Venezuela says debt refinancing under way, S&P calls selective default

[Mittens]

I barely know some stuff about finance, but this sounds serious. If it is, then there goes another victim of state-led socialism.

https://www.reuters.com/article/us-v...-idUSKBN1DE1QS

CARACAS/NEW YORK (Reuters) - Venezuela’s cash-strapped government insisted it had successfully begun efforts to refinance some $60 billion in bonds, though creditors disagreed following fruitless talks and a ratings firm declared the nation in selective default.

Venezuelan bonds slid on Tuesday after S&P Global Ratings announced that Venezuela was in selective default for failing to make $200 million in overdue coupon payments on its 2019 and 2024 global issues within a 30-day grace period.

Investors, meanwhile, voiced concern after President Nicolas Maduro’s negotiators met briefly with bondholders in Caracas on Monday but failed to present firm proposals to alleviate the OPEC nation’s crippling foreign debt amid an unprecedented economic meltdown.

“The process of refinancing Venezuela’s foreign debt began with resounding success,” the socialist government said late Monday, complaining about U.S. financial sanctions and what it called unfair assessments from international ratings agencies.

The government repeated pledges to honor all its foreign debt and said Monday’s talks were attended by 100 or so participants, including bondholders from Venezuela, the United States, Panama, Britain, Colombia, Chile, Japan and Argentina.

However, attendees at the meeting came away confused over how Venezuela plans to avoid a default, given its parlous state finances, and how any refinancing could be worked out amid U.S. President Donald Trump’s sanctions.

The U.S. measures block the issuance of any new Venezuelan debt and impose sanctions on the country’s chief negotiators, Vice President Tareck El Aissami and Economy Minister Simon Zerpa, on drug and corruption charges.

Venezuela has dismissed those accusations as politically motivated fabrications by Washington to tarnish the country’s reputation.

“The bondholder meeting in Venezuela was a non-event, lasting only 20-30 minutes with reports of only 10 non Caracas-based investors...and the only official that spoke was drug kingpin VP Tareck El Aissami” said Siobhan Morden, head of Latin American fixed-income strategy at Nomura, who did not attend.

Four years of recession in the South American nation, fueled by failing socialist economics and a plunge in global oil prices, have hit Venezuelans hard. Many skip meals or suffer from malnutrition and preventable diseases, due to severe shortages of food and medicine and triple-digit inflation.

With some $9 billion in payments looming for 2018, a default would be a short-term relief for the government, enabling Maduro to spend on desperately-needed food and medicine imports ahead of next year’s presidential election.

But that strategy could also backfire if it sparks aggressive legal challenges from abroad, including moves to seize assets of state oil company PDVSA, [PDVSA.UL] which is the cash-cow for Venezuela’s socialist system.

RATINGS AGENCIES CHIDE VENEZUELA

Venezuela's President Nicolas Maduro speaks during a meeting with ministers in Caracas, Venezuela November 6, 2017. Miraflores Palace/Handout via REUTERS/Files
Despite concern that U.S. sanctions could prevent Venezuela hiring advisors, the government has appointed lawyer David Syed - a former partner at Orrick, Herrington & Sutcliffe - to advise it, working alongside a team at global law firm Dentons, according to IFR, a Thomson Reuters news service.

On another flank of the country’s creditworthiness, a committee of the International Swaps and Derivatives Association (ISDA) is looking into whether PDVSA triggered a credit event through late payment of its 2017N bond this month.

The group said it would reconvene on Thursday to continue discussions of whether or not PDVSA was in default.

ISDA also said on Tuesday it had received another request from investors as to whether Venezuela had triggered a credit event due to the late payment of the coupon on its sovereign bonds.

Bondholders had told Reuters on Monday they had not yet received payments on the 2019 and 2024 bonds but were unconcerned about the delay, which they said was partly due to increased bank vigilance following the U.S. sanctions.

In its statement on Monday, S&P Global Ratings said it could raise Venezuela’s ratings again if the government made payments on the overdue coupons and remained timely on other payments before the restructuring is completed.

However, it said it saw a one-in-two chance that Venezuela could default again within the next three months and it listed a further four bonds with overdue coupon payments due in the coming weeks, with unpaid obligations totaling $420 million.

