Mon | Oct 22, 2018

Walter Molano | Venezuela: 'Curiouser and curiouser'

Published:Friday | June 22, 2018 | 12:00 AM
In this February 21, 2018 photo, Venezuelans cross the International Simon Bolivar Bridge into Colombia. Venezuelans have been fleeing into Colombia to escape hunger and other problems in their crisis-wracked country.

In Lewis Carrol's masterpiece, Alice in Wonderland, the protagonist comes face to face with an array of unusual circumstances that somehow have their own logic when viewed from a different perspective.

In much the same way, a strange set of stories have recently drifted through the news wires, which, at first glance, do not make sense.

The first curious headline occurred earlier in the year, when Colombian Finance Minister Mauricio C·rdenas began making the rounds promoting a multibillion-dollar multilateral reconstruction fund for Venezuela that could be used after the regime changes.

The odd thing is that President Nicol·s Maduro just secured another six-year term in office, but it looks like his days may be counted. There is no doubt that there were serious irregularities during the elections, but other forces seem to be raising the ire of the international community, one of them being the Venezuelan diaspora that is spreading across the world, particularly in the Americas.

An estimated 10 per cent of the population has fled the country, creating problems for its neighbours. About 200,000 Venezuelans arrived in Panama, forcing the government to impose travel restrictions on visitors, including visa requirements. Chile reported more than 100,000 Venezuelans have arrived in short order. Brazil is reporting a virtual invasion of its northern border.

Meanwhile, Colombia has had to absorb the brunt of the refugee tidal wave. Venezuela has become the Syria of Latin America, and this is creating social, political and economic ramifications. While the OAS may be unwilling to take direct military action against Venezuela, due to the military legacies of the 1970s, there are other ways to skin a cat.

The second curious headline occurred two weeks ago when Colombia became the first Latin American country to join NATO. This came close on the heels of another odd headline that Colombia had been invited to become a member of the OECD. One reason the news did not raise many eyebrows was because Colombia, which is all but a satellite state of the United States, has always taken great pride in its Washington relationship. Colombia, which is more than 10,000 kilometres from Russia, could never provide much assistance in defending the US and Europe.

However, a closer look at the NATO Treaty suggests why the US and its European allies were so keen on welcoming it into the club. Under the collective clause that is outlined in Article V of the NATO Treaty, the signatories agree that an attack on any member will be considered as an attack on all of the members. Therefore, all will be obligated to respond militarily.

All of a sudden, the 'curiouser and curiouser' events became logical. Given that the OAS has no stomach for military intervention in order to force regime change in Venezuela, an attack on a NATO member nation, such as Colombia, could be sufficient justification for a military response from the developed world.

Taking this into consideration, it makes sense that people are starting to make moves on what Venezuela will look like after regime change. Venezuelan chat rooms are filling up with people wanting to get involved in the reconstruction of the country.

There is no doubt that there will be a free for all, and great fortunes will be amassed. Venezuela sits astride the largest proven oil reserves in the world, and a bounty of other natural resources and minerals. Huge industries lay idle, ripe for the picking.

It is little surprise that the most senior members of the Trump administration have suddenly jumped on the Venezuelan humanitarian bandwagon. The problem for Venezuelan and PDVSA bondholders is that heavy involvement by the multilateral lending agencies, such as the IMF, World Bank and IDB, is akin to subordination. Just ask any of the bondholders that suffered through the Argentine debt restructuring more than a decade ago. The reason investors were forced to accept such a steep haircut was because the multilaterals had to be made whole. This point seems to be lost on the bevy of investors who are currently cheering the renewed IMF involvement in Argentina.

Nevertheless, it looks like Colombia will be leading the charge in forcing the regime change in Venezuela. Its admission into NATO will provide the legal excuse to facilitate allied military action against its neighbour. Its admission into the OECD was nothing more than a smoke screen to justify that Colombia was worthy of NATO membership.

The actual Venezuelan 'attack' will be easily conjured through the infinite array of border incidents that occur daily as Venezuelans escape their misery.

Last of all, Colombia will help reap the spoils as it leads the multibillion efforts to reconstruct its hapless neighbour. The 'curiouser and curiouser' now makes sense.

- Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC. wmolano@bcpsecurities.com.