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PDVSA ...facing difficulties.

Venezuela reaches 'better' oil loans deal with China

CARACAS, May 17, 2016

Venezuela has reached a deal with its main financier China to improve the conditions of an oil-for-loans deal, giving the Opec member's crisis-hit economy "oxygen" ahead of heavy debt payments, its top economic official said.

Venezuelan Economy Vice-President Miguel Perez told Reuters that all conditions, including loan time frames, investment amounts and non-financial aspects, had been improved.

China has lent some $50 billion to Venezuela in that arrangement over the last decade, and markets are watching to see if Beijing will help President Nicolas Maduro's socialist government as it struggles with recession, shortages and reduced oil revenue.

"Today we can say that we've agreed to new commercial conditions that are adapted to the country's reality," Perez said in an interview in his office at the Industry Ministry, which he also heads. He declined to elaborate.

Better terms with China would be hugely useful for Venezuela, given that low oil prices mean the South American country would be required to send more barrels to meet its obligations.

Oil is trading at nearly $50, about half the levels in mid-2014, although prices have risen almost 80 percent this year.

"This will give the country important oxygen to go forward," added Perez, a former industry association leader who became economy czar in February, replacing a hard-line socialist who lasted only a month.

Chinese Foreign Ministry spokesman Hong Lei told a regular press briefing on Tuesday that both sides "agreed to add more flexibility to strengthen financing cooperation", but he did not give details.

Perez said the improved China deal, as well as a steep cut to imports and a new, weaker foreign exchange rate, would help Venezuela crawl out of a "very complicated" semester.

The economy was likely to remain in recession until the end of 2017, he added.

Venezuela's struggling state-led economic model and the fall in oil prices have triggered severe shortages of food and medicine, triple-digit annual inflation, and a slowdown in local business activity.

Maduro blames an "economic war" launched by right-wing businessmen and opposition politicians seeking to sabotage him.

The dire economic situation has led to market speculation that Venezuela, with the world's biggest oil reserves, or its state oil company PDVSA could default.

Perez reiterated that all debt commitments would be honoured and that any refinancing of PDVSA debt would be good for bondholders.

The company's president has said PDVSA, which must pay around $4 billion this year to service debt, was in talks with international banks over refinancing debt.

Perez said Venezuela could offer assets to guarantee bonds issued under a potential refinancing. - Reuters




Tags: China | Energy | Venezuela |

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