The move "is likely to unleash a debt crisis of a size not suffered in Latin America since Argentina’s massive 2001 default, and a bond restructuring that lawyers say would be the world’s most complex yet," according to the Financial Times.
Venezuela is teetering every closer to a debt default, according to analysts. The Venezuelan government and Pdvsa have been skipping interest payments over the last four weeks, taking advantage of grace periods to delay more than $700 million in payouts. And if it can't reach and agreement with debt-holders, it will effectively default, explains CNN.
Negotiations are likely to be made more difficult by the appointment of Vice President Tareck El Aissami to head them, as he is on a U.S. sanction list for alleged corruption and narco-trafficking. But that's also part of the positioning the Maduro government is taking with the restructuring efforts. Maduro blamed part of Venezuela's difficulties on a a financial “blockade” by the United States — arguing that sanctions restricting access to the global banking system are making payments nearly imposible. He also denounced discrimination of Venezuela by financial institutions, reports Efecto Cocuyo.
Maduro's confused use of various bond market terms -- he used refinancing and restructuring, but they mean different actions -- has also left creditors confused about his intentions, according to Bloomberg.
But creditors may also prove flexible considering the difficulty of obtaining redress in the case of a default. While China and Russia are geopolitically motivated to continue propping up the government, argues an Economist piece from before the announcement.
Venezuela has managed to avoid default before, even as currency reserves are dwindling and lack of imports leaves citizens with significant shortages. "Venezuela’s surprising rectitude as a debtor stems from an unlikely confluence of factors," including its lack of democracy, according to the Economist.
Part of Venezuela's interest in avoiding a default involves valuable oil assets abroad that could be seized by debtors. For example, the $7 billion that Venezuela might save in 2018 from not servicing its debts would be offset by lost oil exports, and there would be no net gain, explains FT.
Loss of oil revenue could potentially hurt Venezuela more than ongoing debt payments, according to the Washington Post.
Though the restructuring is a difficult bet, Maduro may have undertaken it in part because he feels politically empowered by recent gubernatorial elections won by the ruling party, and the opposition coalition's growing splits.
- Venezuela's electoral council confirmed Dec. 10 as the date for municipal elections, reports Efecto Cocuyo.
- Center for Economic and Policy Research analyzes the limited statistics used widely in media reporting on Venezuela's food insecurity. "...Media coverage on hunger in Venezuela has relied primarily on anecdotal evidence and an inconclusive report authored in part by a member of the political coalition trying to remove Venezuelan President Nicolás Maduro from office", writes Jacob Wilson. Not that there isn't a problem. A new Food and Agriculture Organization of the United Nations (FAO) report notes that undernourishment in Venezuela is lower than in other countries in the region (such as Haiti, Guatemala, Bolivia and Honduras, but growing. In the last three years, Venezuela contributed an estimated 1.3 million newly food-insecure people to Latin America’s total. "The FAO has provided evidence that food insecurity in Venezuela has increased over the past three years. This does not excuse US journalists and policymakers from crafting narratives with indeterminate sources like the Simón Bolívar University report. The policy implications of such careless reporting are substantial. A Treasury Department press release in July justifying sanctions against Venezuela stated, “tens of millions of Venezuelans are going hungry.” Not only is this figure at least two-and-a-half times the total estimate of 4 million given by the FAO, it is also directly in line with the 90 percent statistic from the inconclusive report."
- Major Haiti U.N. donors -- including the U.S. and the U.K. -- are resisting a plan that would use millions of unallocated dollars to fund a cholera reparation program. U.N. Secretary General António Guterres proposed repurposing money from the peacekeeping mission ended last month to assist in eradicating the cholera outbreak started by peacekeepers in 2011 and pay reparations to victims and families. None of the five UN security council’s permanent members approved the proposed funding reallocation, reports the Guardian. The U.S. government is refusing to reassign $11 million in unspent Haiti peacekeeping money, despite a Senate appropriations committee green light in September, reports the Miami Herald.
- El Salvador's police chief warned of gang infiltration in municipal elections. Howard Cotto explained that gangs sell votes or reductions in violence to candidates in exchange for jobs or benefits for members, reports InSight Crime.
- Beauty pageant contestants in Peru turned convention on its head last weekend by giving gender violence statistics in place of their measurements. The defiance changed the focus of the event, but critics wonder if a pageant that focuses on female bodies was the right space for such a debate, reports the New York Times.
- Mexico's leftist presidential front-runner, Andrés Manuel López Obrador, is a confrontational politician who has "undermined Mexico's democratic institutions," according to the Economist.
- Two weeks after dozens of independent presidential candidates announced intentions to gather signatures needed to run, Animal Político reports on their experiences in the first election they'll be permitted to participate in.
- Cambridge Analytica, a data firm that participated on Donald Trump's campaign last year, is staffing up in Mexico ahead of next year's elections, reports Buzzfeed . It's not clear which party or candidates the company is working for in Mexico, but according job postings, the company will be working on the campaigns for governor in seven of Mexico's 31 states: Chiapas, Guanajuato, Morelos, Puebla, Quintana Roo, Tabasco, and Veracruz. Nonetheless, the U.K. company is not registered with the electoral authorities, a must in order to work on campaigns.
- Chilean right-wing presidential frontrunner Sebastian Piñera unveiled a $14 billion spending plan, to be paid for by cutting “unnecessary” government spending and simplifying the tax code to encourage investment and boost growth, reports Reuters.
- A new Panama Papers investigation has exposed connections between Bolivia and 127 offshore companies mainly registered in Panama and the British Virgin Islands, reports Emilia Díaz-Struck for the International Consortium of Investigative Journalists.
- Argentina plans to start building two new nuclear reactors next year, reports Reuters.
- All Souls Day, in which Brazilians visit the graves of loved ones, was particularly poignant this year, came along with statistics demonstrating that last year was the most murderous in the country's history. One person was killed every seven minutes in the country in 2016, a total of almost 62,000 lives lost to violence, write Cristina Fróes de Borja Reis and Diego Viana in the Guardian. "This “genocide” of Brazilian people – especially her young, black people – overshadows this year’s festivities. Between 2005 and 2015, the average homicide rate rose from 26 to 29.9 murders per 100,000 people. Most were young, and in 2015 seven out of 10 were black. Black people are more vulnerable in virtually every state in the country, regardless of socioeconomic status. ... Brazil seems willing to waste a whole generation – to leave people dead, imprisoned or excluded from formal education and employment – just to keep a segregated political structure based on the national heritage: slavery."
- Evangelical drug dealers in Rio de Janeiro are apparently behind a rising wave of religiously motivated crimes, largely aimed at the temples and adherents of Candomblé and Umbanda faiths, writes Igarapé Institute co-founder Robbert Muggah in the Conversation. He tracks the link between the rising religious intolerance, the rise of evangelical Christianity around the country, and its inroads in the country's prisons particularly.
- A 3 degree rise in worldwide temperatures is an increasingly real possibility, warned the U.N. this week. While some cities, like Miami, are seeing funding for protective measures to keep their streets from becoming waterways, Rio -- which would lose swathes of infrastructure -- is having trouble incorporating climate-change planning into it's cash-strapped politices, reports the Guardian.
- Note to starry-eyed river travelers: There are pirates in Brazil's Amazon. A California family traveling Latin America and blogging about it hid in the jungle for three days after pirates attacked them on a remote Amazon River tributary. They're fine and recuperating in Pará state hospital, reports the Wall Street Journal.