Why is Venezuela such a good payer with Wall Street?

Meanwhile, US agency Standard & Poor’s downgraded Venezuela’s credit rating to CCC + on the grounds that «the economic recession, high inflation and growing liquidity pressures» will hurt the government’s ability to pay.

As a result, Venezuelan bonds fell: on Wednesday, Global 2027, which marks sovereign debt, lost 3.2% and the role of state-owned company Petróleos de Venezuela (PDVSA) expected in 2022 fell by 2, 76%.

And on Thursday, they maintained this negative trend.

So on Wall Street there are comments Venezuela might fall into default, something which, beyond the arguments of economists, would surprise the markets which have seen Caracas always honor its commitments.

However, a good number of economists, both opposition and officials, have argued that the default is, for the moment, unlikely.

«Venezuela has not paid importers not because it has no money, but because its economy is full of distortions,» Mundo Alejandro Grisanti, director for Latin America at Barclays Capital, an investment bank.

One of those distortions, the Venezuelan economist says, is the exchange control system, where the government sells every dollar at 6.3 bolivars, a figure now 15 times lower than the price of the free (or black) dollar. .

This is why economist Francisco Rodríguez wrote in another famous article in response to Hausmann that «the fact that people cannot buy all the dollars or all the imported goods they want at the current price does not tell us anything. on the amount of dollars that the government owns «.

«It just tells us that the government is selling these dollars at an artificially low price.»

And it is also that Venezuela, whatever its problems, was characterized by the payment of its debts to Wall Street on time, especially under the government of the late Hugo Chávez.

Thus, Venezuelan bonds are among the most recommended by market operators to clients with a taste for risk.

Why has Venezuela been such a good salary?

Venezuela is in a special condition: it is one of the largest oil producers in the world and 95% of its exports are barrels of crude.

The Venezuelan economy is very dependent on the international price of oil, which is volatile, and that is why it always faces the possibility of going from a bargain to a lean situation. And vice versa.

“When there is a problem, Venezuela can go and get loans from the market,” economist Luis Oliveros told BBC Mundo.

«But if they say default, the credit market is closing and vulnerability is increasing, ”he says.

With the increase in the price of oil over the past decade, Venezuela has reduced production and increased imports of food, spare parts, and medicine, among many other commodities.

“Almost 75% of what Venezuela consumes is imported,” says Grisanti. «And one default This would have a very high cost because it affects letters of credit and with it imports. «

Being a major exporter of oil, Venezuela has an important presence in international markets and has various goods outside its territory that allow it to maintain this presence.

One of those assets is Citgo, the largest fuel distribution network in the United States with three refineries in that country (currently on sale, the government has admitted).

They also have three refineries in the Caribbean and there are just under 100 tankers carrying barrels of Venezuelan oil around the world every day.

«In case of default, all these assets are likely to be taken, ”says Grisanti.

And Oliveros adds: «We export about 700,000 barrels of oil a day to the United States, so ships can be seized at any port in this country.»

The assets are therefore likely to be sold by legal actions promoted by the creditors of Venezuelan bonds.

The price of bonds and loans on Wall Street depends on the confidence in the country that issues them.

«If you declare default, the market will remember you and limit the loans it gives you abroad, ”says Oliveros.

And adds that a default this would harm the plan to exploit Venezuela’s oil reserves, which are the most important in the world.

«For that, you are necessarily going to ask for loans and foreign investments.»

Although «fall into default“This may seem disconcerting or irrelevant to many Venezuelans, many analysts agree that the consequences are damaging to society.

«Like him default It limits your dollar loans in the future, people, who have already limited them today, will have less access to foreign currency, ”says Oliveros.

“And that makes the price of the black dollar skyrocket even more,” he adds.

In addition, «if you have just declared yourself defaultWhere are you going to get the dollars? To the International Monetary Fund? Oliveros wonders about an organization that the Venezuelan socialist government criticizes on a daily basis.

And he concludes, citing studies in this regard: « default they tend to bring down the government. «