The Luxembourg Stock Exchange said on Tuesday said it was temporarily halting trading of Venezuela’s 2019 and 2024 bonds due to the “event of default” in order to make changes to the way in which the securities are traded.

Fitch Ratings also downgraded PDVSA due to “payment default” on notes due on Oct. 27 and Nov. 2 after “processing delays that resulted in bondholders receiving principal payments up to one week after the due date.”

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Venezuela’s sovereign bonds, already the most distressed in the benchmark JPMorgan Emerging Markets Bond Index Plus (EMBI+) 11EMJ, have whipsawed over the past week.

The index measures the spreads of 13 Venezuelan sovereign bonds versus benchmark U.S. Treasuries.

Last week, as the Caracas talks loomed, investors bought Venezuela’s bonds on speculation there might be progress in finding a solution, driving a 1,095 basis-point narrowing in spreads from Nov. 7 through Monday.

However, on Tuesday, spreads ballooned by 714 basis points as investors dumped Venezuelan bonds.

[Draco-Onis]

sigh Venezuela's troubles are not due to socialism anymore than Russia or Saudi Arabia, it has to do with bad management after oil prices fell below $100 per barrel. Venezuela's economy was badly managed even before this and when Maduro took over it got worse because of corruption and continued mismanagement.

[Mittens]

sigh Venezuela's troubles are not due to socialism anymore than Russia or Saudi Arabia, it has to do with bad management after oil prices fell below $100 per barrel. Venezuela's economy was badly managed even before this and when Maduro took over it got worse because of corruption and continued mismanagement.

Russia and Saudi Arabia are faring much better than Venezuela currently is right now. I'm not so sure why there is so much reluctance at accepting that state-led socialism (not socialism in general) is just a bad model for leading countries into socialist ideals.

[Draco-Onis]

Russia and Saudi Arabia are faring much better than Venezuela currently is right now. I'm not so sure, why there is so much reluctance at accepting that state-led socialism (not socialism in general) is just a bad model for leading countries into socialist ideals.

They are faring better because they had plans in place and are trying to diversify their investments, this has zero to do with socialism. I know you have a boner against it but Venezuela's problems are not due to socialism unless you think that is why oil prices fell below $100 and gave Maduro power.

[Mittens]

They are faring better because they had plans in place and are trying to diversify their investments, this has zero to do with socialism. I know you have a boner against it but Venezuela's problems are not due to socialism unless you think that is why oil prices fell below $100 and gave Maduro power.

The track record of state-led socialism suggests otherwise. And mismanagement of the economy is kinda the point of why the state just sucks at managing the economy.

There is no harm in accepting that a system that consists in giving almost absolute control of the economy to a single entity and hope that agent doesn't become a group of interest is bound to fail.

[Draco-Onis]

The track record of state-led socialism suggests otherwise. And mismanagement of the economy is kinda the point of why the state just sucks at managing the economy.

There is no harm in accepting that a system that consists in giving almost absolute control of the economy to a single entity and hope that agent doesn't become a group of interest is bound to fail.

You do realize that Saudi Arabia, Russia and China etc all into that category right? you know you are wrong but I am sure that won't stop you from harping the evil socialism blah blah. Most systems of government have different aspects to them as such Venezuela wasn't 100% socialist either.

[igualitarist]

sigh Venezuela's troubles are not due to socialism anymore than Russia or Saudi Arabia, it has to do with bad management after oil prices fell below $100 per barrel. Venezuela's economy was badly managed even before this and when Maduro took over it got worse because of corruption and continued mismanagement.

Well, there were news about shortage of basics products in Venezuela since 2012, when oil prices peaked, just google it. Also, before socialism (aka Hugo Chavez), exportations of oil and oil derived products corresponded to about 60% of all exported products, nowadays its more than 90%. Basically through statization and massive intervention on economy, they destroyed all the other industries.

Oil prices dropping just made things worse, but the cause of venezuelan situation is pretty much socialism. And by socialism i mean socialism, not social democracy (which some people here think is the same of socialism).

