Will A Venezuelan Default Impact Your ETF?
A Seeking Alpha Contribution
Summary
- Venezuela is a poorly managed socialist economy that relies on high oil prices to finance government spending and imports.
- The sudden drop in oil prices sent the black market price of the bolivar from 100 to 150 per USD in a month.
- Venezuela is trying to scrape together enough money to wait out the drop in oil prices, but if prices don’t reverse, a crisis looks inevitable.
Margaret Thatcher quipped, “…Socialist governments traditionally do make a financial mess. They always run out of other people’s money.” In 2015, Venezuela may be the latest proof of her statement.
Venezuela’s basket case economy is in trouble. Nearly all of its export earnings come from oil exports and it imports nearly 80 percent of what it consumes. The country’s government also relies on oil revenues to finance social welfare spending and overseas borrowing. Disastrous economic policies could be hidden when oil prices were high, but the plunge in oil prices puts everything at risk and reveals the extent to which the Venezuelan economy has already collapsed…. To Continue Reading, Please Click Here.
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