White House Sanctions May Scare Off Venezuela Vulture Investors

BloombergThe Trump administration’s ban on new Venezuelan debt could scare off so-called vulture investors by making it nearly impossible for the country to restructure its obligations.

That means in the event of default — which investors view as pretty much a certainty within the next five years — the country and its creditors may struggle to come up with an agreement that would assign any value to its outstanding bonds. It also will make smaller debt swaps much more difficult to get done, possibly hastening the day of reckoning.

Such restrictions may throw a wrench into the tried-and-true methods of so-called vulture investors, typically hedge funds that swoop into a country’s distressed debt shortly before or in the aftermath of a default with the goal of extracting value from bonds too toxic for most investors. These funds may now demand a much lower price if there’s no regime change that would prompt the U.S. to lift restrictions, largely because of the complications in negotiating a restructuring. …

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During the last several decades, the United States has invested billions of dollars in trying to help the governments of Latin America and the Caribbean deliver better lives for their citizens. This has meant helping them increase internal security by combating the illicit growing and trafficking in narcotics and the activities of terrorist groups, as well as helping them to shore up their democratic and free market institutions.

Unfortunately, in recent years, continued progress in these areas has been threatened, not least by the elections of radical populist governments in Venezuela, Bolivia, and Ecuador. These governments have instituted retrograde agendas that include the propagation of class warfare, state domination of the economy, assaults on private property, anti-Americanism, support for such international pariahs as Iran, and lackluster support for regional counter-terrorism and counter-narcotics initiatives.

We are a group of concerned policy experts that fear the results of these destructive agendas for individual freedom, prosperity, and the well-being of the peoples of the region. Our goal is to inform American policymakers and American and international public opinion of the dangers of these radical populist regimes to inter-American security.