The financial situation in Venezuela is very dire right now. The problems are only compounded now that China is cutting off cash transfers to the country. China has poured billions into Venezuela in recent decades, but there will be no new loans issued to the Latin American country–a positive trend for Bitcoin, which has already gained significant traction in the region.
China Cuts Off The Faucet To Venezuela
It was only a matter of time before the cash flow from China to Venezuela would dry up. Supporting a country in dire financial straits is very noble, but unless money is returned, it is not sustainable in the long run. Unfortunately for Venezuela, this news could not come at a worse time, as things have gone from worse to near-nightmarish levels for residents and enterprises.
It has to be said that China has been doing everything they can to help out Venezuela during these difficult times. Chinese state banks have loaned US$60bn to the struggling country, and there is an outstanding debt of roughly US$20bn that still needs to be settled. Unfortunately, that will not happen anytime soon, as the country has little to no money to spare right now.
In most cases these back payments are completed in the form of oil export. While Venezuela sits on the world’s largest oil reserves, it’s seeing a new low in production since 2003. With unpaid bills from the government to service providers, the appeal to deal with the Latin American country has all but vanished.
Things are looking very dire for Venezuela right now, as they can’t import or exports goods in a decent capacity right now. There is not enough revenue to buy food or medicine, while other countries are not willing to import Venezuelan goods. Something will have to change before the country falls off the edge of the proverbial cliff.
It will hardly come as a surprise to hear that a lot of residents are flocking to Bitcoin in recent months. Those who still have money convert what they can into Bitcoin as a way to hedge against the devaluing local currency. Bitcoin also allows for some fresh capital inflow, as freelancers and remote workers try to secure deals with international clients willing to pay with cryptocurrency.
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