Venezuela banks on oil and mining to finance debt restructuring

Venezuela is looking to oil and mineral revenues to finance an economic recovery and prepare for a potential restructuring of between $150bn and $200bn in external debt, according to a plan presented to the International Monetary Fund, El Universal reported.

Calixto Ortega, the government’s sectoral vice president for the economy, outlined the strategy in Bangkok during the annual meetings of the IMF and World Bank. The authorities aim to use income from natural resources to rebuild domestic industry, strengthen foreign reserves and reduce inflationary pressures.

The proposal envisages increasing crude production by reviving joint-venture wells and attracting investment through new partnerships. In mining, the government intends to formalise the development of gold, bauxite and coltan deposits to generate additional foreign-currency earnings.

Ortega said Venezuela would “very soon” publish an assessment of its debt sustainability, a preliminary step towards a restructuring of its obligations. The process was delayed by the earthquakes that struck the country in the middle of the year.

The government also wants to redirect resource revenues towards local manufacturing and reduce the economy’s dependence on imported goods. Its exchange-rate strategy centres on accumulating international reserves to support the bolívar and contain inflation.

Dollarisation, however, is not part of the plan. Ortega said it “is not the right answer for the country”, arguing that the bolívar should eventually account for all domestic economic activity. The government’s medium-term objectives include achieving that transition while bringing inflation under control, though it expects the rate to remain in double digits.