Struggling Venezuela looks to restructure debt

“After this payment, I decree a refinancing and a restructuring of all external debt and all of Venezuela’s payments,” Maduro said in a statement broadcast on state television.

He said the efforts to modify reimbursement of his country’s debt pile — estimated at $150 billion — would start after Friday, when the oil company PDVSA pays the $1.2 billion in maturing bonds.

US sanctions imposed on Venezuela in August, however, threaten to complicate Maduro’s ambition. They ban US trade in any new bonds issued by the Venezuelan government or PDVSA — a needed step in any restructuring.

Much of Venezuela’s debt is held by China and Russia, to be paid off in oil — the resource that underpins the Venezuelan economy. The country has less than $10 billion in foreign currency reserves.

Credit-rating agencies are increasingly warning of the risk of a Venezuelan debt default.

But up to now, Maduro’s government has prioritized repayments over all other expenditure — including food and medicine imports needed as the economy deteriorates.

– ‘We will never give in’ –

A default could see investors try to lay claim to PDVSA assets, including tankers, oil in shipment and subsidiaries, such as the Citgo refiner and service station network in the US.

Maduro, who has blamed the dire economic situation on political enemies and the United States, said on Thursday: “They will not asphyxiate us and we will never give in, not to the US empire and not to any empire in the world.”

The president said that, since 2014, his government has paid $71.7 billion in capital and interest.

“Venezuela has always met its international obligations, in times of high oil prices and low oil prices… Our intention is to keep on meeting them, but the financial persecution of Venezuela by international banks and organizations needs to stop,” he said.

PDVSA’s Friday payment is its second big settlement in a week, following a $842 million payment last Friday by the company to partly cover maturing 2020 bonds and interest.

According to estimates by private consultancies, Venezuela has a debt mountain of $150 billion, of which $45 billion is public debt, $45 billion is owed by PDVSA, $23 billion is owed to China, and $8 billion is owed to Russia.

– Oil dependent –

Venezuela is in the throes of hyperinflation and deep recession — with a lack of basic goods, almost all of which have to be imported.

Oil accounts for 95 percent of its exports, but production is declining, in part because of a deterioration in PDVSA infrastructure and oil fields.

Politically, Maduro and his government are becoming increasingly isolated internationally as they tighten their hold on power by sidelining the fractured opposition, muzzling independent media and reworking institutions to their favor.

The International Monetary Fund last month said Venezuela “remains in a full-blown economic, humanitarian and political crisis with no end in sight.”