When I ask ChatGPT to propose a plan to pay off the debt of PDVSA and Venezuela, it develops the following:
“PDVSA and Venezuela’s debt is a complex and difficult problem to solve, but here are some possible strategies to address it:
Debt renegotiation: One possible solution is to renegotiate the terms of the debt with creditors. Venezuela could seek to negotiate longer terms to pay the debt or reduce interest payments. This could help take pressure off the economy and give the country more time to recover.
Increased oil production: Since much of Venezuela’s and PDVSA’s debt is related to the oil industry, one strategy to pay off the debt could be to increase the country’s oil production and oil revenues. This could be achieved through investment in the oil industry and the removal of barriers to foreign investment.
Diversification of the economy: Venezuela could also seek to diversify its economy and reduce its dependence on oil. This could help increase revenue and reduce pressure on the oil industry and hence debt reduction. For this, it is necessary to promote investment in sectors such as agriculture, mining and tourism.
Implementation of economic reforms: Venezuela could seek to implement economic reforms to improve the country’s economic management and reduce corruption. This could improve investor confidence and make it easier for the country to borrow and refinance its debt.
Any plan to pay off PDVSA’s and Venezuela’s debt will be difficult and will require time and effort. However, a combination of these strategies could help the country address its debt problem and improve its overall economy.”.
Now, when I ask him the same thing, but I add “there are OFAC sanctions”, he answers me:
“Paying off Venezuela’s debt with OFAC sanctions is an additional challenge, limiting the country’s ability to access financial markets and other resources needed to service its debt. Here are some possible strategies:
Use oil revenues: Venezuela still has access to oil revenues, although these have decreased in recent years due to the fall in oil prices. However, the sale of oil is still an important source of income for the country. Venezuela could look to increase its oil production and exports and use the proceeds to pay off its debt.
Seek Foreign Direct Investment: Despite OFAC sanctions, there are still international investors interested in investing in Venezuela. The government could seek to attract foreign direct investment through tax incentives and other policies to promote investment in sectors such as agriculture, mining, and tourism. This income could be used to pay off the debt.
Debt renegotiation with creditors: Although OFAC sanctions limit Venezuela’s ability to access financial markets, the country could still seek to renegotiate the terms of its debt with current creditors. This could include negotiating longer payment terms or lower interest payments.
Obtain financing from allied countries: Venezuela could seek financing from allied countries such as China, Russia, Turkey and Cuba, which have expressed their support for the government of Nicolás Maduro in the past. These countries may be willing to provide financing to Venezuela in exchange for oil contracts or other natural resources.
In conclusion, paying off Venezuela’s debt with OFAC sanctions is a significant challenge, but there are strategies that can help the country address its debt problem. A combination of these strategies could help the country pay down its debt and improve its overall economy.”.
In any of the cases, it must not be forgotten that there are still two actors who are the ones who resolve the underlying situation, which are the issuer of the debt, the debtor who has not paid, and the holder of the bonds, the creditor, which is the one that, in the end, must collect.
That is why it is so important that creditors organize themselves, not only to increase the critical mass and improve the negotiation profile, but also so that, on the side of the Venezuelan state, they have organized groups with which to reach agreements, and that do not there are loose cables that could be left out of any collective action, and that could cause problems in the future.
Outstanding news
- On Labor Day, Nicolás Maduro ordered the increase of the cestaticket to 40 dollars and the war bond to 20 dollars, indexed to the rate of the Central Bank of Venezuela. He maintains the minimum wage of $5 a month and “makes it up” with discretionary bonuses.
- La Ceiba: 1) there was no increase in the minimum wage; 2) not everyone collects the economic warfare bonus; and 3) not everyone receives cestatickets, for example, retirees.
- Government accuses the United States and the Unitary Platform of “stealing Citgo.” «They put out a resolution between roosters and midnight, an unworthy resolution, a resolution that is a direct message of surrender. They have decided to hand over Citgo to a group of unknown people, supposedly the directive of the past National Assembly, which no longer exists in Venezuela,” Maduro added, referring to license number 42 of the Office of Foreign Assets Control of the US Department of the Treasury. , which authorized Parliament in 2015 to negotiate PDVSA’s debt with its creditors.
- Illegal mining in Caroní puts hydroelectric generation in Venezuela at risk (to avoid that, it was proposed to build the upper Caroní, Tayucay and Eutobarina dams that would have ordered the territory).
- IBM to pause hiring in plan to replace 7,800 jobs with AI: Bloomberg News.
- Argentines commemorate May 1 with popular pots and acts against the IMF (they protest against the wrong target… the IMF loan was a lifeline that no one else would have thrown at them. If the Fund had not been used, the country would be seized by the creditors of the debt that Cristina left behind. Always from debt to debt… that’s not how you can rescue a country. This is done with austerity, discipline and with recognition of being a poor country).
What was not news (and should be)
- That what happened with the non-increases in the minimum wage was to be expected. By a simple cash flow calculation. Continuous expenses cannot be assumed with discontinuous income. And with the 50 wells in Monagas it is a contradiction, because first it would be necessary to recover PDVSA, if that is still possible.
- Or that, depending on how the 50 wells are handled, if they are removed from Pdvsa’s accounting, it could be a first step to begin to denationalize oil. Let a private company take them, put them on the stock market, and from there the workers own shares. Transparent, and with private management.
- Or that through GL 42, the United States gives a couple of political messages. First, it shows that he did not agree with the dissolution of the interim, which was his idea and his creation; and second, that it continues to breathe life into AN 2015. That, in reality, it will be very difficult to implement, because that AN2015 entity does not have executive capacity… in short, it is more of a political message that they do not recognize Maduro, nor his democratic intentions.
- Nor that, although “GL42 is broad, in practice it has only the purpose of negotiating with the P20 and other lawsuits that seek to liquidate PDV Holding.” 2020 is a special case that still has a way to go, and its legitimacy of origin could even be questioned. Today more than ever, the rest of the bondholders must organize themselves to optimize the recovery of their investment.
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