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The situation in Venezuela continues to worsen year after year. If projections by multilateral organizations are met by 2018, the country will have lost about 50% of its gross domestic product in five years. This fall is among the biggest economic disasters of the last sixty years, over Zimbabwe between 2002 and 2008, and comparable only to those countries that were Soviet after the transition from communism. Or war conflicts like those of Iraq, Liberia, Libya and South Sudan over the last three decades.
Ricardo Hausmann, Miguel Ángel Santos and Douglas Barrios / NYT
conditions of the country, they also modify the strategies and supports necessary to achieve their recovery. Twenty years of chavism have left Venezuela in such a state of invalidity that its rescue will require international assistance in the most classic sense of the term. Latin America and the international community must understand this and assume the rescue of the Latin American nation as an emergency.
In early March 2018, a Venezuelan woman searches for food in a supermarket in Guaicaipuro, a municipality in the state of Miranda. Credit Meridith Kohut for the New York Times Since 2013, we are working on the guidelines of a bailout for "the next day" from the end of the Chavez regime. In September 2014, we proposed a debt restructuring to avoid an imminent collapse and to more equitably distribute the adjustment burden between Venezuelans and the creditors of the external public debt. At the end of 2015, we were alerted to the imminence of the humanitarian disaster. In early 2016, we proposed to accompany the restructuring of an extraordinary assistance program with the International Monetary Fund (IMF). Working with a group of Venezuelan economists, we estimate that at the time, 54,000 million dollars were needed in five years; a similar amount – ten times the country's share – to the help that the IMF provided to Greece in 2010 and to Argentina a few months ago. We have gathered the results in a proposal to save the well-being of Venezuelans that we made public in 2017.
But the next day did not arrive and the future is no longer what that he was before. By updating our estimates with the most recent data, we realized that the $ 54,000 million we proposed last year is not enough. The cause of this deficiency is the huge destruction of value over the past twelve months. According to a recent report from the Organization of the Petroleum Exporting Countries (OPEC) last May, Venezuela's oil production was 570,000 barrels a day lower than May 2017, a 29 percent drop. This difference represents about $ 12,000 million a year, a figure similar to that of last year 's total imports, and the equivalent of 140 percent of the country' s international reserves. In addition, refining systems, electricity generation, water, domestic gas and health have collapsed and more than one million Venezuelans have left the country.
Our problem can no longer be solved only with a deeper restructuring of debt or with a larger financial assistance program. Although funds from multilateral organizations – such as the IMF – are at very low interest rates, these loans need to be repaid. IMF rules require that the country be sufficiently creditworthy within a reasonable period of time to be able to issue loans at the market rate, in order to repay the loans obtained. Given the damage recorded over the past twelve months, the need for additional funds would be of such magnitude that the country would be overburdened and lose the ability to go to the financial markets to repay the IMF.
A simple comparison may help to understand: If a person, in good health, burns the house that he bought by means of a mortgage, it is difficult to acquire another one with another loan and get two mortgages. For the same reason, banks will lend you the credit of a second mortgage only if the first one is eliminated. But if, in addition, the person loses health and is unable to work at a normal pace for a few years, banks will not lend at home unless others contribute a portion of the capital.
The same goes for Venezuela. This is no longer one of those nations that can access financial markets when they need them. This is also not the case for middle-income countries, which can not do so, but they can resort to regular loans from multilateral organizations. Nowadays, Venezuela is a poor, highly indebted country, which can not go ahead simply by borrowing. For these countries, another resource was created: donations.
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