Venezuela Is Facing Bankruptcy

People queue to buy basic food and household items outside a supermarket in the poor neighbourhood of Lidice, in Caracas, Venezuela.

Venezuela Is Facing Bankruptcy

The struggling country has already defaulted on some of its debt—but Russia is there to help.

On November 13, Venezuela missed the deadline for a $200 million interest payment, despite a 30-day grace period. Later that day, S&P Global Ratings declared that Venezuela had defaulted on its debt, meaning that the country is in danger of bankruptcy. The Fitch ratings agency also declared that the pdvsa oil company—Venezuela’s primary oil company and the source of much of its revenue—is now in “restricted default.” Restricted default is one level above full default.

Financial woes combined with domestic problems, government ineptitude and widespread corruption have brought Venezuela to the brink of bankruptcy. If Venezuela’s economy crashes, the oil market will take a major hit. This would have ramifications around the globe.

Venezuela may be falling apart, but Russia is there to help. On Wednesday, the two countries agreed on a $3.2 billion debt restructuring deal that will let Venezuela make smaller payments on its debt to Moscow over the next six years. This frees up more money to pay other creditors, which may prevent the country from going into full default.

Russia already has 49.9 percent ownership of Citgo, one of Venezuela’s biggest oil companies. This new deal puts Venezuela even more in Russia’s back pocket.

If Venezuela goes bust, it would have a huge effect on the global oil market. Venezuela has the largest oil reserves in the world. Its economy depends almost entirely on crude oil, which composes 96 percent of its exports and about half of state revenue. The country produces 2 million barrels of oil every day, which is 8 percent of all U.S. oil imports.

Venezuela may be oil-rich, but government corruption has left it low on cash. Inflation is so bad that its money is almost worthless. The International Monetary Fund has predicted that inflation in Venezuela may reach 650 percent this year. By 2018, it could be as high as 2,300 percent. Inflation in Venezuela is already 17 times worse than it was at the start of this year. The situation is quickly spiraling out of control.

Colombian President Juan Manuel Santos said on November 9, “Venezuela is my worst nightmare.” Neighboring countries fear that if the Venezuelan crisis gets any worse, they will have a refugee crisis on their hands. Venezuelans have been facing dire food and medical shortages for years. If the country declares bankruptcy, many of its starving and desperate citizens will flee.

Fernando Freijedo, an analyst at the research firm Economist Intelligence Unit, told cnn, “The humanitarian crisis is already pretty dire … it boggles the mind what could happen next.” Peru and Colombia have already been taking in thousands of refugees, but other countries have closed their borders.

Russia may be closing in on Venezuela at the moment, but Europe is watching the situation as well. The Bible indicates that Europe, not Russia, will be allied with Latin America in the near future. With a solid presence in Latin America, the German-led Holy Roman Empire will be able to “besiege” the U.S. “in all thy gates” (Deuteronomy 28:52).

In May 2013, Trumpet writer Ron Fraser wrote in “Restoring Europe’s Latin Empire”:

In Revelation 17 and 18, God labels the German-led, Vatican-influenced empire currently emerging in Europe as “Babylon the Great.” In the corresponding Old Testament prophecies of Isaiah 23 and Ezekiel 27, the same empire appears under the name Tyre, the most powerful trading center of the ancient Mediterranean world.

Based on these scriptures, Mr. Armstrong long said that the alliance between Europe and South America would grow strong. The May 1962 Plain Truth predicted, “The United States is going to be left out in the cold as two gigantic trade blocs, Europe and Latin America, mesh together and begin calling the shots in world commerce.” …

Germany and the Vatican are building a transcontinental alliance that will ultimately include 10 European kings, an anti-Iranian alliance of Arabic regimes, and a loyal network of Latin American vassal states. With its left arm, this Vatican-dominated conglomerate will reach down southward and eastward into the Middle East to conquer the Holy City, Jerusalem. Then with its right arm, this “Holy” Roman Empire will reach southward and westward across the Atlantic to take control of Latin America and besiege the United States!

The Venezuelan crisis is giving Russia an opportunity to expand its role in Latin America. But you can be sure that Europe and the Vatican are watching this situation closely.

For more understanding on the future relationship between Latin America and Europe, read the chapter “Europe’s Inroads Into Latin America” in our He Was Right booklet.