Wednesday, October 27, 2021

Debt addiction of Argentina and the debt traffickers of the Wall Street

Argentina is in the news these days with speculations about the possibility of debt default, yet again.... 

The country does not have enough foreign exchange reserves to make repayments and interests to the 40 billion dollars IMF loan and the 70 billion dollars of Argentine bonds held by foreign bond holders. 

When I asked an Argentine amigo (friend), he shrugged his shoulders and told me that he had seen the movies of debt and default many times before. According to him, the current crisis is nothing in comparison to the catastrophic economic, political and social collapse of the country in 2001.
 
It is in this context of yet another Argentine debt crisis that I read the book “And the Money Kept Rolling In (and Out) Wall Street, the IMF, and the Bankrupting of Argentina” by Paul Blustein, a Washington Post staff writer. He was a first hand witness to the Argentine crisis when he was posted in Buenos Aires in 2002. He has done extensive research and interviewed IMF, Argentine and US officials as well as the bankers. He had already written a book “ The Chastening: Inside the crisis that rocked the global financial system and humbled the IMF" following his coverage of the crisis in Asia, Russia and Brazil in the 1990s. With such deep expertise, he has brought out the role of Wall Street and IMF in the Argentine financial crisis in 2001. 
 


The primary responsibility, of course, lies with the Argentines themselves. It was the Argentines who made the crucial decisions and took the money happily from the Wall Street and IMF.  The Argentine government spent more than they should have, taxed less than they should have and borrowed more than they should have. In 1991, they started the Convertibility system of 1:1 fixed exchange rate of peso with dollar which lasted for a decade. This system should have been used as an anesthesia for a short period to fix the system and move on to a sustainable long term exchange rate policy. There was no way for the Argentine peso to maintain its parity with US dollar in the long term. It was a no brainer, as the Americans say. But the Argentines kept up the system beyond its expiry date and paid a huge price. In 2001, the economy collapsed accompanied by an unprecedented political and social crisis.
 
The Wall Street and IMF are equally responsible for helping the Argentine addiction to debt. In the 1990s, the Wall Street hyped Argentina as a success story, encouraged the country to issue bonds and sold them in the international financial market. Argentina was one of the biggest bond issuers in the world during the period 1997-99. At a time when Argentina’s indebtedness was mounting in the late 1990s, the Wall Street bankers lauded the country as a paragon of the developing world and poured money in, lulling the government into complacency. 
 
The Wall Street firms whose analysts peddled optimistic reports were generally the same ones collecting fees from bringing Argentine government bonds to market—a business that generated nearly $1 billion for big securities houses during the period 1991–2001. 
 
A little over a year before Argentina’s default, J P Morgan, the firm that brought more Argentine bonds to market than any other, sent clients a report taking issue with pessimists worried that the country was destined for bankruptcy. The report’s title was “Argentina’s debt dynamics: Much ado about not so much.”. The basic thrust of that report was that fixing the fiscal problem was essential but that a modest adjustment would enable the country to avert default.
 
In March 2001 another Morgan report said: “The government’s capacity to service its debt this year is not in question.... We believe that the fears of abandoning convertibility are overdone and point out that devaluation is not a policy option due to the limited benefits.” 
 
ABN-AMRO, assured its clients at the end of June 2001: “Argentina has neither devalued its currency nor defaulted on its debt obligations and we continue to believe that neither scenario is in the cards.”
 
“A Bravo New World.” So proclaimed the title page of a report on Argentina and other Latin American markets that Goldman, Sachs & Co. sent to clients in January 1996. The report hailed Argentina “for adhering to the prescriptions of the Washington Consensus and keeping the peso tied to the dollar through thick and thin. President Menem and Finance Minister Domingo Cavallo not only did not retract on their promises, but accelerated their economic reform efforts. For Argentine citizens and for those investors who were willing to believe in those promises, the benefits are now becoming apparent.”
 
The investment firm of Dresdner Kleinwort Benson assured clients that they should not worry unduly about Argentina following countries like Thailand or Indonesia into turmoil. “Argentina has come through the first phase of the Asian crisis with flying colors,” the firm said in a June 1998 report, and this was “no coincidence. The economic fundamentals are considerably stronger than three and a half years ago. The decade of reform has strengthened Argentina’s economic foundations dramatically and the asset prices should rebound as the market once again is impressed by Argentina’s capacity to overcome a difficult global financial period.”
 
