Under the terms of the deal that Russia’s Finance Ministry announced today, Venezuela will be repaying the debt over the next ten years, of which the first six years include “minimal payments”.
“The debt relief provided to the republic from the restructuring of its liabilities will allow funds to be allocated for the country’s economic development, to improve the debtor’s solvency and increase the chances of all creditors to recoup loans granted earlier to Venezuela,” the Russian ministry said.
However, the deal doesn’t include funds that Venezuelan companies—including state oil firm PDVSA—have borrowed from Russia, Venezuelan Economy and Finance Minister Simon Zerpa said, as quoted by Reuters.
According to Venezuela’s vice president for economics, Wilmar Castro Soteldo, the terms of the deal are favorable for his country and are flexible.
“We will be able to return to the level of commercial relations with Russia that we had before,” Soteldo said, adding that Caracas will sign an agreement to buy wheat from Russia next week.
Russia, as well as China, are the main sources of funds for the Venezuelan regime now that the U.S. slapped a series of sanctions on Venezuela’s government and its oil company PDVSA, including on issuance of new debt.
Venezuela has already started defaulting on some of its payments and is getting closer to total default and collapse.
On Tuesday, S&P Global Ratings declared Venezuela in default just as the country’s Vice President Tareck El Aissami met with creditors to discuss the restructuring of its debt. According to reports from the meeting, it only lasted about half an hour and did not result in any agreement on how to proceed. The ratings agency said Caracas failed to make a US$200-million payment on a debt until the end of the 30-day grace period.
Fitch Ratings downgraded yesterday Venezuela’s Long-Term Foreign Currency Issuer Default Rating (IDR) to RD (Restricted Default) from C, to reflect “the failure of bondholders to receive overdue interest payments on Venezuela’s sovereign bonds maturing Oct. 13, 2019, and Oct. 13, 2024, by the end of the 30-day grace period that ended on Nov. 13, 2017.”
by Tsvetana Paraskova