Trump moves to squeeze Venezuela’s access to finance

US president bans trade in new bonds issued by government

WASHINGTON: The White House amped up pressure on Venezuela’s cash-strapped government, restricting access to vital US capital markets and escalating a standoff between Washington and Caracas.

In a move aimed at leveraging America’s vast financial power against Nicolas Maduro’s regime, President Donald Trump banned US trade in new bonds issued by the government or its cash-cow oil company PDVSA.

That could choke off access to New York debt markets and substantially raise the likelihood of Venezuela being forced into default.

Maduro’s government - which has faced months of deadly mass protests - has been accused of hijacking state institutions and moving ever deeper into autocratic rule.

The measures will “deny the Maduro dictatorship a critical source of financing to maintain its illegitimate rule,” the White House said in a statement.

Venezuela denounced the new US sanctions as the “worst aggression” against the country’s people and accused Washington of trying to stoke a humanitarian crisis in the oil-rich, cash-poor country.

“What do they want? They want to starve the Venezuelan people? What is it they’re looking for?” said Foreign Minister Jorge Arreaza after talks with UN Secretary General Antonio Guterres in New York.

Maduro’s government has been keen to blame the United States for its economic woes and leapt on Trump’s recent suggestions that Washington could intervene militarily - using that as a tool to unite the military.

Trump’s national security advisor HR McMaster played down the prospect of an armed intervention, saying “no military actions are anticipated in the near future.”

But Trump’s order will ratchet up the fight on another front.

Venezuela’s outstanding debt is estimated at over $100 billion, while oil revenues have declined and currency reserves have shrunk to just $10 billion.

October and November will be a crunch period for repayments. That’s when a hefty $3.8 billion in bond payments need to be paid by Venezuela and PDVSA.

S&P Global Ratings predicted a contraction in the country’s gross domestic product of around 6% this year and the need to finance around $7 billion in debt in 2018.

Published in The Express Tribune, August 27^th, 2017.

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