[Draco-Onis]

Well, there were news about shortage of basics products in Venezuela since 2012, when oil prices peaked, just google it. Also, before socialism (aka Hugo Chavez), exportations of oil and oil derived products corresponded to about 60% of all exported products, nowadays its more than 90%. Basically through statization and massive intervention on economy, they destroyed all the other industries.

Oil prices dropping just made things worse, but the cause of venezuelan situation is pretty much socialism. And by socialism i mean socialism, not social democracy (which some people here think is the same of socialism).

What part of was mismanaged even before oil fell did you miss? They did not know how to run their finances that is not a problem unique to socialism. I mean you are from Brazil you should know about mismanagement more than anyone.

[Omega10]

The track record of state-led socialism suggests otherwise. And mismanagement of the economy is kinda the point of why the state just sucks at managing the economy.

There is no harm in accepting that a system that consists in giving almost absolute control of the economy to a single entity and hope that agent doesn't become a group of interest is bound to fail.

Chinese state run socialism is posting annual 7% growth, while American growth is less than 3%. Using your standards, socialism is significantly better than capitalism.

So there IS harm in accepting what you just stated since then you would be accepting as fact something that is an outright lie.

[Dacien]

Chinese state run socialism is posting annual 7% growth, while American growth is less than 3%. Using your standards, socialism is significantly better than capitalism.

So there IS harm in accepting what you just stated since then you would be accepting as fact something that is an outright lie.

China has strongly embraced capitalism.

https://www.cato.org/policy-report/j...ame-capitalist

[Mittens]

You do realize that Saudi Arabia, Russia and China etc all into that category right? you know you are wrong but I am sure that won't stop you from harping the evil socialism blah blah. Most systems of government have different aspects to them as such Venezuela wasn't 100% socialist either.

China has been liberalizing its economy and as a result it has been rewarded with economic growth. That kinda was the point of its special economic development zones and other similar reforms made by Den he set the trend and this far every chairman of the party has continue it. Heck now they are no longer forcing companies to transfer tech to local companies. I dunno about Russia or Saudi Arabia, so I'm not commenting on that.

[Dacien]

People working in factories where the conditions are so bad that they have to install anti suicide nets sounds like capitalism to me.

Well that would be odd, because the US is as capitalist as it gets and we don't have that here.

[Draco-Onis]

China has been liberalizing its economy and as a result it has been rewarded with economic growth. That kinda was the point of its special economic development zones and other similar reforms made by Den he set the trend and this far every chairman of the party has continue it. Heck now they are no longer forcing companies to transfer tech to local companies. I dunno about Russia or Saudi Arabia, so I'm not commenting on that.

Your point was that state run government always leads to failure they got to this point using that model. There's a rather long list of capitalists countries in Latin America that have defaulted by your logic capitalism doesn't work either. The situation is far more nuanced than you make it seems though I can understand why you would take that socialism is bad as your take away given your bias.

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Well that would be odd, because the US is as capitalist as it gets and we don't have that here.

We did until the evil socialist government stepped in and created labor laws, pure anything is bad.

[Dacien]

We did until the evil socialist government stepped in and created labor laws, pure anything is bad.

I definitely don't disagree with that; government has a role. I like the idea that every time I step into a restaurant, people from the government who know what they're doing have been there and have made sure there are no bug particulates in my sandwich.

[Mittens]

Your point was that state run government always leads to failure they got to this point using that model. There's a rather long list of capitalists countries in Latin America that have defaulted by your logic capitalism doesn't work either. The situation is far more nuanced than you make it seems though I can understand why you would take that socialism is bad as your take away given your bias.

They got to this point by slowly liberalizing its economy. Its kinda the opposite of what state-led socialism aims to achieve. And for the record Latin American countries at the time had a lot of state owned industries or heavily subsidized ones, the state was heavily involved in the economy. Examples that come to my mind are Bolivia, Peru and Argentina.

Also, for the record, I'm not pinning this on socialism, just state-led socialism a model that by its track record should've been dismissed years ago.

[igualitarist]

What part of was mismanaged even before oil fell did you miss? They did not know how to run their finances that is not a problem unique to socialism. I mean you are from Brazil you should know about mismanagement more than anyone.

Yeah, and mismanagement is pretty disastrous when government controls every aspect of your life. Thats what happens in socialism and in every other kind of totalitarian and authoritarian regime.