The 1998 award for “Issuer of the Year,” bestowed by Latin Finance magazine, went to Argentina, which issued large quantities of bonds. Were it not for Argentina, the magazine said, many emerging-market investment bankers “would probably have been twiddling their thumbs” that year, because the currency crises in Asia and Russia had caused capital flows to dry up to the markets they usually served. “Argentina above all other issuers, both sovereign and corporate, was the bankers’ saving grace in 1998,” the magazine said.
 
Besides optimistic analyses, another factor propelling the excessive amount of capital to Argentina was Wall Street’s system for rating the performance of professional money managers. The system created bizarre incentives by rewarding money managers for investing heavily in the bonds of emerging-market countries that already had lots of bonds outstanding. Put more simply, the system strongly encouraged people who controlled huge pools of money to lend to countries with huge piles of debt.
 
The Wall Street traders and brokers make a living out of the up and down swings of markets. They make a killing when the swings are extreme. Argentina had one of the most extreme swings from 1991 to 2001. Having made money during Argentina’s boom period by bringing the country’s bonds to market, those same firms—albeit different departments—were profiting again by speculating on the bonds’ decline. The vulture funds made a killing by buying up the junk bonds cheaply and later blackmailing and suing the Argentine government and forcing them to pay the original prices of the bonds plus interest and penalty. 
 
Blustein notes, “ The conduct of the markets in Argentina is redolent of the scandals that rocked Wall Street following the bursting of the stock market bubble in the United States. Striking parallels can be seen between Argentina’s crisis and some of the most notorious flameouts of recent years, such as Enron, WorldCom, and Global Crossing , in which major brokerage firms pumped up the companies’ securities prices, issuing bullish forecasts that were later seen to be tainted by self-interest”.
 
It is the same trick the bankers used to hype up and over sell the sub prime mortgages before 2007 and caused the financial crisis. Just as the Rating Agencies gave triple A ratings and mislead the investors, the Wall Street analysts and bankers praised Argentina as the best emerging market for investment in the nineties. 
 
The bankers got even the thinktanks to sing the chorus with them. The Heritage Foundation, a conservative think tank that evaluates countries according to an “Index of Economic Freedom,” rated Argentina in 1999 as tied with Chile for the best policies in Latin America, and almost equal to Australia and Taiwan. (The criteria include the degree of government intervention in the economy, respect for property rights, extent of black-market activity etc.)
 
What was the role of IMF?
 
IMF provided a kind of guarantee and cover to the irresponsible Wall Street lenders to Argentina. The lenders know that uncle IMF will come to the rescue of Argentina at the end of the day. And when that happens, the Wall Street bankers get the priority to collect their Argentine dues. If there is no IMF rescue, these bankers would never touch Argentina, knowing the country’s history. Thus the IMF has become an accomplice to the Wall Street who profits from the Argentine addiction to debt. 
 
During the presidencies of Nestor Kirchner and Cristina Fernandez Kirchner (2003-15) , Argentina was ex-communicated from the international financial markets after the audacious and successful  self- restructuring (against the advice of IMF and in defiance of the Wall Street) of the 90 billion dollar debt by 30 cents to a dollar by Nestor Kirchner. Argentina’s external debt was the lowest in this thirteen year period since no one was willing to lend to the country. The Chinese and Chavez helped with some loans and purchase of bonds. Argentina freed itself from IMF surveillance after paying off the IMF debt in full in 2006 ahead of its scheduled period. President Cristina rejected the claims of vulture funds and refused to settle with them even when they started blackmailing her and the country through legal and illegal channels.
 
