By MARY ANASTASIA O’GRADY
Venezuelan bond prices swooned last week on renewed speculation that the government of President Nicolás Maduro might soon default on as much as $80 billion of foreign debt. The yield on the government bond due in 2022 hit a six-month high of 15.8% on Sept. 9. David Rees of London-based Capital Economics, who last year warned of the risks of falling oil prices to Venezuelan solvency, told Bloomberg News by telephone that “the bond market is finally beginning to wake up.”
That may be true. It’s clear that the foreign exchange that Venezuela earns from oil exports cannot pay its import bills along with debt service. There are dire shortages of industrial and consumer goods as well as services. Something has to give and odds are that allowing the required adjustment to the economy won’t be the government’s first choice.