PRESS RELEASE: Venezuela Makes Debt Payment, Citizens Pay

News In The NewsPRESS RELEASE: Venezuela Makes Debt Payment, Citizens Pay

FOR IMMEDIATE RELEASE

Press Release
February 29, 2016

Venezuela Makes Debt Payment, Citizens Pay

Foreign Creditors Paid In Full; Venezuelans Face Shortages of Foods and Medicines

Washington, DC – On Friday, there were doubts that Venezuela would make good on its sovereign debt payments, but the South American country found a way. Venezuela’s international reserves are now at their lowest level this century, following its $1.5 billion debt payment made over the weekend. As international oil prices continue to sink, Venezuela’s payments to foreign creditors have forced the government to protect its dwindling reserves by cutting imports of food and medicine. Venezuela is scheduled to make over $10 billion in sovereign debt repayments in 2016, which is expected to drive further cuts for a country already facing severe shortages and increasing poverty.

“Without an international debt restructuring process, Venezuela is forced to decide between keeping its access to markets and giving its citizens access to basic necessities” said Jo Marie Griesgraber, Executive Director at New Rules for Global Finance, an economic justice organization. “Venezuela’s economy is crippled by low oil prices, the poverty rate is increasing and the growing threat of Zika is expected to overwhelm a weak health system. This is not the right time for Venezuela to do ‘whatever it takes’ to make debt payments.”

Despite the expectation that Venezuela will default in the near future, the country has managed to make its debt payments (including this recent one), but through unsustainable means which have impacted poor households the most. The reduction of spending on imports has affected the quality of healthcare, which has lead thousands of Venezuelans to seek treatment for the recent Zika outbreak in nearby Colombia – increasing tensions between the two countries. As a result of shortages, rampant inflation, and widespread poverty, there are protests calling for President Maduro’s resignation.

Ms. Griesgraber added:

“The risks associated with oil prices were spelled out in Venezuela’s bond contracts. But there are no requirements that compel both parties to negotiate in the event of low oil prices. There is no international institution or process to facilitate this discussion. The absence of such institutions and procedures means fears about the reaction from capital markets could force Venezuela to cut medical and food imports further, leading to even great human costs.

Venezuela is not alone in this conundrum. The G20 and other global institutions need to find or design a prompt, humane solution to de facto bankruptcy of sovereign states.”

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Notes to Editor:
New Rules for Global Finance is a 501(3)c non-profit organization that promotes reforms in the rules and institutions that govern international finance; in order to support inclusive and sustainable economic development.

For more information, please visit www.new-rules.org.

Contact:
Nathan Coplin
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