In the 1990s, the IMF kept up a positive image of Argentina through its statements and lending even when some staffers of the Fund had raised the alarm several times. IMF chief Camdessus raved in a speech in 1997 in Buenos Aires praising the latest economic indicators of high growth and low inflation. “My friends, this may not be paradise,” Camdessus declared. “But the situation is far better than we would have dared imagine not so very long ago.” He invited President Menem to address the annual meeting of the IMF and World Bank 1998 saying, “ the experience of Argentina in recent years has been exemplary, including in particular the adoption of the proper strategy at the beginning of the 1990s and the very courageous adaptation of it when the tequila crisis put the overall subcontinent at risk of major turmoil.... Notable, too, are the efforts of Argentina since that time to continue its excellent compliance with the performance criteria under our arrangements and much progress in implementation of the structural reforms. So clearly, Argentina has a story to tell the world: a story which is about the importance of fiscal discipline, of structural change, and of monetary policy rigorously maintained”.
 
One would have expected Argentina, the IMF and the foreign lenders to have learnt some lessons from the unprecedented tragic crisis of 2001. No, they have not.. They are at it again…
 
The IMF extended a massive 57 billion dollar loan to Argentina in 2018, the largest in IMF history. Christine Lagarde, the chief of IMF, justified the unprecedented large loan saying that it was to bolster market confidence. But it was an open secret that the US and the Wall Street encouraged the IMF to help out the market-friendly centre-right President Mauricio Macri to help in his campaign for reelection. But Macri lost the 2019 election to the anti-IMF Peronist party. The market did not gain any confidence and the IMF money simply disappeared into the usual Argentine labyrinth. The currency has kept up its momentum of rapid devaluation while the inflation has remained high. Now Argentina is stuck with a huge IMF loan.
 
The Argentines have taken seriously the words of Camdessus that ‘Argentina has a story to tell the world’. The University of Buenos Aires has set up a “Museum of External Debt” which tells the story of Argentina’s addiction to debt. It displays documents and charts alongside  a rogues' gallery of photographs of finance ministers and  presidents who had leading roles in the country’s foreign debt. The IMF has a central place among the exhibits.
 
The US blames the Mexican and Colombian cartels as responsible for the American drug addiction and wages even a war to stop the supply of drugs, although it is a completely consumer-driven business. My Argentine amigo uses the same supply side logic to claim that Pobrecito (poor darling) Argentina is a victim of the debt addiction caused by the Wall Street debt traffickers.
 

Tuesday, October 26, 2021

Latin America’s economic outlook

Latin America’s GDP is projected to grow by 5.2% in 2021 and 2.9% in 2022, according to the latest (October 2021) Economic Survey of ECLAC ( UN Economic Commission for Latin America and the Caribbean)

The growth is coming back after a GDP contraction of 6.8% in 2020. The region is recovering slowly after having  suffered disproportionate deaths and devastation caused by covid.

 

GDP growth:

 

country

2021

2022

Brazil

5.2

2.2

Mexico

6.2

3.2

Argentina

7.5

2.7

Colombia

7.5

3.8

Peru

10.6

4.4

Chile

9.2

3.2

Venezuela

-4.0

1

Central America

5.5

4.6

 

 

Venezuela is expected to show a positive GDP growth of 1% in 2022. 


What a pleasant surprise ! 


What a relief !.. after seven consecutive years of GDP contraction.


Venezuela has suffered an astonishing -124.4% GDP contraction cumulatively since 2014. The economy shrank by a brutal -30% in 2020,  -28% in 2019, -19.6% in 2018, -15.7% in 2017 and -17% in 2016.  

 

The rise in international price and demand for commodities exported by Latin American countries will help in the recovery and growth.

 

Average Inflation of the region was 5.4% in June 2021 on a year-on-year basis. The region has managed to keep the rate of inflation in single digits in recent years. The exceptions are Venezuela and Argentina.

 

Venezuela’s inflation stood at 2719% in June 2021. It has come down from a sky-high 132,060 % in 2019. Argentina’s inflation continues to be in double digits of over 25% in the last several years.

 

Venezuela’s economic catastrophe is compounded by its political crisis and the crippling US sanctions. Argentina is again staring at large external debt and inadequate reserves to meet the payments. 

 

Brazil, which has suffered excessive covid deaths due to the irresponsible policies of the extreme rightist Bolsonaro, is in for political crisis in 2022 when Bolsonaro is likely to challenge his expected defeat in the next year’s elections.

 

Except for Argentina and Venezuela, the other 17 countries of Latin America show relatively positive and encouraging macroeconomic fundamentals.