We impeached a president in 2016, her politics made our economy shrink in the last years, she is from a marxist party and aligned with Maduro and Chavez. Her administration was marked by mismanagement, mostly because she believes the government is a god with power to control everything and also believes in wrong economic theories.

As a brazilian i know pretty much how mismanagement can destroy a country, and i tell you, corruption and mismanagement reached an all time high here during those 13 years of socialist governments. Venezuelans will tell you this, argentinians will tell you this and all the latin american countries that went red last decade and now are getting rid of their socialist politicians will tell you this.

I recommend reading about Foro de São Paulo to understand about socialism in Latin America, for those interested.

[Draco-Onis]

They got to this point by slowly liberalizing its economy. Its kinda the opposite of what state-led socialism aims to achieve. And for the record Latin American countries at the time had a lot of state owned industries or heavily subsidized ones, the state was heavily involved in the economy. Examples that come to my mind are Bolivia, Peru and Argentina.

Also, for the record, I'm not pinning this on socialism, just state-led socialism a model that by its track record should've been dismissed years ago.

You are contradicting yourself if it is such a failure then China should have crashed and burned long ago. Each situation is different you cannot pin this on anything other than bad management by the Venezuelan government, you are simplifying a rather complex situation.

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Yeah, and mismanagement is pretty disastrous when government controls every aspect of your life. Thats what happens in socialism and in every other kind of totalitarian and authoritarian regime.

We impeached a president in 2016, her politics made our economy shrink in the last years, she is from a marxist party and aligned with Maduro and Chavez. Her administration was marked by mismanagement, mostly because she believes the government is a god with power to control everything and also believes in wrong economic theories.

As a brazilian i know pretty much how mismanagement can destroy a country, and i tell you, corruption and mismanagement reached an all time high here during those 13 years of socialist governments. Venezuelans will tell you this, argentinians will tell you this and all the latin american countries that went red last decade and now are getting rid of their socialist politicians will tell you this.

I recommend reading about Foro de São Paulo to understand about socialism in Latin America, for those interested.

Your country is a capitalist democracy, you have corrupt politicians of every party unless Latin America remembers it's history it will forever be stuck in this cycle of defaults. What you need is a completely new class of politicians but that is a gigantic task, if you think only socialists are corrupt boy are you in for a wake up call.

[Mittens]

You are contradicting yourself if it is such a failure then China should have crashed and burned long ago. Each situation is different you cannot pin this on anything other than bad management by the Venezuelan government, you are simplifying a rather complex situation.

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Your country is a capitalist democracy, you have corrupt politicians of every party unless Latin America remembers it's history it will forever be stuck in this cycle of defaults. What you need is a completely new class of politicians but that is a gigantic task.

And it crashed and failed in the 90s when capital flight was a serious threat to its economy. China pursued further liberalization and more commitments when it entered the WTO and was rewarded with more growth, the extent of how many of this commitments it eventually carried out is another thing. On the other hadn, Latin America went balls deep into state-led socialism in the 70s and 80s and the result was hyperinflation and a lost decade. Heck right now you can check in Latin America and see that the more succesful countries are the ones that did not embrace the pink tide.

[Draco-Onis]

And it crashed and failed in the 90s when capital flight was a serious threat to its economy. China pursued further liberalization and more commitments when it entered the WTO and was rewarded with more growth, the extent of how many of this commitments it eventually carried out is another thing. On the other hadn, Latin America went balls deep into state-led socialism. Right now you can check in Latin America and see that the more succesful countries are the ones that did not embrace the pink tide.

They have all defaulted under capitalism and we in the US have our economy crash on a regular basis again your bias is pretty obvious.

[Mittens]

They have all defaulted under capitalism and we in the US have our economy crash on a regular basis again your bias is pretty obvious.

Because you are as arrogant as they come. The president in Peru back then was Alan Garcia and he was the leader of APRA, a party famous for its pro-socialist agenda. When he came to power, he pursued the policies of his party like price controls, further subsidiations, agricultural land reform, etc. The result... massive hyperinflation as products became more scarce and eventual default by its subsecuent president. Latin America at the time was plagued by this type of parties and leaders that had just rose to power.