Two weeks after signing a long-term debt-refinancing agreement, Venezuela will seek easier repayment terms because of a financial crisis caused by falling oil prices, President Jaime Lusinchi announced here today.
"As soon as we can get more stable predictions with respect to the oil market, and in light of the evaluation we received, we will invoke the contingency clause to ask for a revision of the terms to new parameters," Lusinchi said in his State of the Nation address.
The contingency clause allows Venezuela to demand easier payment terms in the event of a severe economic setback, such as the collapse of oil prices.
Venezuela, a leading producer in the Organization of Petroleum Exporting Countries, is expected to invoke the contingency clause within two months.
Lusinchi, who last week chopped this year's oil-income estimate by one-third, to $8.5 billion, said that Venezuela cannot meet debt payments and domestic spending needs under the current debt terms.
Despite attempts to diversify the economy, oil income still accounts for 90 percent of foreign reserves and 60 percent of domestic government revenue.
Bankers said they were willing to discuss relaxing the agreement, which refinances $21.2 billion of Venezuela's public-sector foreign debt over the next 12 1/2 years. The agreement was signed Feb. 26 in New York City after three years of negotiations.
"The banks recognize that Venezuela is being buffeted by falling oil prices, and that this is something outside of the government's control," said one U.S. banker here. "We recognize that Venezuela needs help."
Venezuela's 450-odd creditors have been flexible before, agreeing in February to postpone 1986 debt payments on principal for two years. This reduced Venezuela's 1986 payments by almost $1 billion, to $4.2 billion.
Many analysts here thought that Venezuela would be able to ride out the oil crisis, since it has $16 billion in foreign reserves, easily the most in Latin America. But Energy Minister Minister Arturo Hernandez Grisanti said last weekend that the average price for Venezuelan oil has declined to about $16 per barrel, from $28 per barrel on Jan. 1.