 

Saturday, October 23, 2021

Conquest of Latin America by Chinese capitalists continues...

Chinese acquisitions, investment and projects in six countries of Latin America  amount to an impressive 35.3 billion dollars since 2019. 

The investment is going into power generation, railways, renewable energy and vaccine production..different from the past when they were maligned as predatory extractors of minerals, oil and food crops..

This is is the highlight of an October report of Americas Quarterly 

https://www.americasquarterly.org/article/latin-americas-evolving-relationships-with-china/

There has been no significant new investment in Venezuela and Panama, the other two countries covered in the report. They have not published (may be they are still doing the research) information on the remaining 11 countries of Latin America  




Country-wise share is as follows:

 

Peru 7.98 billion dollars

Chile 6.99 bn

Colombia 6.42 bn

Argentina 5.8 bn

Brazil 5.37 bn

Mexico 2.73 bn


 

Of the total 35.3 billion dollars, the power sector has got the maximum of 12.5 billion followed by railways with 9.8 billion dollars.

 

Detailed break-up below:

 

 

ARGENTINA

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$2.6 billion

Reconstruction of San Martín cargo railway by China Railway Construction Corp. Ltd.

$1.02 billion

Malal-Hue UTE consortium, headed by PowerChina subsidiary Sinohydro, won the bid to build the Portezuelo del Viento hydroelectric dam in Mendoza province

$816 million

China Machinery Engineering Corp.’s improvement of the Belgrano freight railway

$784 million

Northern Patagonian train line built by PowerChina, linking Vaca Muerta shale reserves and Bahía Blanca port

$580 million

Investment by Ganfeng Lithium in solar-powered lithium plant in Salta province

 

BRAZIL

 

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$1.7 billion

China General Nuclear Power Group 2019 acquisitions of Atlantic Renewable Energies and Enel’s Brazilian wind and solar assets

$1.3 billion

China Communications Construction Co. (CCCC) to build a 130-mile railway between Marabá and the port city of Barcarena in Pará state

$1.2 billion

Consortium of three Chinese firms signed a public-private partnership with Bahia state to build a 7.7-mile bridge connecting the capital city Salvador and Itaparica Island

$719 million

China’s BYD company to construct SkyRail monorail system in the city of Salvador

$450 million

CCCC co-invested in a steel rolling mill in Pará state with Brazilian mining company Vale

 

 

CHILE

 

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$3 billion

State Grid bought CGE, the Chilean subsidiary of Spanish company Naturgy

$2.2 billion

State Grid bought U.S. firm Sempra Energy’s Chilean business Chilquinta Energía

$922 million

China’s Joyvio Agriculture Development Co. acquired Chilean salmon producer Australis Seafoods

$804 million

Consortium of CRCC International Investment Co. Ltd. and China Railway

$60 million

Sinovac Biotech to build a vaccine production plant in the Santiago region and a research and development center in northern Chile

 

 

Colombia

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$4 billion

Consortium of two Chinese companies to build the elevated 15-mile metro line in Bogotá

$1 billion

China Civil Engineering Construction Corporation to build a tram line connecting Bogotá to its suburbs

$1 billion

Zijin Mining Group bought Canadian firm Continental Gold, gaining access to the Buriticá gold project in Antioquia department

$418 million

China Development Bank’s financing of the $652 million Mar 2 highway project connecting Medellín to the country’s port

 

Mexico

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$1.8 billion

CRRC Zhuzhou Locomotive to modernize Line 1 of Mexico City’s subway system and add 30 new train cars

$630 million

A consortium including China Communications Construction Company to construct a section of the Maya Train on the Yucatán Peninsula

$300 million

Zhongtong Bus Holding Co. Ltd. and Mexican firm Golden Star 400 to build a plant in Nuevo León state to produce buses that run on natural gas

 

Peru

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$3.59 billion

China Yangtze Power Co., Ltd. bought U.S. firm Sempra Energy’s Peruvian assets, including a 83.6% stake in Peru’s largest power utility company, Luz del Sur

$3 billion

Chinese-Peruvian consortium constructing Chancay port north of Lima

$1.39 billion

Consortium led by China Three Gorges Corp. bought Chaglla hydroelectric power plant

 


Friday, October 22, 2021

record number of illegal emigrants at US-Mexico border despite the covid risk

1.66 million illegal immigrants were apprehended at the Mexico-US border by the US Border Patrol in the 2021 fiscal year, which ended in September.


