From a speech by Venezuelan President Nicolas Maduro this weekend:
There is no possibility of default, unless we would decide to not pay anymore as part of an economic strategy for development, and that’s not the strategy that has been constructed in these years of economic thought laid out by Hugo Chavez.
It’s good to know that Venezuela will not default, unless it decides not to pay anymore “as part of an economic strategy development.” You can certainly hasten development, at least in the short term, by not paying your creditors. Markets are skeptical of the Venezuelan government’s resolve. Its benchmark bonds, according to the article in Bloomberg, are trading at 37.835 cents on the dollar, and the pricing on credit default swaps implies a 97 percent chance of default in the next 12 months. Venezuela will be the first sovereign casuality of the oil price drop; the betting here is that it won’t be the last. Even at 37.835 cents on the dollar, anyone who wants to speculate on Venezuela’s bonds had better have strong nerves, infinite patience, and top-flight lawyers; sovereign defaults tend to get very messy.