Venezuela Facing Default (Again)

Bloomberg: Venezuela's Default Risk Is Rising

* Nation’s reserves haven’t fallen below that level since 2002
* Political tension spikes as Maduro plans new constitution

Bets on a Venezuelan default are climbing as international reserves slump toward $10 billion amid anti-government protests and President Nicolas Maduro’s push to rewrite the constitution.

The implied probability of the country missing a payment over the next 12 months rose to 56 percent in June, according to credit-default swaps data compiled by Bloomberg. That’s the highest level since December. The odds of a credit event over the next five years increased to 91 percent last month.

Maduro, who has faced three months of violent protests that have left almost 80 dead, has drastically cut imports of food and medicine in order to conserve the cash needed to pay bondholders with declining oil prices and production. That hasn’t stopped a drop in reserves, which usually provide investors with a certain degree of assurance that the government will avoid default in the short-term. Recent deals to provide the government with liquidity have only resulted in minor spikes that have disappeared quickly.

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WUN Editor: Venezuela will continue to use its oil reserves as collateral to raise money .... albeit at horribly costly rates and conditions to avoid going BK. The main problem is political, and an unwillingness to institute the badly needed reforms to energise the economy.