Venezuela will continue repaying its debt normally in 2017 as it has done since 2014, repaying USD32.4 billion of capital, according to hedge funds Adar Capital Partners.
In the event that Venezuela should have no access to international markets in 2017, it would only need to pay off USD6.6 billion – not so great given Venezuela's size and potential.
Diego Marynberg, portfolio manager at Adar Capital, says: “Since the beginning of the second half of 2014, when the price of oil began shooting down from over USD100 per WTI barrel to its minimum of USD26 in March this year and its recovery to its current level of USD45-50 dollars, markets have set prices based on the expectation of a debt default by Venezuela and its main oil company Petróleos de Venezuela, SA, but they were wrong.”
The Adar Capital report argues that for two years investors have been discounting debt issued by the Republic of Venezuela and by Petróleos de Venezuela by more than 30 per cent p.a. on bonds maturing in 2022 or earlier, with interest rates of 20 per cent or more for the rest of the bonds. As a country dependent on international trade and in which the state is the leading exporter and importer of goods, Adar Capital does not expect there to be a default, given the catastrophic impact this would have domestically.
Marynberg's says: "in the most adverse circumstances imaginable, President Maduro has shown an attitude of absolute responsibility and pragmatism, making each payment of both capital and interest as they became due, and reducing the country's external debt.”
