Kenneth Rijock

Kenneth Rijock

Tuesday, May 24, 2016

VENEZUELA: A FAILED STATE ?

Caracas, Fall 2016 ?
Things have gone from bad to worse in the "Bolivarian Republic" of Venezuela, which can no longer feed its people. Now, not only did the brewer of the country's famous Polar Beer stop producing, due to its inability to obtain the necessary ingredients, the Coca-Cola distributor has shut down production, as it  can no longer get sufficient sugar to turn out its soft drinks.

Given the dire economic situation, any extension of credit by foreign banks, and even a single instance of financial exposure, is  fraught with a high risk of default. Many foreign creditors cannot recover their funds, due to the inability of local businesses to obtain dollars. The Bolivar is well on its way to becoming virtually worthless against the dollar.

The Venezuelan military will not intervene, to remove the failed socialist government of Nicolas Maduro, because its leaders are making millions from drug trafficking. Many Venezuelans have voted with their feet, and are now living in Miami's city of Doral.  For Country Risk purposes,  the prudent move is to avoid any and all transactions with Venezuelan businesses, for you will either be stiffed, or you may later learn that your wealthy bank client is really a corrupt government official, or a narcotics trafficker.

What is next, US Army helicopters rescuing Venezuelans from Caracas rooftops, while a bloody civil war rages below ? Many observers actually fear that this is coming, and soon.

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