608,000 arrestees (36.6%) were Mexicans
308,931 from Honduras
279,033 from Guatemala
95,930 from El Salvador
95,000 from Ecuador
57,000 from Brazil
50,000 from Nicaragua
48,000 from Venezuela
45,000 from Haiti
38,000 from Cuba

2,600 from India

The large numbers from Brazil, Ecuador and Nicaragua are new and surprising.

More than 90,000 people entered Panama via the deadly Darien Gap from January to September including hundreds of people from Bangladesh, Ghana, Nepal and other distant countries.

There are no numbers of how many died, got killed and were lost in the gang violence at the US-Mexico border and attacks from venomous snakes in the Darien Gap between Colombia and Panama.

The number of illegal entrants stopped at the US border in 2021 is the highest ever since 1960. The earlier record was 1.61 million in 1986. The number was around one million in most years between 1983 and 2006. After this, it declined to between three and four hundred thousand until 2018. It jumped to 851,000 in 2019 but decreased to 400,000 in 2020.

It is heart breaking that so many people took the deadly risk of migration journey even at this dangerous covid times.

Such large numbers is also indicative of the booming business of the human trafficking agencies.

Sources:
Forbes 22 October report, based on US government statistics.
US Border patrol https://www.cbp.gov/sites/default/files/assets/documents/2021-Aug/US59B8~1.PDF

Thursday, October 21, 2021

Intense Chinese engagement with Latin America is instructive for India

The second high-level academic forum and the sixth think tank forum between China and the Community of Latin American and the Caribbean States (CELAC) held their meetings on October 12-13 at Beijing. 
 It was organized by the Institute of Latin America Studies at the Chinese Academy of Social Sciences Beijing in collaboration with the UN Economic Commission for Latin America and the Caribbean (ECLAC based in Santiago), the Chinese People’s Institute of Foreign Affairs, the China Institute of International Studies, the China Foundation of International Studies and United Nations. Roberto Escalante Semerena, Secretary-General of the Association of Universities and Institutions of Higher Education of Latin America and the Caribbean (UDUAL) also participated in the event.




 

The event was sponsored by the foreign ministries of Mexico (current president of CELAC) and China. Experts, officials and entrepreneurs from both sides participated.

 The Latin Americans had expressed appreciation to China which had given to the region 241 million doses of covid vaccine out of the total Chinese supply of 946 million doses to the world. 

 The academic forum and thinktank tank forum are part of the larger China-CELAC Forum established in 2014. These hold meetings at various levels and in different subjects as follows:

Summit Meeting

Ministerial Meetings

Meeting of National Coordinators

Dialogue of Foreign Ministers of China and the "Quartet" of CELAC

Subforums in Specific Fields

 

In July, 2014, President Xi Jinping announced that China would provide CELAC countries with 6,000 governmental scholarships, 6,000 training opportunities and 400 opportunities for on-the-job master degree programs in China between 2015 and 2019. In 2015, China officially launched the ten-year training program for 1000 young leaders from both sides entitled the “Future Bridge”.

 By the end of 2015, China has opened 39 Confucius Institutes and 18 Confucius Classrooms in 20 LAC countries. There are more than 100,000 Latin American students enrolled in the Chinese language and culture programs of the Institute.

 Detailed, clear and impressive information on China-CELAC activities are given in the link

http://www.chinacelacforum.org/eng/ltjj_1/P020161207421177845816.pdf

 

These elaborate structures, regular meetings and systematic follow up are done mainly by the Chinese side who take the initiative and finance the  projects and activities. 

India held its first Indo-CELAC Troika Foreign Ministers meeting in New Delhi in August 2012, within a year after the formation of CELAC in December 2011. In fact, the CELAC Troika visited New Delhi before Beijing. In this meeting, the two sides agreed to set up a India-CELC Business Council and a India-CELAC CEOs Forum, Energy Forum, Agriculture Forum and Science Forum. There have been a few more meetings at the level of foreign ministers during the Un General Assembly. But India has not sustained its engagement with CELAC in the way China has done so impressively and comprehensively.

