The three-tier exchange control system decreed by Venezuela on Monday has been an unpleasant surprise for international bankers. At first they lauded the measure, but now they feel that it will force a rescheduling of the country's private-sector debt.
The bankers had insisted that Venezuela take some measures to stanch the outflow of dollars and other foreign currencies as a condition for restructuring the public sector's $9.2 billion in short-term foreign debt. They were initially pleased last week when Finance Minister Arturo Sosa announced that an exchange control system would be imposed.
"Bankers are breathing a collective sigh of relief that Venezuela finally is facing the tough situation that lies ahead," one representative from a major U.S. bank said last week. "Most banks have been suggesting they do something like this three months ago, which would have curbed unnecessary capital outflow."
That "tough situation" is the drop in oil prices which, together with a worldwide liquidity crunch and bureaucratic debt-management problems, has made refinancing Venezuela short-term foreign debt more difficult in the last few months.
Sosa will present bankers in New York this week with a plan that would permit Venezuela to defer payment of its public-sector foreign debt. However, he denied rumors that the country has declared a moratorium on its debt payments through March 31. "We have sent a Telex to banks saying we will continue to pay interest for the next 90 days, time for us to negotiate the debt," Sosa told reporters Monday. "When you pay interest, that is not a moratorium."
As bankers interpreted the exchange control regulations, Venezuela's private-sector banks and other borrowers must convert short-term foreign debt into four-year debt in order to obtain the most favorable dollar exchange rate. Otherwise, they would have to buy free-market dollars at a floating rate. Dollars were being sold today at the Caracas stock exchange at 7.60 Bolivar per dollar, roughly twice the preferential rate. Economists here worry that a wave of bankruptcies could result, especially among private banks and financial companies, if the private sector is forced to go to the free market.
Private-sector debt is estimated to be between $6 billion and $9 billion, with as much as $4 billion coming due this year.
"In effect, it is a moratorium on private-sector debt," said one representative of a major international bank.
"We are being told to roll over private-sector debt and, if we do not, the whole system may collapse."
However, a government economist said that the international banks "will have to go along with the refinancing of the short-term private debt. They've gone along in Mexico, Brazil and everywhere else."