Sanctions and Creditors’ Views on a Venezuela Sovereign Debt Restructuring

Abstract

This article discusses the relationship between U.S. sanctions on Venezuela and Venezuela’s willingness to service its principle and interest obligations, and presents an activist creditor’s perspective on the effectiveness of litigation in sovereign debt restructurings. Then, it considers the question of whether strong actions should be undertaken by a debtor who is defrauded by a country agent to recover the defrauded funds to repay its creditors, and it outlines some country paradigms that could serve as general guidance. In general, recovery of ill-gotten gains is a lengthy process that recovers only a fraction of the funds, thus making it impossible to take them into account in debt sustainability analyses and post-default funding arrangements. It concludes with some thoughts on how to proceed with an eventual Venezuela debt restructing.

TOPICS: Fixed income and structured finance, emerging, financial crises and financial market history