Venezuela debt crisis: Maduro gives creditors CHOCOLATE as economy on brink of collapse

The socialist government offered the sweet treats during a brief meeting in Caracas but left investors without a clear understanding of the government’s strategy to renegotiate $60 billion in debt.

President Nicolas Maduro confused investors this month with a vow to continue paying Venezuela’s crippling debt, while also seeking to restructure and refinance it.

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Monday’s short and confused meeting, attended by senior Venezuelan officials blacklisted by the United States, gave no clarity on how Mr Maduro would carry out his plan, bondholders and their representatives who participated said afterwards.

One bondholder, leaving the meeting that lasted a little over half an hour at the ‘White Palace’, departing with a colourful gift-bag containing Venezuelan chocolates and coffee, said: “There was no offer, no terms, no strategy, nothing.”

Both restructuring and refinancing Venezuela’s debt appears out of the question, however, due to US sanctions against the crisis-stricken nation. 

A default would compound Venezuela’s dire economic crisis.

Venezuela faces the ongoing dilemma of whether to continue paying debt at the expense of an increasingly hungry and sick population, or whether to default on creditors and burn its bridges to the global financial system.

Nearly $300 million in late interest payments on three bonds – PDVSA 2027, Venezuela 2019 and Venezuela 2024 – was also due on Monday after 30-day grace periods ended. 

But bondholders appeared unconcerned at the delay, which was due in part to increased bank vigilance of Venezuela transactions.

Jan Dehn, Head of Research at Ashmore Investment Management, said: “My expectation is that the coupon payments will come through as well. We know that these delays exist and why they exist.”

About 100 investors, including some bondholders from New York and lawyers representing creditors, entered the ‘White Palace’ via a red carpet and were greeted by a poster of Mr Maduro’s predecessor Hugo Chavez at the entrance of the meeting room inside.

Chief debt negotiators Vice President Tareck El Aissami and Economy Minister Simon Zerpa – on US sanctions lists for drug and corruption charges respectively – attended the meeting for half an hour.

They met with some bondholders, while others stayed out of the room on concerns about penalties for dealing with officials sanctioned by Washington.

El Aissami told creditors that Deutsche Bank may soon cut off some financial services to Venezuela, participants said. Deutsche Bank declined to comment.

He read a statement protesting unfair treatment by global financial institutions, including US President Donald Trump’s sanctions aimed at preventing Venezuela from issuing new debt.

Separately, the European Union approved economic sanctions and an arms embargo on Venezuela on Monday, although it has yet to name who will be subject to the sanctions.

Markets continue to remain optimistic that Venezuela will service its debts, noting it has made close to $2 billion in payments in the past two weeks, albeit delayed.

Bond prices were up across the board on Monday, with the benchmark 2022 notes issued by state oil firm PDVSA rising 3.3 percentage points.

The economic implosion has already taken a brutal toll on Venezuelans. Citizens are suffering from malnutrition and preventable diseases because they cannot find food and medicine or cannot afford them because of triple-digit inflation.

The sight of poor Venezuelans eating from garbage bags has become a powerful symbol of decay. 

It contrasts sharply with the era of Chavez, when high oil prices helped fuel state spending.

Halting debt service would free up an additional $1.6 billion in hard currency by the end of the year. 

Those resources could be used to improve supplies of staple goods as Maduro heads into a presidential election expected for 2018.

But the strategy could backfire if met with aggressive lawsuits. 

A default by PDVSA, which issued about half of the country’s outstanding bonds, could ensnare the company’s foreign assets such as refineries in legal battles – potentially crimping export revenue.