Home NEWS Science Why there’s ‘no future for bond holders’ as Venezuela staggers into default

Why there’s ‘no future for bond holders’ as Venezuela staggers into default

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The idea that the same magnitude of allowance would be made, while any trace of the Chavista revolution (the socialist movement sanctioned against by the US for decades) remains in Venezuela, is highly unlikely. The US would simply veto any such move.  

It’s also worth noting that while speculation as to the scale of any Venezuelan bail-out is rife, it cut the last of its ties with the IMF in 2007, which means that attempts to gather intelligence as to the real state of its economy are seriously curtailed. 

Who could lose money as a result of the default?

Bondholders who are owed $60bn. Which while it sounds obvious, some exposure to debt may have reached quite surprising places: most money has been moving on the secondary bond market – as the US stepped up sanctions against deals with the Maduro regime. 

The largest institutional holders of Venezuelan debt are Fidelity Investment, $572m; T. Rowe Price, $370m; BlackRock iShares, $222m; Goldman Sachs, $187m; and Invesco Powershares at $113m, according to CNN.

Professor Ricardo Hausmann, a Harvard-based expert on the Venezuelan economy, told The Daily Telegraph that there was unlikely to be any change to the situation in the immediate future.

Observers need to comprehend the level to which the economy has imploded: “There is no economic plan,” he explains. Oil production is declining sharply, and there is currently no value – with close to zero imports halting most production in the country – being created in the economy. That means there is no sort of exchange to be made with the country’s debtors: “there is no future for bondholders [under the Maduro regime],” he says. 

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