ADVERTISEMENT

Is this the South American country's day of reckoning?

Combined, the events point to a day of reckoning for the OPEC-member nation, and a tighter squeeze on its beleaguered President Nicolas Maduro...

Combined, the events point to a day of reckoning for the OPEC-member nation, and a tighter squeeze on its beleaguered PresidentNicolas Maduro and his socialist government.

But when it comes to the technical world of debt trading, things remain unclear. Monday may be the day that Venezuela's house of cards comes tumbling down. Or, judgment day may be pushed off again -- though not very far by most accounts.

The Caracas meeting of foreign bondholders, called to talk over debt refinancing and restructuring Maduro wants, could bring some clarity.

ADVERTISEMENT

Yet it's not yet clear who will be attending, what possible terms of engagement could be set, or even if a restructuring can be brought about.

To encourage attendance, Venezuela has reportedly said Vice President Tareck el-Aissami won't physically be there -- despite being put in charge of the restructuring. US sanctions designate him a drug kingpin, with whom American entities are barred from doing business.

Default inevitable, but when?

Maduro's aim is to establish a rescheduling of repayments of the public part of Venezuela's total debt mountain -- estimated at up to $150 billion, counting sovereign bonds, debt issued by state oil company PDVSA and debt directly taken on by China and Russia.

A default can be declared in several ways: by the major ratings agencies, big debtholders, or by the government itself.

ADVERTISEMENT

A significant step in that direction could come in a meeting of creditors in New York under the International Swaps and Derivatives Association. Those creditors, represented by 15 financial firms which make up a Determinations Committee, started a meeting Friday and decided to continue it on Monday.

The decision before them is whether to declare conditions are met for default insurance -- known as credit default swaps -- have been met.

By Monday, it should be known whether most or all of $1.2 billion meant to have been paid by PDVSA last week has made it to bondholders' accounts. As of Friday, information on that was incomplete and contradictory.

The rating agencies all forecast a Venezuelan default as inevitable, but differ on when it might occur. With less than $10 billion in hard-currency reserves, though, it cannot be far off.

Creditors' hopes

ADVERTISEMENT

Several in the bond-trading industry are holding out hope that Venezuela will keep up with payments, even belatedly, as it doesn't make sense to lose liquidity by paying out the $1.2 billion if a default is going to happen anyway.

However, news on Friday that a state-owned utility, Electricidad de Venezuela, failed to make a $650 million payment within a one-month grace period bolstered creditors' wariness that a default was unfolding.

As rough as the ride has been regarding debt, Maduro is also being buffeted by international accusations that he is acting as an autocrat -- stomping on democracy by marginalizing the opposition, which controls the parliament, and stifling independent media.

The United States has imposed successive rounds of sanctions on Venezuela for that reason, most recently last week.

The European Union is poised to officially unveil its own measures on Monday, EU sources have told AFP and other media.

ADVERTISEMENT

They are to take the form of an arms embargo meant to prevent Venezuela buying weapons, such as water cannon, and surveillance equipment that could be used for repression.

A blacklist for sanctioned Venezuelan individuals and entities would also be created, the EU sources said, though for the moment it will be empty.

"It's a gradual, flexible and reversible tool," one diplomatic source said.

Claudio Salerno, Venezuela's ambassador to the EU, said in imposing sanctions the EU is "bowing to the call of the head of the empire" -- President Donald Trump -- adding Venezuela sees itself as a "victim."

"The Venezuelan people will decide next year if they want to continue with this model or if they want to take another route," she said. "It has to be decided through the polls, not through international pressure."

ADVERTISEMENT

The EU move, after those of the US, comes on top of widespread criticism across Latin America of Maduro's actions -- especially his appointment in August of a chamber of loyalists that has usurped parliamentary powers.

Adding to the political pressure against Maduro, Monday will also see a UN Security Council meeting called by the United States.

"As the Venezuelan economy continues to crumble, the situation will likely only worsen especially as the country is at risk of defaulting on its debt," the US delegation said in a document calling the meeting.

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.
ADVERTISEMENT

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng

Recommended articles

Renowned Canada-based Nigerian playwright, Oguntokun is dead

Renowned Canada-based Nigerian playwright, Oguntokun is dead

Kaduna Gov grants scholarship to 137 rescued schoolchildren, son of late teacher

Kaduna Gov grants scholarship to 137 rescued schoolchildren, son of late teacher

Siamese twin gets married while still conjoined with her sister

Siamese twin gets married while still conjoined with her sister

LP BoT kicks out Abure despite convention victory, takes over party affairs

LP BoT kicks out Abure despite convention victory, takes over party affairs

6 Labour Party lawmakers defect to PDP in Enugu State

6 Labour Party lawmakers defect to PDP in Enugu State

Tinubu's special assistant donates food items to 1,700 residents in FCT

Tinubu's special assistant donates food items to 1,700 residents in FCT

Anambra PASAN begins strike over Soludo's failure to grant financial autonomy

Anambra PASAN begins strike over Soludo's failure to grant financial autonomy

Governor Sanwo-Olu pays ₦4.48 billion to 1,455 retirees in accrued pensions

Governor Sanwo-Olu pays ₦4.48 billion to 1,455 retirees in accrued pensions

Court discharges ex-AGF Adoke, 6 others in Malabu oil scam case

Court discharges ex-AGF Adoke, 6 others in Malabu oil scam case

Pulse Sports

Nigeria vs Mali: Has Finidi George done enough to land Super Eagles job permanently?

Nigeria vs Mali: Has Finidi George done enough to land Super Eagles job permanently?

I want to emulate Keshi and win the AFCON - Finidi George shares ambitious Super Eagles dream

I want to emulate Keshi and win the AFCON - Finidi George shares ambitious Super Eagles dream

Michelle Alozie: I had to do it because of African referees

Michelle Alozie: I had to do it because of African referees

AC Milan star reveals he was named after Super Eagles legend Tijani Babangida

AC Milan star reveals he was named after Super Eagles legend Tijani Babangida

Give him the job! Super Eagles fans beg NFF to make Finidi George permanent coach after Nigeria's win over Ghana

Give him the job! Super Eagles fans beg NFF to make Finidi George permanent coach after Nigeria's win over Ghana

Super Eagles 2-1 Black Stars: Nigerians praise Iwobi, Lookman, Finidi George after friendly victory against Ghana

Super Eagles 2-1 Black Stars: Nigerians praise Iwobi, Lookman, Finidi George after friendly victory against Ghana

ADVERTISEMENT
ADVERTISEMENT