The Daily Journal — Venezuela’s National Academy of Economic Sciences (ANCE) has warned that the country will require a “significant reduction in the nominal value of its debt” and support from multilateral institutions such as the International Monetary Fund (IMF) if it hopes to achieve a viable and internationally credible restructuring of its external obligations.
The academy issued its statement after authorities announced the start of the debt restructuring process for both the Republic of Venezuela and Petróleos de Venezuela, S.A. (PDVSA) on May 13.
ANCE noted that Venezuela faces a particularly complex situation because the Republic, PDVSA, Corpoelec, and Sidetur have remained in default since November 2017.
The institution argued that, without a favorable agreement with creditors, the country risks extending its financial isolation.
“If the country does not negotiate debt service under favorable conditions, it will remain trapped in financial isolation that will hinder its domestic recovery,” the academy stated.
The statement comes in the context of General License 58 issued by the U.S. Office of Foreign Assets Control (OFAC), which has opened avenues for negotiations involving Venezuelan liabilities.
ANCE also highlighted the appointment of U.S. financial advisory firm Centerview Partners and law firm Hogan Lovells US LLP as advisers to the restructuring process, as well as the restoration of relations between the Venezuelan state and the IMF.
Although the institution acknowledged the lack of updated official figures on the consolidated debt burden, it noted that independent estimates indicate obligations that exceed the country’s current and future repayment capacity.
“It is both foreseeable and essential to negotiate a significant reduction in the nominal amount of the debt,” the academy stated, arguing that economic reconstruction and the fulfillment of social needs will require substantial resources in the coming years.
ANCE also insisted that any negotiation must form part of a comprehensive economic program.
“It is mandatory for negotiations to take place within a formal program for economic recovery, stabilization, and growth,” the document stated. It also called for deep institutional reforms and explicit support from the international financial community.
Among the priorities identified by the institution is the updating of national economic statistics, which international organizations have not received since 2004.
“The validation of the country’s national and fiscal accounts” constitutes an urgent and necessary step toward accurately determining the magnitude of the financial obligations that the state will ultimately assume, the academy noted.
The institution also called for independent specialists to lead the claims-reconciliation process under transparent criteria and urged authorities to include all eligible external public debt in the restructuring to guarantee equal treatment among creditors.
In addition, ANCE emphasized the need to design legal mechanisms that reduce the risk of future litigation and neutralize potential actions by dissenting creditors, commonly known in financial markets as holdouts.
Regarding the role of multilateral institutions, the academy described IMF participation as a fundamental condition for restoring confidence in international markets.
“IMF participation constitutes an indispensable condition for providing international credibility to the process before global markets,” the academy stated.
The institution also recalled that both the IMF and the World Bank have previously classified Venezuela as a country facing social and institutional fragilities. This designation could facilitate access to specialized technical assistance and financing programs tailored to complex crises.
Finally, ANCE urged the country’s authorities to approach the issue “with the seriousness and urgency it requires” and to pursue a comprehensive negotiation strategy that places “the national interest at the forefront and serves as an effective engine for Venezuela’s long-overdue economic and social reconstruction.”
