Venezuela has suffered what is expected to be the first in a cascade of defaults on more than $60bn of international bonds after missing several interest payments. The country on Monday evening missed a deadline to make $200m in interest payments on two of its government bonds, spurring S&P to formally declare the first of what are expected to be many defaults. Caracas is already overdue on another $420m of interest payments on other sovereign bonds, which will also soon be in default, as will payments on debt from PDVSA, the state oil company.
The oil-rich nation managed to service its debts for much longer than many investors had expected after the 2014 energy price collapse. But Nicolás Maduro, the president, finally admitted defeat two weeks ago, announcing the country would have to “refinance and restructure” all its foreign debts. Including bilateral and other loans, these total more than $150bn, so a sovereign default would be one of the biggest in history. In 2012, Greece restructured more than €200bn, which remains the largest default on record.
Venezuelan bond prices had begun to recover from the fright of the default announcement on Tuesday but fell back to trade at cents on the dollar. A $2.5bn bond due in October next year — one of the bonds now in default — lost almost a fifth of its value to trade at 25.7 cents on the dollar. Pressure is growing on the socialist government after investors left a Caracas meeting on Monday none the wiser about how it will surmount the financial challenges and the EU-imposed sanctions on Venezuela for human rights abuses.
Despite calls by some in Latin America for escalating sanctions to include travel bans and asset freezes, as well as an embargo on oil exports, Caracas has shown little concern over the international opprobrium. Mr Maduro called the EU sanctions “stupid”. Tareck El Aissami, the vice-president, who is already under US sanctions for alleged drug trafficking and was the only government official to speak at Monday’s bondholder meeting, offered no concrete proposals for debt restructuring.