China's trade with the region in 2020 was 315 billion dollars as against India’s trade of 28.8 billion dollars. China has given credit of 160 billion dollars while India’s credit is just under 500 million. China’s investment in the region is 110 billion dollars which is 11 times bigger than Indian investment of about 10 billion.

 Obviously India cannot ever hope to match the Chinese scale in trade, investment and credit. But India can certainly learn from the way the Chinese cultivate Latin America seriously and systematically through so many channels and intense engagement. 

The Latin Americans are keen for partnership with India as part of their strategic policy to reduce over dependence on China and diversification. They are appreciative of India's annual supply of a billion dollars of affordable generic medicines which has helped reduce the cost of healthcare of the Latin American people and governments. They are impressed by the 10 billion dollar Indian investment and especially employment of 35000 Latin American staff in the two dozen Indian IT companies operating in the region. India has become a top export destination for Latin America in recent years.

 It is heartening to see that the Ministry of External Affairs of India is attaching more importance to the region in recent years and has taken a number of initiatives to reach out to the region. There have been a number of visits of Indian dignitaries, ministers and officials covering all the countries in the region. India has increased its technical assistance and development partnership. India has just opened two more embassies in Paraguay and Dominican Republic adding to the ten embassies in the 19 countries of the region.  

 

More things for consideration by MEA:

-Revive India-CELAC engagement besides proactive subregional interactions with Mercosur, Pacific Alliance and Central American SICA group.

-open embassies in Ecuador, Bolivia, Uruguay, Costa Rica, Honduras, Nicaragua, El Salvador.

-Increase the strength of diplomatic missions in the region. At the moment most embassies operate with one and half diplomats..ambassador plus a trainee diplomat

- set up cultural centres in more Latin American countries to project soft power. At the moment, only Brazil and Mexico have Indian cultural centres.

- persuade the Commerce Ministry to revive its Focus LAC programme which had helped in the past in encouraging and supporting Indian exporters to explore the business opportunities in Latin America.

-The annual India-LAC Business Conclave needs to be scaled up and organised regularly by pooling and coordinating the efforts of CII and FICCI and other trade bodies and export promotion councils with substantial financial investment by the government.

-Announce a credit of a billion dollars to the region spread over 5 years

-Join the InterAmerican Development Bank so that Indian companies can participate in their projects

-sign FTAs with Mexico, Colombia and Peru which are major destinations for India’s exports in the region

- encourage Indian universities and thinktanks to open Latin America study centres and Spanish and Portuguese language studies. China has over 60 centres to study Latin America. Spanish language departments in Chinese universities have jumped from 12 in 2000 to more than 80. There is only one (Goa) university in India which has a Latin America studies centre.  There are, however,  a few good quality Spanish language courses run by universities and private institutes.

The action by the government of India needs to be supplemented by organizations outside the government sector. The Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) have been proactively promoting business with Latin America. The Indian Council for Cultural relations (ICCR) is active in cultural exchanges with Latin America. The India International Centre, New Delhi is planning to organize an international conference "Connected Histories, Shared Present: Cross-Cultural Experiences between India and Latin America and the Caribbean" on 22-25 February 2022.

Saturday, October 02, 2021

Venezuelan currency Bolivar undergoes yet another surgery for removal of zeroes

Venezuelan currency Bolivar undergoes yet another surgery for removal of zeroes
 
The Venezuelan government removed 6 zeroes from its currency Bolivar on 1 October.  The surgery became necessary when the currency lost its value to ridiculous levels causing massive inconvenience to people. A loaf of bread was 7 million Bolivars and bus ticket was 2 million Bolivars. So it became a mathematical nightmare for people to calculate and pay for high value items. It was nothing but magical realism. Every Venezuelan was a millionaire but quite a lot of them were “poor millionaires”.  Since the currency notes were also scarce like all other essential items, people had to queue up in front of banks for many hours. And they were allowed to take out only 20 million Bolivars a day. It was nothing but a nightmare.

One million Bolivar (equal to 25 US cents) has now become just 1 Bolivar with the issue of new currency notes called as Digital Bolivars.



