Venezuela Is the New Greece

Venezuela Is the New Greece

May 31, 2016 | 8:16 AM EDT


It's "Apocalypse Now" for Venezuela, with hyperinflation and an economy that's in a freefall. A social collapse seems like the inevitable next step.

Commodities-driven run-ups and subsequent declines have left much of South America in chaos socially, politically and economically. For example, Argentina and Brazil's political leaderships have already changed as the commodities "boom" turned into a commodities "swoon."

Among the worst-off countries is Venezuela, which has been hit hard by low oil prices. Venezuelans face high inflation and a shortage of foodstuffs and other basic goods, and airlines Lufthansa and Latam (Latin America's largest carrier) have both suspended service to the country.

Importantly, Venezuela's foreign-exchange reserves are also disappearing, as this chart from The Daily Shot shows:


Source: The Daily Shot

According to The Financial Times (subscription required), Venezuela's gold reserves have also dropped to their lowest level on record after the government sold more than $1.7 billion of the metal during the first quarter to pay debts. That's around a one-third drop in the last 12 months. The FT also noted that gold now makes up nearly 70% of Venezuela's total reserves, which fell to a low of $12 billion last week.