Foreign relations can be a tricky subject particularly if a country does not have a strong leader. If the country has a strong leader, then other countries can either support or try not to support them, but at least the other countries know who they are dealing with. In the case of Venezuela, there are 2 different people who believe they should be President – Nicolas Maduro and Juan Guaido. There was an election and Mr. Maduro said he won and is President at the moment. Mr. Guaido says the election was not fair so he should have won and for various reasons countries around the world have picked sides.
The economy of Venezuela was based on heavy oil and oil, but prices are down so the heavy oil production loses money and the economy of the country went down hill. When times were good the country imported 90% of what they consumed. With the drop in oil prices, all the prices which were subsidized have gone up, but people’s income have gone down.
As a country, Venezuela has assets and according to an article by Paul Waldie in May 2019, the Central Bank of Venezuela moved to cash in a gold swap contract it had with Deutsche Bank in London. The contract was secured by $1.95 billion worth of gold held at the Bank of England. The Venezuelans wanted payment.
This is where politics gets in the way, Mr. Guaido’s group said he won the election and demanded the gold remain in Britain. The Bank of England looked to the government and decided let the case end up in court, which is a good delaying tactic.
Last summer, the court noted the British government supports Mr. Guaido and the gold stays. The Venezuelan Central Bank appealed the ruling to a higher court and said while the British government supports Mr. Guaido it also supported maintaining diplomatic relations with the Maduro government. Similar to most countries, sitting on the fence and supporting both side is a good strategy.
Mr. Maduro said the money will go to fight the COVID costs, but Mr. Guaido believes the money will end up in someone’s bank account. An appeal to the Supreme Court of Britain will be done.
Linking to dividend paying stocks, one of the wonderful aspects of a profitable company is they have assets which can be divided up. When things go wrong financially for any company or country, examining the assets is top of the lists. As long as the company is profitable, few will complain whether the money should go to shareholders or be reinvested in the company and that is a good thing.
There are more questions than answers, till the next time – to raising questions.