 
This is the third time that the Venezuelan government did surgery for removal of zeroes. In 2008 President Chavez removed 3 zeroes and introduced Bolivar Fuerte (strong). His successor Maduro deleted 5 more in 2018 and called the new currency as Bolivar Soberano (sovereign). So it is a loss of 14 zeroes in 13 years ! Quite a record..
 
Besides the zero surgery, the government had introduced in the past several different exchange rates for imports of essential items, travels etc. This gave rise to large scale black market, corruption and abuse by those close to the authorities.
 
The currency devaluation and change are just small part of the larger tragedy. The GDP of the country has gone down by 80% since 2013. The country has the highest inflation in the world. It was 3000% in 2020 and 9500% in 2019, according to the Venezuelan Central Bank. The inflation in 2021 is forecast to be 1600%. There is acute shortage of food, medicine and essential items. People have to queue up for hours in front of supermarkets and pharmacies. There are frequent power cuts and shortage of water. Most international airlines have stopped flights to Venezuela due to payment issues.
Crime and violence is rampant in Caracas which has one of the highest murder rates in the regionPoverty has increased dramatically. There are more poor people today than before Chavez came to power in 1999.
 
Unable to tame the inflation and currency devaluation, the government has quietly allowed dollarization of the market. Seventy percent of the transactions are done in US dollars, according to some estimates. Many shops display prices in US dollars. Since the dollar revenue from the main exports of oil has been crippled by the US sanctions, there are not many dollars to go around in the market. The new source of dollars is the remittances from the 4 million Venezuelans who have fled to other countries of Latin America, US and Europe. 
 
The Venezuelan government has tried crypto currency experiments too. In December 2017 the government  announced the launch of “Petro”, a cryptocurrency, backed by the country’s oil and mineral resources, unlike the other crypto currencies which are mined online. The authorities decreed it mandatory to pay with Petro for government document services and fuel for planes flying international flights. In Feb 2018, the government announced another crypto currency “ Petro Gold”. But the government kept changing the regulations many times causing loss of credibility in the world’s crypto community. It is not known how many Petro tokens have been issued or bought.
 
The genesis of the currency and economic crisis goes back to the coup against President Chavez in 2002. The Venezuelan oligarchs and businessmen were the main coup conspirators. Pedro Carmona, the president of the Venezuelan Chamber of Commerce became the interim president after the overthrow of Chavez. However, the coupsters mismanaged the coup and Chavez came back to power in just 48 hours. Chavez then unleashed a ferocious campaign of revenge against the business community by introducing foreign exchange and import controls, nationalization of industries and other punitive measures. He did not care about the economy or industry. His only aim was to teach an unforgettable lesson to the businessmen. He changed his agenda from “ pro-poor” to “ anti-rich” and took total control of the economy. No one in his cabinet or party dared to oppose Chavez, who became the absolute authoritarian. The Chavista economic advisers and administrators who were neither qualified nor experienced, resorted to ad hoc policies to suit the whims of Chavez. He gave positions and powers to thousands of Chavistas and military officials and let them become corrupt and his accomplices. Maduro who succeeded Chavez has simply inherited the system and he is not powerful or charismatic enough to control others. So the country is bleeding with multiple political, economic and social wounds. 

Trump tried regime change with overt bullying and covert operations but failed. He took the illegal and unilateral US sanctions to an absurd extreme by announcing a 15 million dollar bounty for the arrest of President Maduro on drug trafficking charges. This is besides the 30 million dollar bounty on the heads of some ministers, generals and judges. 

The US engineered the formation of Lima Group with some Latin American countries to recognize Guaido as President and deal with the Venezuelan crisis.This was supported even by European Union. But now the Lima Group has become an anticlimax after the new leftist government of Peru has exited from the group and recognized the Maduro government. Earlier the leftist governments of Argentina and Bolivia also left the group, which was recognized by their rightist predecessors.

The opposition lead by Juan Guaido has done worse by seeking external intervention from US. His attempts and promises to bring down the Maduro regime have failed miserably. He has lost credibility. 

Now the Opposition has realized rightly that the only way for resolution of the crisis is to take part in the elections and fight the Maduro regime democratically and constitutionally. 
Credit should be given to Mexico which is facilitating the negotiations between the Venezuelan government and the opposition.