Last month Ricardo Hausmann, a normally mild Harvard academic, set off the equivalent of a financial bomb. The economist suggested that Venezuela had already defaulted on many of its suppliers, its oil service contractors, and its citizens. So who or what might come next?
When Hausmann suggested Wall Street, the market reaction was huge. Indeed Venezuelan bonds, undercut by the falling oil price, have been dropping ever since. Yet it turns out that Venezuela’s latest default has been, in fact, to China. Given that Beijing is one of Caracas’ closest allies, this is surprising. It is also bullish for Wall Street.
By Felipe Pérez Martí
In a recent article published in The Guardian, American economist Mark Weisbrot argues that concerns expressed by economists about the condition of the Venezuelan economy are unfounded. He claims that the Venezuelan economy is not headed for collapse, and describes those who say this is so as “Venezuela haters” allied to the opposition.
I served under President Hugo Chávez as Minister of Planning and Head of the Economics Cabinet between 2002 and 2003. I deeply believe in the ideals of the Bolivarian Revolution of creating a just, egalitarian and democratic society in Venezuela, and in Chávez’s commitment to turn these ideals into reality.
When Russia’s Communist party called for a Moscow street to be named after Hugo Chávez in March, the city authorities refused on grounds that the former Venezuelan leader had not been dead long enough to qualify for the honour. However, in a sign of the importance Russia attaches to Venezuelan relations, Igor Sechin, the powerful chief executive of Rosneft, wants Moscow to waive the rules. Visiting Caracas this week to finalize a big oil deal, Sechin said a Chávez street should indeed be added to the map of the Russian capital.
By Michael McCarthy of Johns Hopkins-SAIS
So, the chavista revolution continues: interim president Nicolás Maduro has defeated opposition leader Henrique Capriles Radonski by 7,505,338 votes (50.7 per cent) to 7,270,403 (49.1 per cent) in Venezuela’s presidential election. But as the late Hugo Chávez liked to say in a different context, the revolution continues por ahora (for now).
One of the things Hugo Chavez will be remembered for is his spontaneous, freewheeling style of government. But in his enthusiasm for imitating the late Comandante, down to singing at political rallies despite not quite having the voice for it, his successor Nicolás Maduro might be going a bit too far.
By Roderic Wye of Chatham House
Does the death of Hugo Chávez risk seriously undermining China’s position in Venezuela? China’s apparent obsession with energy security led it to invest heavily in energy and in other sectors in Venezuela in the last decade or so. At a time when other foreign investment in Venezuela was falling rapidly, China’s was growing almost exponentially. But was it committing too much to one relationship, which would be vulnerable to a change in regime and necessitate a rapid change in China’s policy? The answer is probably no.
By Paulo Sotero of the Woodrow Wilson International Center
Brazilian president Dilma Rousseff declared three days of official mourning in honour of her late Venezuelan colleague Hugo Chávez Frias, who died on Tuesday in Caracas after a two-year public battle with cancer. “We recognize a great leader, an irreparable loss and above all a friend of Brazil, a friend of the Brazilian people,” she said before leading a minute of silence at a meeting with rural leaders in Brasília carried live on national television.
There was, however, an uncharacteristic twist in Rousseff’s expression of condolences. “On many occasions,” she noted, “the Brazilian government did not agree” with the policies of the Bolivarian leader. Insiders say this was not an extemporaneous remark, but a pre-planned statement calibrated for domestic and international consumption.
The 7km queue of Venezuelans hoping to catch one last glimpse of Hugo Chávez resting in his coffin before his funeral tomorrow was a striking measure of the devotion among his adoring supporters.
But even those who didn’t exactly see eye to eye with the revolutionary leader while he was alive rushed to offer their condolences. Thursday’s newspapers were bulging with extra pages to fit in all the messages from private companies that Chávez so often scolded.
There’s a risk that Venezuela will default, but really it won’t. That’s the thinking that drives the market in the Bolivarian Republic’s sovereign bonds. Investors charge hefty interest to buy debt issued by the chavista government because it does market-unfriendly things like appropriating foreign companies. But they know it won’t default, because it can’t afford to be shut out from international markets.
By Diego Moya Ocampos of IHS
Hugo Chávez’s death is a game changer in Venezuela and will inevitably bring a reorganisation of the political order. It creates a power vacuum that will be hard to fill and a political crisis could take place should vice president Nicolas Maduro, Chávez’s appointed successor, fail to guarantee continuity for the Chavismo movement.
So Hugo Chávez is dead. Now what?
It’s still early days. But one thing to keep an eye on is what Big Oil’s reactions could be.
Remember, Venezuela has the world’s largest oil reserves in the world. The country has proven oil reserves of 297.6bn barrels at the end of 2011, compared to Saudi Arabia’s 265.4bn barrels, according to data from Opec.
Hugo Chavez has died from complications related to cancer, Nicolas Maduro, Venezuela’s vice president said on Tuesday.
More to come on ft.com and beyondbrics
News that Hugo Chávez’s health has taken a turn for the worse didn’t solicit much of a reaction from the markets. Prices on Venezuela’s dollar sovereign bonds barely budged on Tuesday. Could that be because after nearly three months of twists and turns, investors have pretty much decided that the end of Chávez is near?