Venezuela’s record-scale reset
Venezuela’s interim government is preparing what could be the largest sovereign debt workout in history. The country’s GDP has collapsed from $370 billion in 2012 to around $100 billion today, while Caracas is expected to reveal a $240 billion debt pile, far above earlier estimates of $150–$200 billion. Officials plan to offer creditors only partial repayment, in a restructuring set to eclipse Greece’s roughly $200 billion default in 2012.
The overhaul follows a sharp political break. Nicolás Maduro was removed from power in January, sanctions on Venezuelan dollar transactions were lifted, and interim president Delcy Rodríguez has taken charge. Her administration aims to acknowledge about $240 billion of obligations and reach a deal with creditors before year-end to reopen access to global markets, from which Venezuela has been largely shut out for nearly a decade.
For bondholders, the scale is only one concern. Roughly $60 billion consists of government and state oil company PDVSA bonds, with another $40 billion in unpaid interest, plus additional claims from oil companies, suppliers, expropriation disputes and loans from China and Russia. A forthcoming viability plan from advisory firm Centerview is expected to set out how this stack of obligations might be tackled against an economy now worth about $100 billion.
The restructuring blueprint is being drafted without an IMF debt sustainability analysis, a standard feature in many past sovereign workouts. The IMF has said it is not participating directly, though it has resumed technical contacts with Caracas after a seven-year freeze. Some domestic political figures worry this could weaken the state’s bargaining position with creditors.
Markets are already reacting. Venezuelan sovereign bonds fell to their lowest level in two months as investors brace for the government’s detailed assessment of its debts and economic prospects, with notes due in 2027 dropping below 50 cents on the dollar and PDVSA bonds also sliding. A concrete restructuring proposal is expected to land in early July.
