All-in, we still have as base scenario (closely followed by a restructuring) that both issuers will be able to honor its debt service. Local color from the government tells they are confident about paying in 2016 for instance.

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Venezuela Weekly Report

Implications of an IMF Bailout

October 16, 2015 / By Hernán Yellati & Guillermo Quiroga

•           The political and social repercussions of an IMF program could be harsh, although economically speaking it may be assertive
•           Maduro announced some economic figures and a 30% minimum wage increase
•           Supreme Tribunal of Justice premature Magistrates changes points to a political move from the government to retain power quotas

On 14 October National Assembly President and PSUV leader, Diosdado Cabello, revealed an audio between Harvard Professor and Venezuelan Economist, Ricardo Hausmann, and Polar Enterprises (most important private company in Venezuela) President, Lorenzo Mendoza. In the piece – which veracity was confirmed by Hausmann himself – the conversation goes around what an IMF aid package for Venezuela could amount and some general guidelines that the private sector and bondholders must assume. In detail, Hausmann said to have talked with the International Monetary Fund (IMF)about a USD40bn-USD50bn bailout, with an additional USD6bn-USD11bn to come from the World Bank (WB), Inter-American Development Bank (BID in Spanish) and the Andean Corporation of Development (CAF in Spanish). In addition, the program would include “private sector involvement” and a debt restructuring with a-so-far-disclosed write-off (haircut) on the foreign currency denominated debt.

Of course, this is all under the assumption of a hypothetical transitional government that will knock the IMF’s door. We’re not going to discuss whether an IMF bailout is the most convenient path for Venezuela in what could be a Hausmann-Rogoff VS Stiglitz economic theory discussion, but rather we will analyze the political and even social viability of an IMF intervention. Nonetheless there’re several “clear” things: 1) there are confronted opinions inside MUD’s economic team about the IMF issue and even more confronted among outsider consultants, 2) a debt restructuring seems more likely by the day in the case that Venezuela and PDVSA is not able to repurchase 2016 and 2017 maturities. All-in, we still have as base scenario (closely followed by a restructuring) that both issuers will be able to honor its debt service. Local color from the government tells they are confident about paying in 2016 for instance.

http://www.banctrust.com/research-reports/venezuela-weekly-report/