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Venezuela’s cryptocurrency plans were met with a dismissive reaction from Lat Am bond market participants this week, who questioned the value of any currency issued by the defaulting government.
Even if Venezuela can overcome the complications of being the first sovereign to issue such an instrument (see cover story), the investment case looks weak, suggested experts on the country.
The oil rich but dollar-poor nation’s already limited financing options were further reduced last year as US government sanctions barred any US persons from extending credit of more than 30 days to the country.
The government has not made any bond payments since September, while state-oil company PDVSA has not made any bond payments since November. Together, the two issuers have around $65bn of dollar-denominated bonds outstanding.
Despite both entities being in default, and the Emerging Markets Trading Association recommending that they trade without accrued interest, bondholders have not shown any inclination to accelerate.
Yet the country’s catastrophic economic situation is one...