Venezuela President Nicolas Maduro. — AP
CARACAS: The political turmoil unleashed by Venezuela’s presidential election is threatening to extend the nation’s economic isolation and derail any moves towards restructuring its debt.
President Nicolas Maduro’s declared victory in Sunday’s vote to set off an escalating conflict, with the opposition alleging fraud and his government claiming its rivals tried to sabotage the election.
The outcome has cast doubt on hopes that the United States will lift economic sanctions, promising to leave the nation cut off from international capital markets and delay efforts to deal with some US$150bil of defaulted bonds, loans and legal judgments owed to creditors.
The pessimistic outlook quickly showed up in markets, where sovereign and state oil company bonds – already trading deeply into distressed levels – fell further as investors waited to see how the dispute would play out.
“At the very least, Maduro’s stay will prolong the entire restructuring process,” said Alejandro Arreaza, an economist at Barclays. “That has a high cost of opportunity for creditors.”
Venezuela’s 2027 bonds slipped 2.3 US cents to 19.5 cents on the US dollar, the lowest in nearly four weeks.
Petroleum of Venezuela bonds also fell, with notes maturing in 2026 losing 2.2 US cents to trade around 12 cents on the US dollar.
Venezuela started defaulting on its debt in 2017 after years of economic chaos caused by hyperinflation and authoritarian politics that had left it increasingly isolated from much of the world.
Maduro, who has since brought some stability to the economy, had recently taken the first steps towards what was expected to be a lengthy and complex effort to rework its debts and regain access to world markets.
The allegations that Maduro’s re-election victory was the result of widepsread fraud cast new and long shadows over the country’s international standing.
The opposition claimed that rival Edmundo Gonzalez was well ahead in the partial, raw voting data to which it had access.
“Maduro’s continuation probably impacts the timing of recoveries more than the recovery value itself at this stage,” said Stuart Culverhouse, chief fixed-income strategist at Tellimer, which has a “hold” rating on the country’s debt.
The United States, which has Maduro and other Venezuelan officials under sanctions, expressed doubts about the official tally.
Some left-wing governments in Latin America also refrained from endorsing the election results.
Chile’s Gabriel Boric said “they were hard to believe” and Colombian Foreign Minister Luis Gilberto Murillo requested a full recount of the votes to “dispel any doubts”. — Bloomberg
