17 Nov 2017;
On Monday, November 13, Standard & Poor’s (S&P), one of the world’s leading credit rating agencies, lowered Venezuela’s Long-Term Foreign Currency Rating to ‘SD’, meaning it had selectively defaulted on a specific issue or class of obligations. On Tuesday, S&P also downgraded Venezuela’s state oil company Petroleos de Venezuela (PDVSA) to ‘SD’ on a missed interest payment. While several analysts have indicated for some time that a Venezuelan default was inevitable, it still came as a shock, because the country has made extraordinary efforts to continue to make payments. A default will expose the country to the risk that its international oil assets (including PDVSA’s Houston-based refining arm CITGO) could be seized by creditors or tied up in court. If creditors go after Venezuela’s oil assets, buyers will avoid buying its crude, further depressing the demand and value of the country’s main export. However, Venezuela is not completely without options. Its government still maintains good relationships with Russia and China and these countries have a geopolitical and economic interest in keeping Venezuela afloat.
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