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Venezuela Officially Defaults; Annual Inflation 2689 Percent: When Does the Military Take Over?

Electricidad de Caracas, a Venezuelan state-owned electric company, officially defaulted on a $650 million bond payment. The company was already a month late on its payment before the trustee, Wilmington Trust, issued a statement. Meaanwhile, Professor Steve Hanke notes annual inflation is 2689%.

Venezuela’s Electricidad de Caracas — a state-owned electric company — has defaulted on a $650 million bond payment, Wilmington Trust said Friday.

The default comes as the International Swaps and Derivatives Association (ISDA) prepares to decide next Monday whether state-run oil giant Petroleos de Venezuela (PDVSA) experienced a credit event earlier this month.

PDVSA missed a $1.12 billion bond payment on Nov. 2. If ISDA decides that PDVSA did experience a credit event, that could lead bondholders to declare a default, which could trigger an avalanche.

“We expect if holders do declare a default then that could be used to trigger cross default across the whole US$28bn of PDVSA bonds,” Stuart Culverhouse, chief economist at Exotix Capital, said in a note. He noted, however, that bondholders “may simply give the government more time to make the payment, as the intention seems to be there, but coordinating a large group of holders with different incentives could prove challenging.”

Food Shortages

President Nicolas Maduro erased any remnants of democracy in late July, stripping political opponents of power and establishing a new legislature filled with his cronies.

But Maduro’s cemented regime still faces the same problems it started years ago: An exodus of its educated class combined with mass shortages of food, medicine, money and — most importantly — time.

Shortages of basic medicine and proper medical equipment are common. More than 750 women died during or shortly after childbirth in 2016, a 66% increase from 2015, according to the Venezuelan health ministry.

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