Venezuela was on the verge of bankruptcy — low oil prices and lack of foreign reserves forced the international investors to doubt the ability of the exporter of «black gold» to service their external debts, writes Газета.RU.
If Venezuela is to go for debt restructuring, it will hit all developing countries.
The investors doubt about the ability of Venezuela to service its foreign debts, writes The Wall Street Journal. The nervousness of investment funds increased with approach of the next date of repayment on the sovereign bonds of the country, which will come on February 26.
The pessimism of the investment community has arisen on a background of sharply depreciating national currency and the negative trade balance of Venezuela. Venezuela is among the ten largest oil producers, producing about 2.5 million barrels a day.
The lack of stabilization Fund of the country in crisis makes a default almost inevitable. Foreign exchange reserves are at their lowest for the last 12 years (15.3 billion us$, more than 65% of which is stored in gold). Despite the fact that only this year the country will spend more on servicing its debt is $ 9.5 billion. The probability of default of the country within the next 5 years is estimated to be 97%.
«The question is not whether there will be a default of Venezuela, but «when» it will happen», — says the partner of investment Bank Holdings Latinvest Group , Russ Dallen.
However, a number of investors hoped to remove the last cream on the bonds of the Latin American country. Thus, TIAA-CREF Emerging Markets Debt Fund have decided to invest part of their funds in the purchase of the bonds of Venezuela, the production of which in the amount of $ 1.5 billion must be repaid just 26 of February. «We think the likelihood that they will pay, very high,» said Foundation co-Director Catherine Renfrew.
Some of the reason for that is, as Venezuelan authorities are trying to reassure investors. In January of this year President Nicolas Maduro said in his address to the nation that «in Venezuela there are ethical standards and moral principles… commitments that the Republic respects and will continue to respect».
But now the situation has seriously complicated. In addition to falling oil prices, the country actually lost the support of China, who has previously regularly funded the country’s economy in exchange for oil supplies. Now China’s economy is slowing, and he isn’t showing any desire to lend on the same terms.
Venezuela also failed to agree at a meeting on Monday with Saudi Arabia on the coordination of efforts to raise oil prices within OPEC.
In addition, investors do not fully understand what is happening in the economy because of the lack of reliable data about the economic situation and the finances of Venezuela.
Moody’s estimates losses of foreign currency earnings of Venezuela to 2016 due to falling oil prices in 33 billion while maintaining oil prices at around us $ 30. per barrel.
The default of Venezuela will have implications for all developing countries, the main sources of income of which is secured by oil exports. Many of them actively borrowing on debt markets in the period of oil price boom. To refinance its debts on the international market becomes almost impossible. A number of these countries — particularly Nigeria and Angola — has already approached international financial institutions for help in the face of increasing budget deficit.
This situation could potentially lead to the change of power in Venezuela. Under the Constitution, the impeachment of the President can be initiated after the expiry of half the term of the presidency. In the case of nicolás Maduro is going to happen in April.
Venezuela is preparing to default 11.02.2016