Vol 17 (2020) - Issue 1

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Venezuela: A War of Principles or Just a Matter of Semantics?

Synopsis

This article looks at the current critical situation in the Republic of Venezuela and focuses on its ongoing debt crisis. The core of the article analyses the guidelines published by the Guaido Administration (the currently recognised Government of Venezuela in several jurisdictions, including the UK and US), and the principles published by a creditor committee based in the US, that nucleates some institutional and retail investors. As can be seen from the analysis, these principles include some interesting points (the clash between debtor and creditors as to how to treat the debt, i.e. aggregate different claims against the central government and its state-owned enterprises or separate by distinguishing the debtor entity) and some others that would be difficult to implement (e.g. equal treatment, which cannot be put in practice due to some contractual or structural limitations). Probably it would have been more meaningful just to endorse and abide by the Principles for Stable Capital Flows and Fair Debt Restructuring, produced by the Institute of International Finance, which are the industry standard. More importantly, recent events might accelerate a run-to-the-courthouse but we should not lose sight at the pressing need to resolve the prevailing humanitarian crisis.