“La sabiduría de la vida consiste en la eliminación de lo no esencial. En reducir los problemas de la filosofía a unos pocos solamente: el goce del hogar, de la vida, de la naturaleza, de la cultura”.
Lin Yutang
Cervantes
Hoy es el día más hermoso de nuestra vida, querido Sancho; los obstáculos más grandes, nuestras propias indecisiones; nuestro enemigo más fuerte, el miedo al poderoso y a nosotros mismos; la cosa más fácil, equivocarnos; la más destructiva, la mentira y el egoísmo; la peor derrota, el desaliento; los defectos más peligrosos, la soberbia y el rencor; las sensaciones más gratas, la buena conciencia, el esfuerzo para ser mejores sin ser perfectos, y sobretodo, la disposición para hacer el bien y combatir la injusticia dondequiera que esté.
MIGUEL DE CERVANTES Don Quijote de la Mancha.
1 de agosto de 2016
Venezuelan Credit Dashboard: $726 Million Comes Due in August
Rate of reserve depletion accelerates as currency stabilizes
Oil price starts to decline again as heavy payments loom
Venezuela, which has the largest crude reserves on the planet, has defied predictions of default
since the oil collapse started in 2014 and analysts are split as to how
long the nation of 30 million can hold out. With that in mind,
Bloomberg is taking a close look each month at some of the key
components that may determine its fate.
Debt Payments
The
government and state oil company Petroleos de Venezuela SA need to pay
$726 million this month after lighter payments in June and July,
according to data compiled by Bloomberg. Attention will now start to
shift toward the last quarter of the year, when interest payments
totaling almost $5 billion come due.
Whether or not Venezuela can
avoid a default may depend on if the government and PDVSA officials can
strike a deal to refinance debt coming due over the next year. Rumors
are swirling, and investors have been paying close attention. A deal
won’t come cheap, though, as PDVSA would need to offer bondholders
securities that boost the net present value of their investment.
Bond Prices
Venezuela’s
dollar bonds nearing maturity rallied on speculation of an imminent
debt swap, with PDVSA’s bonds due in November 2017 rising 11.3 percent
in July to 77.6 cents on the dollar and a yield of 31.5 percent.
Longer-dated
bonds were more stable last month. The government’s benchmark notes due
2027 ended the month trading at 48.17 cents on the dollar and yielding
21.8 percent. The price fell about 0.8 percent in July, demonstrating
how the volatile situation in the country can create big winners - or
losers - on Wall Street, depending on the maturities of the bonds you
hold.
Trading
in credit-default swaps show that investors continue to lower
short-term default expectations. While Venezuela is still by far the
most likely country to default in the world, the implied probability
that it happens over the next 12 months fell to 49 percent on July 29
from 56 percent at the end of June and 83 percent in February. The
probability of a default in the next five years is 91 percent, according
to credit-default swaps. Highlighting the still very real risk of
nonpayment, Moody’s Investors Service warned
on June 20 that it was “highly unlikely” that Venezuela would have
enough hard currency to fully make its debt payments this year.
Central Bank Reserves
Venezuela’s
international reserves fell to a new 13-year low in July, falling below
$12 billion for the first time since 2003 to end the month near $11.8
billion. Reserves fell about $247 million in July after declining $68
million in June and $607 million in May, according to data compiled by
Bloomberg.
Currency Rates
Venezuela’s
weakest official exchange rate, used mostly for imports deemed
non-essential, stabilized in July, declining only 2.6 percent to 644.3
bolivars per dollar after plunging 15 percent in June and 29 percent in
May. The complementary system, known as Simadi or DICOM, accounts for
about 8 percent of the government’s hard currency sales. The rest of
Venezuela’s greenbacks are sold at the priority rate of only 10 bolivars
per dollar.
The devaluation of the currency decelerated to the
slowest monthly pace since February, giving credence to economy Vice
President Miguel Perez Abad’s comments in a May interview
that the DICOM exchange rate was close to reaching “equilibrium.” It
still needs to fall another 35 percent before it catches up with the
illegal, black-market rate, though.
Crude Prices
The
price Venezuela receives for its oil exports had started to stabilize
earlier this year and ended June 66 percent higher from a low in
January. It didn’t last. The Venezuela crude oil basket fell 13 percent
in July, the first monthly drop since January, ending at $35 a barrel.
Still, concerns
are starting to grow that overall revenue may suffer as crude output
falls. Eulogio Del Pino, the country’s oil minister and president of
state-owned producer PDVSA, told Bloomberg Television on June 16 that
current oil prices would be enough to avoid a default.
To hear a podcast about Venezuela’s ongoing political and economic turmoil, click here.
The Latin American Reserve Fund, financed by eight Latin American central banks, last month agreed to lend Venezuela $482.5 million. A growing constitutional standoff
between the opposition controlled National Assembly and pro-government
Supreme Court, however, could increase uncertainty about holding
government debt.
Alfonso Marquina, an opposition deputy and head of finance committee, on July 21 warned investors that any new debt or restructuring not approved by the national assembly would be null and void.
This
week the National Electoral Council is expected to announce the next
step required for the opposition in order to proceed with a referendum
to recall Maduro as early as this year. His current presidential term
doesn’t end until 2019.
