The so-called “socialist paradise’ is running out of money and has proceeded to sell its gold holdings. The once described “heaven on Earth” because of its socialist programs has now fallen into a pit of destitute and despair.
Venezuela is projected to default on many of its debt payments sometime next year. Right now, Venezuela is indebted to creditors by $15.8 billion. The unfortunate thing for President Nicolas Maduro is that the Latin American, oil-rich country is running out of cash so it can’t pay off its debt and maintain its generous social welfare programs.
As a result, Venezuela’s reserves, which are mostly comprised of gold, are being depleted at a rapid rate. It’s estimated that Venezuela only has $15.2 billion in foreign reserves remaining, and much of it is in the yellow metal, while less than $1 billion is in cash. This is the lowest amount in more than a decade.
Venezuela, like a lot of other countries in its situation, has depended upon oil to fuel its economy, pay for its socialist programs and cover its debts. However, since oil prices have tumbled and continue to remain low at around $45 per barrel, Venezuela is running on empty.
Economists say Venezuela is the worst economy in the world right now. The bolivar has collapsed, inflation is in triple digits, citizens are in financial destitute and there are widespread shortages in nearly every area. Most consumers can’t even access the simplest of products like toilet paper and corn starch (SEE: Venezuela’s socialism leads to food riots (video)).
Nevertheless, Maduro is acting like nothing is wrong. Instead of cutting back and trying to keep the boat afloat, Maduro has increased public spending, subsidized grocery stores, raised the minimum wage (SEE: Huh? Venezuela raises minimum wage by 30% but businesses can’t raise prices) and provided free government healthcare.
The only way Venezuela can survive at this point is if oil prices surge to $100 a barrel again or China/Russia voluntarily pay off its debt.
Russ Dallen, managing partner at LatInvest, eloquently asks the question: “What kind of government does it take to bring a country with the largest oil reserves in the world to the brink of bankruptcy?” Simple: a socialist one.
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