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Venezuela: We can't pay our debts anymore
Venezuela's bonds are already rated as Junk. The country renounced its membership in the International Monetary Fund and World Bank in 2007. The Maduro government is under US sanctions. It may lose ownership of its PDVSA (Petróleos de Venezuela, S.A./Citgo) national oil conglomerate to China and Russia. No entity will want to restructure debt -- the country is probably already too far gone with no monetary lifelines available. The government of Venezuela will most likely be forced to default, with expanding national impoverishment and accelerating social unrest/riots.
by Patrick Gillespie
November 3, 2017
Maduro said in a televised speech Thursday that Venezuela and its state-run oil company, PDVSA, will seek to restructure their debt payments. The oil company made a $1.1 billion payment on Thursday, he said, a sizable amount for a country with only $10 billion left in the bank. "But after this payment, starting today, I decree a refinancing and a restructuring of the external debt," Maduro told the country. Venezuela is already deep into a humanitarian crisis, with people suffering from food and medical shortages. Many can't afford to buy basic items because prices are skyrocketing faster than wages. The country's currency, the bolivar, is worth less than a tenth of a U.S. penny. If Maduro's government can't reach a new agreement with bondholders over the debt restructuring -- which often means trying to pay less money -- it will end up defaulting. That would trigger a potentially ugly series of events. Investors in the U.S. and elsewhere could seize Venezuelan oil as collateral. All told, Venezuela owes about $65 billion in bonds denominated in foreign currencies, mostly in dollars, according to research firm Capital Economics. Venezuela also owes debts to China, Russia, oil service providers, airlines and a slew of other entities. Its top negotiator also has a problem: He can't do business in the U.S.
Venezuela's bonds are already rated as Junk. The country renounced its membership in the International Monetary Fund and World Bank in 2007. The Maduro government is under US sanctions. It may lose ownership of its PDVSA (Petróleos de Venezuela, S.A./Citgo) national oil conglomerate to China and Russia. No entity will want to restructure debt -- the country is probably already too far gone with no monetary lifelines available. The government of Venezuela will most likely be forced to default, with expanding national impoverishment and accelerating social unrest/riots.