Venezuela: the consequence of S&P declaring default

How the United States seems to now own the South American nation’s future

Venezuela: the consequence of S&P declaring default

Leer en Español: Venezuela: implicaciones del default de S&P

S&P Global ratings downgraded Venezuela into default and expected another nonpayment to take place in the next 6 months. Fitch Ratings declared a Venezuelan bond selloff, meaning the Latin American nation will be excluded from foreign direct investment and international credit markets.

The default announcement occurred days after Europe and the United States have established stronger sanctions against Venezuela, which include halting their crude imports from the Latin American country. PDVSA represents 95% of the Socialist Government’s total income inflows, which could stop flowing soon.

Tareck El Aissami, the U.S.’s dubbed “drug dealer from Aragua” and vice-president of Venezuela, claimed the defaults were due to a financial conspiracy against the nation. The message was delivered during a 30-minute meeting in Caracas with nearly 100 investors who received no substantial solution to the South American debt crisis.

In 2015, PDVSA agreed to pay its bondholders an extra 20% and transferring half of the Company Citgo for a $2.8 billion in bond debt, which ended up totaling more than the double of the original liability. Similar returns were experienced after Canadian Gold Reserve’s $769 million lawsuits, which were settled by granting the mining conglomerate 45% of the shares for a new state company in the same industry.

Read also: Brazil into junk territory according to S&P

As of today, Nicolás Maduro owes $60 billion dollars through Venezuelan petroleum PDVESA’s bonds mainly to T Rowe Price Associates Inc, Ashmore Investments Management Ltd and BlackRock Investment Management Ltd as his nation’s oil deposits sit at the lowest level since 1989. Oil embargos and international asset collections are expected to continue taking place.

Further financial pressure arises as Citigroup Inc. has closed some of the country’s accounts, Euroclear blocked PDVSA’s bond payment while Deutsche Banks AG decides to discontinue its role as a correspondent bank to the US this month. Credit Default Swaps are also expected to hit Venezuelan accounts.

The Venezuelan situation does not affect any other nation as worldwide Central Banks halted to obtain the Socialist nation’s bonds since their risk became too high for a responsible long-term investment, Colombian finance minister Mauricio Cardenas explained.



Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto

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