Venezuela in ‘Selective Default’, Signs Debt Deal with Russia

Venezuela signed a debt restructuring deal with major creditor Russia on Wednesday, as ratings agencies declared Caracas in partial default., AFP reported.

The country is seeking to restructure its foreign debts, estimated at around $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 $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 ten 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 said at 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 its interest payments on some of its debt.

The ratings agency this week declared the country itself in selective default after it failed to make $200 million in payments on two global bond issues.

Fitch also downgraded PDVSA and cash-strapped Venezuela over delayed payments, but Caracas insisted it was in the process of paying up.