Faced with a major repayment deadline, Venezuela sways between hunger and economic default

With a crisis that persists, Maduro has chosen to hold on to power and repay debts over political and fiscal compromise.

Venezuelans already struggling to find food, medicine and other basic necessities have a new headache to worry about: shortages of cash. (CREDIT: Fernando Llano/AP Photo)
Venezuelans already struggling to find food, medicine and other basic necessities have a new headache to worry about: shortages of cash. (CREDIT: Fernando Llano/AP Photo)

As Venezuela’s humanitarian and financial crisis deepens, the European Union opted to award the country’s opposition-led National Assembly legislature with the Andrei Sakharov award, named after the Soviet dissident.

Reuters reported on Thursday that the award came with a statement from the European Parliament President Antonio Tajani, saying: “Today we are supporting a nation’s freedom struggle.” But statements of support from Europe and other quarters have done little to calm the political tensions consuming Venezuela for over a year, since President Nicolas Maduro started cracking down on the opposition.

Ironically, the opposition that was honored is now being abandoned by many young activists who feel “betrayed” after the government won 18 of 23 governorships in the October 15 regional elections. It was a serious blow, with Reuters reporting that, “In the wake of defeat, stunned opposition leaders could not even agree whether to pursue fraud allegations, with some refusing to accept the election results and others publicly admitting defeat.”

Violence has swept through the country, resulting in over 100 deaths and mass arrests. An international outcry followed, urging Maduro to restore rule of law and democracy to the oil-rich country which has been slapped with sanctions. Meanwhile, the country is teetering on the verge of default. Bonds issued by the national oil company, PDVSA, dropped sharply on Thursday, ahead of a deadline for an $842 million payment on a four-year bond on Friday. The government already missed a $237 million payment last weekend, though that does not technically put them into default yet.

Dany Bahar, the David M. Rubenstein Fellow in the Global Economy and Development program at the Brookings Institution, told ThinkProgress that he doesn’t think that Venezuela will default on the payment on Friday — and that making the payment will be done “at the expense of Venezuelans.”

He said as soon as the price of oil went down, the government had to make a choice: keep importing food and medicine, or paying off bonds.

“And they’ve made a very clear choice,” said Bahar. Hence the term “hunger bonds” to describe Venezeula’s debts.

“Venezuela is paying these debts to Wall Street at the expense of the Venezuelan people, because the imports to the country have gone down 70 percent since 2014. That’s why you don’t see food, that’s what you don’t see medicine,” said Bahar. The only immediate solution is to restructure the debt, but that seems unlikely, because, said Bahar, this government is not seen as likely to bring about any economic reform.

“This is not going to come out of this government. This is going to come out of, potentially, the possible next government, if that ever happens,” he said. But, he said, this assumes a number of things: that there will be presidential elections in 2018, that they will be clean, and that there will be a peaceful transition of government.

“I don’t see any of this happening…so neither the bond holders nor the IMF [International Monetary Fund] are willing to discuss debt restructuring,” said Bahar.

In addition to targeted sanctions, President Donald Trump has also placed several Venezuelan officials on his travel ban as well as threatening the country of 30 million with military action in August, and Bahar said that the sanctions could still be expanded to include more high-level officials and their families, not just by the United States but in a coordinated effort with the E.U.

Still, looking for allies, the Venezuelan opposition has reportedly reached out to Russia, which is more than receptive to talks, according to Bloomberg:

He’s [National Assembly President Julio Borges] now turning his attention to Russia after Foreign Minister Sergei Lavrov disclosed that the government in Moscow was ready for discussions with Venezuela’s opposition. ‘We are not avoiding these contacts. On the contrary, we are actively working and encouraging the government and the opposition to negotiate,’ Lavrov said in New York, on the sidelines of the United Nations General Assembly in September.

However, this is doing little to alleviate the suffering of people who for months now have been struggling with severe shortages in medicine, food supplies, and cash. Things have gotten so dire that according to the LA Times, Venezuelans in the United States are shipping food to their families back home.

“The government that is currently in place isn’t even acknowledging that there is a crisis. For them the source of the crisis is that there’s an economic war against them, I don’t know by who. This crisis is there as a result of twenty years of mismanagement.”

“You have a government that is fantasizing,” said Bahar, adding that the government still isn’t allowing a channel for humanitarian aid and that there’s little hope of a new government coming into power next year. “Hope,” he said, “has disappeared.”