UK Edition
Speculation about IMF bailouts ignores political realities in Venezuela
"Oligarchs, tremble."
This was a pet saying of Hugo Chavez, the late president of Venezuela. In 2016 his successor, former bus driver Nicolas Maduro, who rose through the Chavez movement, erected a Russian-made statue in his memory in his hometown, Sabaneta. Maduro even awarded Putin an alternative Nobel Prize.
It's an important relationship for Maduro to nurture. With rocketing inflation and with spiralling debts, Russia has become the Venezuelan lender of last resort. But given the scale of the economic collapse in the country, their pockets will not prove nearly deep enough.
Amid a brutal clamping down on popular protests, Maduro is busily mortgaging the nation to Russian oil barons while people of the OPEC member nation struggle to feed themselves.
Igor Sechin, often described as Russia's "oil king", is a close ally of president Vladimir Putin, and has been spending big in the Latin American country. Rosneft, Russia's largest oil company, led by Sechin, lent $6bn (£4.5bn) to Venezuela's state oil company Petroleos de Venezuela (PDVSA).
The thirst for foreign money to prop up the country's dire situation is huge. Repayments on some $3.7bn of debt are due in the next two months, and the nation's reserves, which were relatively well-stocked from the sale of oil over the years (the Venezuelan central bank held $43bn in 2009) are now close to bare, with just less than $10bn left to spend. The best measure of Venezuela's hyperinflationary woes is the Cucuta measure. Cucuta is a border city between Colombia and Venezuela, and the city's rate is supposedly the number of bolívares a dollar can generate there, which gives it some basis in real trades. Using that, the value of a black market US dollar is now close to 40,000 bolívares. From 2010-2012, one bolívar hovered near the $10 mark.
Richard Hausmann, a Harvard University professor and himself Venezuelan, explains that the level of inflation is far beyond any traditional measure of hyperinflation.
'Over the last four weeks the average weekly inflation has been 13.2pc. That's an annualised rate of 66,000pc a year'," he says. "This is by far the greatest economic collapse that has happened in the context of peace."
"Cash flow is very limited. Default seems to be closer and closer," explains Brookings Institution associate Dany Bahar.
"This government has shown no willingness to accept that there is a crisis going on." The regime has been prepared to allow extraordinary hardships in order to avoid this. Import-dependent Venezuela now faces a 94pc decline in goods entering the country.
Despite the country experiencing serious shortages of food and medicines, Bahar says he cannot see the regime going to the IMF for money before a default, something he predicts could happen in the next two years.
Imminent default or not, the world's lender of last resort is certainly concerned. When questioned on its recent forecast for the Venezuelan economy, Alejandro Werner, IMF director, said there had been "no relevant contact with authorities".
The Financial Times reports that a Greek-style IMF bailout was being considered, because the country would, as Greece did, require a controversial permission for funds known as "exceptional access".
IMF multi-year programmes are limited to 435pc of a country's quota. In practical terms that would mean $23bn over three to four years for Venezuela. It needs more like $32bn a year. "If there is a new government everything changes, but I can't see that happening anytime soon. I can't see the IMF bailout happening, and if it happens it's going to be limited," says Bahar.
A former IMF official also believes a bailout is highly improbable. "It would be unlikely that the fund and the Maduro administration would find enough common ground on policy issues to support a programme," they say.
The idea that an economic disaster such as that seen in the country should be enough to overthrow the current dictatorship is refuted by Hausmann.
"This situation could go on for quite some time. I'm questioning this logic that goes from economic performance to regime change. That logic should have applied two or three years ago," he says. "It's true in a democracy, it's not so true in a dictatorship."
Suggestions that bailout plans are under way were denied by the IMF. "There have been no discussions regarding a programme for Venezuela," an IMF spokesman told The Sunday Telegraph, explaining that its work had instead been focused on surveillance. "We've been following the situation closely, including monitoring how the crisis is affecting neighbouring countries."
It was also pointed out that any request for support would have to be approved by the IMF's executive board. Approval would be hard to come by. Any package would probably be vetoed by the US.
And experts suggest that an opposition government, likely to be built from a shaky coalition of parties that form Mesa de la Unidad Democrática (known as MUD), is unlikely to stand the test of governing such a troubled state.
Even if a bailout were secured, Casey Reckman, an emerging markets expert at Credit Suisse, believes any unravelling of the crisis will be highly complex.
"I don't think it's nearly as simple as getting an IMF bailout. The Argentine restructuring process took roughly 15 years to be completed," she explains.
"The only [credit] salvation is the Russians. The [Maduro] government has shown it's willing to mortgage the country's assets to a foreign power."
"It's like a gold mine for the Russians; access to more oil reserves than Saudi Arabia," says Bahar. But there simply is not enough Russian money to keep Venezuela afloat.
"I think that the nightmare scenario is a disorderly default," Hausmann warns.
As the 30-day window to pay debts due closes, and markets wait to see if a messy default will begin, Chavez's true legacy is far more a case of crying "Oligarchs, welcome!", if they will open their pockets for supposed-socialist Maduro.
Meanwhile, the people of Venezuela grow ever more hungry.