CARACAS — Venezuela has reached a deal with its main financier China to improve the conditions of an oil-for-loans deal, giving the OPEC member’s crisis-hit economy “oxygen” ahead of heavy debt payments, its top economic official said on Monday.
Venezuelan Economy Vice-President Miguel Pérez said that all conditions, including loan time frames, investment amounts and non-financial aspects, had been improved.
China has lent some $50 billion to Venezuela in that arrangement over the last decade, and markets are watching closely to see if Beijing would help President Nicolás Maduro’s socialist government as it struggles with recession, shortages and reduced oil revenue.
“Today we can say that we’ve agreed to new commercial conditions that are adapted to the country’s reality,” Pérez said in an interview in his office at the Industry Ministry, which he also heads. He declined to elaborate.
“This will give the country important oxygen to go forward,” added Pérez, a former industry association leader who became economy czar in February, replacing a hard-line socialist who lasted only a month.
The improved China deal, as well as a steep cut to imports and a new, weaker foreign exchange rate, would help Venezuela crawl out of what Pérez called a “very complicated” semester.
Still, the economy is likely to remain in recession until the end of 2017, he added.
Venezuela’s struggling state-led economic model and the fall in oil prices have triggered severe shortages of food and medicine, raging triple-digit annual inflation, and a tumble in local business activity.
Maduro blames an “economic war” launched by right-wing businessmen and opposition politicians seeking to sabotage him.
The dire economic situation has led to market speculation that Venezuela, which has the world’s biggest oil reserves, or its state oil company PDVSA could default on their heavy debt load.
Pérez reiterated that all debt commitments would be honored and that any refinancing of PDVSA debt would be “very positive” for bondholders.
The company’s president has that PDVSA was mulling an extension on payments for bonds maturing in 2017.
Pérez said Venezuela could offer assets to guarantee bonds that would be issued under a potential refinancing.
Prioritizing its debt payments, Venezuela has slashed imports in the last two years, with this year’s shipments set to fall to $16 billion, the official said.
That compares with $28 billion in the first three quarters of 2015, according to official data. Some 75 percent of 2016 imports will be financed at the most favorable exchange rate, currently at 10 bolivars to the dollar, Perez added.
Venezuela has two official exchange rates, with the dollar going for more than 400 bolivars on the second system. The greenback is worth nearly 1,100 bolivars on the black market.