Tag Archives: Greece

Sep
13
2010
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Venezuela on the Brink

This article was originally posted by Commentary

Venezuela goes to the polls on Sept. 26 in a parliamentary election that opponents of President Hugo Chavez see as “a chance to turn the tide,” as Reuters news service puts it. Chavez may be taking on more authoritarian powers, but he also has to defend what the latest data show is the worst economy in the world.

The Economist magazine provides statistics weekly on 57 nations, from the United States to Estonia. Its most recent report forecasts that gross domestic product in Venezuela will decline by 5.5 percent in 2010. Next worst is Greece, with a 3.9 percent decline. Greece, of course, came close to defaulting on its debt earlier this year, and analysts at Morgan Stanley worry that Venezuela is moving in the same direction.

“Our new baseline of at least three years of economic contraction suggests the risks to Venezuela’s ability to honor its international financial commitments may be on the rise,” wrote Daniel Volberg and Giuliana Pardelli in a June report, at the same time predicting that GDP will fall by 6.2 percent in 2010. “While most of Latin America, in line with the globe, has been in recovery mode since last year, Venezuela has seen an intensifying downturn in activity,” they added.

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Jun
30
2010
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Venezuela in more trouble than Greece

Economy in VNZ Venezuela in more trouble than GreeceArticle originally posted by Bloomberg.

The cost of insuring Greek government debt is now second only to that of Venezuela, where Chavez has declared “economic war” against the “bourgeoisie.”
The CHART OF THE DAY shows that credit-default swaps on Greek government bonds, in red, have overtaken Argentina, which failed to pay more than $80 billion in December 2001. The Latin American nation still has more than $6 billion of defaulted securities outstanding after its second attempt to restructure.

“Greece isn’t Argentina,” said Niels Jensen, a portfolio manager at London-based investment firm Absolute Return Partners LLP, which oversees more than $300 million. “From an economist’s point of view, there’s no question that it’s much, much worse.”

Greece’s debt burden last year was equivalent to about 115 percent of gross domestic product, compared with a level of about 60 percent for Argentina when it defaulted. Credit swaps signal there’s a more than 67 percent chance the southern European nation won’t meet its commitments within the next five years.

Venezuela’s Chavez, a 55-year-old former army paratrooper who champions a socialist ideology, oversees an economy that may contract 2.5 percent this year, according to Bank of America Corp.

“You’ve declared an economic war against me, so I accept your challenge, stateless bourgeoisie,” Chavez said June 2 after business chambers criticized his handling of the economy. “I’m declaring an economic war with the help of the people and workers.”

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should an issuer fail to adhere to its debt agreements.