with the worlds burgeoning natural gas industry — an allegation the Kingdom and OPEC have categorically denied. In the meantime, Venezuela is already suffering from food shortages. A lot of that food — along with other household goods — is imported, and without the cash from oil, the government will not be able to subsidize those imports, according to a report by the research firm Stratfor. Default is the end game, the bond trader said. Bonds trade down into the 20 cents on the dollar, then restructuring etc. but the default could cause political unrest. President Nicolas Maduro lacks the charisma of his predecessor, the late Hugo Chavez. His approval rating hovers around 30%, though the country remains more evenly divided about his socialist party. What this economic strain could do is take us back to February, when hundreds of thousands marched through the streets of Caracas and other cities all over Venezuela, with the government engaging in a campaign isolating or imprisoning opposition leaders like Harvard-educated politician Leopoldo Lopez (who still sits in jail awaiting his day in court). Back then the lines to get into government supermarkets were long. They will only get longer. The people will get angrier. Maduro will run out of time. But that does not mean he will let go of power. At least, not without a fight. businessinsider/traders-scared-as-hell-of-venezuela-2014-11
Posted on: Sat, 15 Nov 2014 17:18:01 +0000
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