Venezuela, in ‘selective default’, signs debt deal with Russia
MOSCOW: Venezuela signed a debt restructuring deal with major creditor Russia, as ratings agencies declared Caracas in partial default.
The country is seeking to restructure its foreign debts, estimated at around US$150 billion, after it was hit hard by tumbling oil prices and American sanctions.
A Venezuelan delegation led by Finance Minister Simon Zerpa signed the deal restructuring US$3.15 billion of debt taken out in 2011 to finance the purchase of Russian arms.
Under the agreement, Caracas will pay back its debts over 10 years, with ‘minimal’ reimbursements for the first six years, Russia’s foreign ministry said in a statement.
“The reduction of the burden of debt... will allow the utilisation of funds to develop the country’s economy, improve the debtor’s solvency and increase the chances of all creditors recovering loans already made,” according to the statement on the ministry’s website.
“These are very favourable terms that Venezuela can honour. This deal strengthens the relations between our two countries,” Venezuelan vice president for the economy Wilmar Castro Soteldo told a press conference in Moscow.
But the goal of solvency seemed a distant one Wednesday after S&P Global Ratings said it had placed Venezuela’s state-owned oil company PDVSA in “selective default” for failing to make interest payments on some of its debt.
The ratings agency this week declared the country itself in selective default after it failed to make US$200 million in payments on two global bond issues.
S&P managing director Joydeep Mukherji, who handles Latin American and Caribbean sovereign ratings, said even if the payments to Russia are confirmed, other debt service remains in doubt, including on four other bonds that already are overdue.
Fitch also downgraded PDVSA and cash-strapped Venezuela over delayed payments, but Caracas insisted it was in the process of paying up.
“It’s a respite, but a slight respite,” Orlando Ochoa, a Venezuelan economist, told AFP. “It doesn’t change the context, it doesn’t help to stabilize the economy or substantially increase its ability to pay.”
Caracas has only US$9.7 billion in foreign reserves and needs to pay back at least US$1.47 billion in interest on various bonds by the end of the year, and then about US$8 billion in 2018. — AFP