Horror In Venezuela: Stock Market Crashes
Lance Jepsen | Jun 29, 2016 11:45AM ET
A terrifying political battle is unfolding in Venezuela where Maduro is attempting to dissolve Congress (by influencing the courts) because they are trying to recall him.
The IBC Index, which tracks the 15 largest companies traded on the Caracas Stock Exchange (Venezuela), has crashed as the political drama unfolds.
The Washington Post reports that Venezuelans are storming supermarkets and attacking trucks as food supplies dwindle.
The Oil Bubble Pop Is To Blame
The problem in Venezuela is that the price of crude oil collapsed thanks to Saudi Arabia targeting the US shale industry. The Venezuela bolívar is a Petro-currency, and so its value crashed along with oil. The falling value of the bolívar pushed inflation through the roof. Consumer prices are up more than 700%.
Rating agencies' reports and credit default swaps estimate a high probability of default on Venezuela's debt. In 2015, the implied probability of default during the next five years, provided by the credit default swaps market, has been up to close to 95%. All the leading rating agencies have repeatedly downgraded Venezuela's credit rating.
Venezuela is close to falling into a civil war. Most people can only afford to eat one small meal, once a day. Decades ago, Hugo Chavez established a network of government-run supermarkets that sold basic foods at subsidized prices. The system of government-subsidized food has completely collapsed with the price of oil. Horrific inflation has caused just two pounds of yucca to cost a whopping 1/3 of the weekly minimum wage.
Citizens are organizing against their leaders, and things could turn violent quickly. In the past week, Venezuelans lined up to add their names to a recall petition that aims to kick President Nicolas Maduro out of power. Removing President Maduro from power would put an end to the socialist-inspired "revolution" started 17 years ago by Hugo Chavez.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.