Tuesday 15 June 2021

Russia Agrees to Wait for Venezuela Debt

Venezuela signed a deal in Moscow on Wednesday, November 15, about restructuring US$3.15 billion of debt to the Russian government. Venezuela’s economy has been hit by tumbling oil prices and US sanctions.

Russia and China are Venezuela’s biggest creditors with total liabilities of around US$8 billion and US$28 billion respectively.

Venezuelan finance minister Simon Zerpa and Vice President Wilmar Castro Soteldo signed the deal, which gives Caracas a six-year breathing space.

- Advertisement -

“These are very favorable terms that Venezuela can honor. This deal strengthens the relations between our two countries,” Mr. Soteldo said in Moscow.


Missed US$200 Million Payments

Gustavo Angel, sovereign expert at RAEX Europe, said although the deal signed in Moscow helped, it did not greatly reduce the risk of President Nicolas Maduro’s government defaulting.

Mr. Angel said the default risk came because Venezuela had delayed payment of US$200 million coupon payments on bonds which were due to mature in 2019 and 2024.

“In my view Russia or China are not as risky debt holders as the institutional investors — Goldman Sachs, Blackrock and others. Institutional investors bought Venezuelan bonds in representation of its clients and will make the restructuring process of the debt more cumbersome because Venezuela has to convince more individual parties which have very different investment strategies,” Mr. Angel said.

- Advertisement -

He said that happened with Argentina in 2014, when the whole restructuring process failed and the country went into default after a small minority — three percent — of bondholders refused to accept new conditions.

Beware ‘Vulture Fund’ Investors

What were known as “vulture fund” investors demanded a full pay-out of the US$1.3 billion worth of Argentinian bonds they held.

On Wednesday, S&P Global Ratings said it had placed PDVSA in “selective default” for failing to make the US$200 million payments, joining Fitch who downgraded Venezuela earlier this month.

Mr. Angel said Venezuela owes a total of around US$150 billion, which was a mixture of government bonds and bonds in the national oil company, PDVSA, with Venezuela’s oil reserves held as collateral for the debt.

Russian President Vladimir Putin meets in the Kremlin with Nicolas Maduro

Several major US companies and pension funds had bought these bonds, including Fidelity Investments (US$572 million), T. Rowe Price (US$370 million), Black Rock iShares (US$222 million) and Goldman Sachs (US$187 million).

- Advertisement -

Venezuela has only US$9.7 billion dollars in foreign reserves left and needs to pay back US$1.47 billion in interest on various bonds by the end of the year and another US$8 billion next year.

The Chinese Foreign Ministry said on Wednesday they had confidence Caracas could “properly handle” its debt crisis.

“Over a period of years, Venezuela has borrowed billions of dollars from Russia and China, primarily through oil-for-loan deals that have crimped the country’s hard currency revenue by requiring oil shipments to be used to service those loans,” explained Mr. Angel.

“As mentioned with Russia, a potential restructuring of the Chinese debt with Venezuela can alleviate Venezuela’s problem. However, the main problem of Venezuela remains on the debt servicing expenses, the low amount of reserves at the central bank and the restructuring of the debt with institutional investors,” he told Sputnik.

World’s Highest Oil Reserves

Mr. Angel said there was some good news for Caracas.

“Venezuela has more than enough oil reserves to repay its debts. In fact, Venezuela is the country with the largest reserves of oil in the world with 300 billion barrels, more than Saudi Arabia which holds 269 billion barrels,” Mr. Angel said.

“The problem of Venezuela has nothing to do with its proved reserves of oil, but with production of oil, for which the country has been lagging behind for years. Since Hugo Chavez came to power in 1999, a large stake of the country’s oil company profits were used to financial social programs and very little was allocated for investment in the oil industry. Crude oil production of Venezuela amounted to 1,955 barrels per day in October 2017, well below that of Saudi Arabia which produced 10,056 barrels per day. This represents for Venezuela the lowest production of oil since 1989, when production reached 1,905 barrels per day,” Mr. Angel told Sputnik.

Weighed Down by Sanctions

He added that much of Venezuela’s problems stemmed from the sanctions which had been imposed by the US, the Organization of American States, Mercosur, the European Union, and some banks like Commerzbank and Deutsche Bank.

“The current default position of Venezuela could potentially encourage the Venezuelan government to look for a transition towards consensus with the country’s opposition party and other countries and blocs in the region… the boundaries of the executive, legislative and judicial branches are not clear and this harms confidence of investors in the country,” Mr. Angel concluded.

Article originally appeared on Today Venezuela and is republished here with permission.

- Advertisement -

We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

Q24N is an aggregator of news for Latin America. Reports from Mexico to the tip of Chile and Caribbean are sourced for our readers to find all their Latin America news in one place.

Related Articles

Nicaragua government assures that detainees violated one of the Ten Commandments

TODAY NICARAGUA – The vice president of Nicaragua and First Lady,...

The US sanctions Nicaraguan Daniel Ortega’s daughter and close associates

TODAY NICARAGUA – The United States imposed economic sanctions on four...


Immigration system failure affected passengers at the San Jose airport Monday

QCOSTARICA -  In yet another system-wide failure in the immigration check-out, passengers looking to leave Costa Rica Monday morning by way of the Juan...

Daniel Ortega undertook a hunt for presidential candidates and opponents

TODAY NICARAGUA – In an unprecedented persecution, the Daniel Ortega regime detained four presidential candidates in one week, a move that is part of...

Costa Rica passes law to attract foreign pensioners and rentiers with $150K capital

QCOSTARICA - Costa Rica's legislature approved, in the first debate, a bill that reduces the minimum amount that a foreign pensioner or rentier must...

The US sanctions Nicaraguan Daniel Ortega’s daughter and close associates

TODAY NICARAGUA – The United States imposed economic sanctions on four Nicaraguan officials close to President Daniel Ortega on Wednesday, June 9, 2021, including...

El Salvador Makes Bitcoin Legal Tender, A World First

Q24N (Reuters) El Salvador has become the first country in the world to adopt bitcoin as legal tender after Congress approved President Nayib Bukele's...

Opinion: Peru’s electoral drama is damaging democracy

Q REPORTS (DW) In Peru, the left-wing village school teacher Pedro Castillo has in all probability been elected the new president. The fact that...

On Monday the vehicle restriction will change, again

QCOSTARICA - In times of pandemic, things change constantly, especially when it is necessary to tighten the belt to reduce the contagion of covid-19. The...

5.7 Quake jolts Costa Rica

2021-06-10 17:27:0.5, Magnitude: 5.76, Depth 10.0 km, Epicenter: 95.5 km Southwest Malpais de Puntarenas. The jolt was felt also in the Central Valley. No reports...

Bribed with cars, sexual favors and money in exchange for road works contracts

QCOSTARICA - The OIJ uncovered a big pothole on Monday when it was announced that public officials had allied with construction companies that, apparently,...


Get our daily newsletter with the latest posts directly in your mailbox. Click on the subscribe and fill out the form. It's that simple!

Article originally appeared on Today Venezuela and is republished here with permission.

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.