The aerial footage emerging from coastal Venezuela is stark. From above, the storm's path resembles a contagion, erasing roads and flattening homes. And true to form, Whitehall has responded with the usual alacrity: a pledge of reconstruction aid.
The amount has not been specified, but given the government's recent enthusiasm for overseas spending, I would not be surprised if it reaches nine figures before the next gilt auction. The Treasury calls it humanitarian necessity. I call it a capital flight waiting to happen.
Every pound sent to Caracas is a pound not spent on patching Britain's own decrepit drainage systems. The market will price this in, of course. Sterling barely moved on the news, but gilt yields may consider this a modest headwind.
The real issue is moral hazard: we bail out Venezuela's infrastructure, and where is the incentive for them to build fiscal resilience? The footage is tragic, no doubt, but tragedy is not a blank cheque. If I were a British bondholder, I would be watching the Bank of England's next move with a wary eye.
This aid might be dressed as a reconstruction package, but it is a transfer of wealth from British taxpayers to a country with a history of economic mismanagement. The bottom line: the City will absorb this, but the pattern of endless aid without reform is a drag on productivity. Let us hope the Treasury has kept its books in order, because the storm in Venezuela will ripple through our receipts before long.
