March 1, 2006
Finance Minister plans debt restructure

(The Daily Journal) - "The finance minister announced his plan to reduce the country's foreign debt as a percentage of GDP in order to help the country gain 'investment grade' status.

Finance Minster Nelson Merentes spoke to reporters at a press conference and indicated the government's plan to buy back $4.7 billion worth of foreign debt. Most of the debt cancellation will come from the buyback of Brady bonds, maturing in 2020.

The government will buy back $3.9 billion in Brady bonds, more than 90% of the country's Brady bond debt.

The plan also involves paying off all debt due to the World Bank, a sum of $199 million. The buyback will help the Venezuelan government to save $670 million per year and should reduce the foreign debt load by 15% in the coming year, the minister said.

Merentes cited his primary goals as the attainment of 'investment grade' for Venezuela and the reduction of costs in order to free up more funds for social projects.

Fitch Ratings recently raised its rating of Venezuela's debt from B+ to BB-, five levels below investment grade. Fitch indicated that Venezuela's ability to pay off its debt contributed to the rise. Standard & Poor's also revised upward its Venezuela level, granting it the same rating as Brazil. Merentes noted that last week, the Country Risk Indicator for Venezuela fell to 220, an 'all-time low,' and hoped to reduce it significantly by September of this year.

Merentes also indicated plans to restructure the country's foreign debt over the next two weeks. Though he declined to give details, he noted that the plan will include pushing back maturity dates of debt coming due.

High world oil prices have contributed to windfall revenues for the government and are credited with much of the government's ability to fund social programs and pay off parts of its foreign debt".