Venezuela will attempt to stretch out payment of at least $9 billion of debt that falls due this year by seven to 10 years, and may sign a stand-by agreement with the International Monetary Fund, Finance Minister Arturo Sosa said today.
"We hope to refinance 90 percent of the short-term debt and a fraction of the long-term debt," Sosa said after he and other officials held an all-day meeting Wednesday with a 12-bank advisory group. According to Venezuelan government figures submitted to the bankers, $13 billion of a total public-sector foreign debt of $26.7 billion matures this year. Of the $13 billion, there is $10.8 billion in short-term debt.
Last week, Venezuela notified banks that, with some exceptions, it would not make principal payments on more than $4 billion of foreign debt maturing up to July 1. The 90-day moratorium is meant to allow time to complete negotiations with bankers on the restructuring of the debt, according to Maritza Izaguirre, Venezuela's planning minister.
As part of the refinancing effort, Sosa said Venezuela "probably" will enter into a standby agreement with the International Monetary Fund. The IMF, which recently made its annual inspection visit to Venezuela, will present the government with its recommendations in Caracas Tuesday. Sosa previously had told bankers that Venezuela could draw on the $1.2 billion it holds in the IMF if the country's attempt to refinance its debt faltered.
Sosa told bankers that Venezuela expects to cope with an expected $3 billion shortfall of petroleum revenue and a resulting balance-of-payments deficit by vastly reducing imports and adopting an austerity budget. According to government projections, Venezuela, which posted a $2.2 billion current accounts deficit in 1982, will reduce it to $200 million in 1983 and will be able to show a $1.7 billion surplus by 1985.
After hearing the Venezuelan presentation, the advisory group recommended that Venezuela offer rates of 1 1/4 points over the London Interbank Offered Rate and 1 1/8 points over the U.S. prime rate to banks willing to go along with the country's refinancing plan.
Bankers from the advisory group said that the "arrogance" that previously had characterized Venezuela's dealings with the financial markets was not present, and added that the presentation of the Venezuelan team had been impressive. "Their approach to financial markets for a long time has not been realistic," one banker said, referring to Venezuela's decision last June to turn down a $2 billion credit because the country thought the pricing was too high. "There is no quibbling now about one-eighth of a point," he said.
"Major banks will cooperate with the country's effort to refinance the debt," one banker said. "The question, as has been the case in the past, is whether U.S. regional banks and small non-U.S. banks will go along." Venezuela's case has been hampered particularly by bad debt management, which led to a small flurry of lawsuits last January when the Corporacion Venezolana de Fomento, the government development agency, was unable to pay loans it had guaranteed, he added.
"Superficially, the country looks worse than it is," he said. "Their situation is not like that of Mexico or Argentina. It is akin in that it cannot pay principal according to the schedule, but not as bad."
Meanwhile, Chilean officials in New York met for the third day with their bank creditors in an attempt to reach agreement on a stretch-out of $3.5 billion of debts due in 1983 and 1984 and a requested new loan of about $900 million, sources said.
The talks have been described as "tough," and covering the interest rates that will be charged on the refinancing, the issue of whether the Chilean government will take over the large private sector debts, and the details of Chile's new economic and financial plan.