It would be irresponsible of anyone knowledgable of its economy not to be thinking about the possibility that Venezuela needs to talk with the IMF, to soon begin a process of renegotiating its debt, as well as PDVSA's, which both seem imposible to duly serve in the short term, if the country is not to suffer biafran hunger.
But during the week the Financial Times columnist, Martin Wolf, in an article entitled "Resist Russian blackmail over Ukraine's debt", recalled how the influences of some sovereign creditors could block the constructive actions of the IMF to reach an acceptable solution.
In this regard it may be desirable to first pass before the International Criminal Court in The Hague. I say this because the massive waste of economic resources in a country, for reasons of incompetence, corruption or simply ideological, notoriously verifiable, should qualify as an economic crime against humanity. And the financing of an economic crime against humanity, should not count on any institutional support, like of the IMF type.
Currently there is also much discussion in the world about the need to establish a mechanism for Sovereign Debt Restructuring (SDRM). I agree with this need but, for the results of an SDRM to be acceptable to us citizens, it must:
Remove all incentives that may encourage governments to contract excessive debts.
And make sure it does not provide any benefit, much rather the contrary, to any debt that could be considered as derived from an odious credit.
A loan granted with a lack of transparency, in which an act of corruption might be involved, or that it was originally granted when it was clear that the resulting debt was not sustainable, and therefore it was purely of speculative nature, should not receive the same treatment by the SDRM, as a regular loan to the public sector awarded transparently, and when there were no major doubts about the ability to serve the sovereign credit.
To identify the speculative nature of a loan, one could use for example that the interest rate exceeds 5 percent the rate charged to an AAA rated sovereign.
We must never forget that the best SDRM is the one that reduces the need for it, and thus lowers the risk premiums to be paid to the sovereign.
And we read that investment funds dedicated to capitalize on the opportunities offered by troubled loans, so-called vulture funds, are growing much. These, an even when we like with vultures and buzzards do not like them much, they do in some cases provide important liquidity to the financial and credit markets... and should be duly rewarded for it.
But, since Venezuela already faces major challenges canceling debts duly owed, the last thing we need is that vulture funds also end up
collecting rotten credits from us.
Translated from Noticiero Digital
Translated from Noticiero Digital
