The chance of a friendly agreement on Venezuelan debt is lessened

Informe Especial de Coyuntura Carpe Diem
The candidate to the Venezuelan opposition primary elections, María Corina Machado, is working on an economic plan with which she assures she will lead Venezuela out of the crisis that the country has been enduring for almost a decade. María Corina Machado (MCM) has regarded the agreement between business leaders and the Maduro regime as “unsustainable”. Now with the help of a group of experts in economics, including Gustavo García and Rafael de la Cruz (both former officials of the Inter-American Development Bank) she has talked about including in her government’s economic plan a debt restructuring proposal to be presented to economists and bondholders in New York in July.

But the time to lend credibility to any restructuring proposal by MCM seems to have suddenly disappeared. On Friday, June 30, in a letter from the Office of the Comptroller General to Congressman José Brito, a member of the National Assembly controlled by the ruling party, announced the disqualification of the former congresswoman barring her from running for public office for a term of 15 years.

So far, no candidate to the opposition primary elections had addressed the thorny issue of Venezuela’s debt, so MCM’s announcement to promote a friendly agreement led to certain optimistic expectations in financial markets, considering that as of today her candidacy is emerging as the first option to win the primary elections organized by the opposition. The biggest problem now seems to be the prohibition imposed by the nation’s comptroller general for his candidacy for presidential elections.

Moreover, since Maduro regime banned her from leaving the country some time ago, Machado arranged to virtually present a plan to restructure the Venezuelan debt on July 18, at an event to be hosted at the headquarters of the Americas Society/Council of the Americas in New York.

The plan, will presumably consists of a “friendly agreement with bondholder” that includes the restructuring of Venezuela’s US$60 billion of defaulted bonds issued by the government and Pdvsa (according to a copy of the event’s program obtained by the U.S. agency Bloomberg). The restructuring plan seems to consist of swapping sovereign debt for ownership or stakes in state-owned enterprises that would be privatized under her tenure.

Certainly, the search for a solution to the default problem linked to the Venezuelan foreign debt is far from easy. Venezuela’s defaulted external debt can amount to approximately US$160 billion, plus interest and principal payments on outstanding debt of the Republic’s and PDVSA’s unpaid bonds, as well as payments to suppliers, international agreements and commercial commitments. The above includes debts owed by Venezuela to China, Russia and Brazil, as well as payment commitments established by international courts in connection with litigation with different companies that have been expropriated or affected by the Venezuelan State.

The heterogeneous composition of Venezuelan debt and the challenges that may arise from a differentiated treatment by type of creditor are major problems.

Now the action of barring the opposition leader as a candidate not only lessens a chance that could be considered by markets, but also tarnishes the whole process that provides the organization the basis of a “clean” presidential election in 2024.

Artículos destacados

Para el debate