By Carlos Camacho
CARACAS — The infighting between the National Assembly (NA), the Supreme Tribunal of Justice (TSJ) and the Nicolas Maduro presidency is escalating, threatening to make it almost impossible for oil-rich but financially battered Venezuela to get new loans or even to issue fresh debt, according to lawmakers and experts interviewed by the Latin American Herald Tribune Monday.
“There is no way Venezuela can contract new debt without the National Assembly issuing a “Ley de Endeudamiento”, a law to contract debt”, National Assembly Deputy José Guerra, who heads the Finance Committee, told LAHT on Monday.
The President of the Assembly, Henry Ramos, had initiated the strategy last week, putting international investors on notice that without National Assembly approval, any such contracts were "null and void."
“Warning to foreign creditors: contracts in the national interest signed by the Chavista government without approval by the National Assembly will be null and void,” tweeted Ramos.
That tweet was followed by one from Guerra, literally seconding Ramos tweet and strategy, saying "I second what was said by Henry Ramos Allup: credits planned by Merentes [Central Bank President] and Del Pino [PDVSA head and Minister of Oil and Mining] will be null if not approved by the National Assembly. You are warned."
Guerra knows about foreign debt: besides being a Professor of Economics at the University of Central Venezuela (UCV), he worked as an official at the Central Bank of Venezuela for many years, before turning to politics last year.
He is a member of the opposition’s super-majority that won the legislative body in elections on December 6, 2015.
But the super-majority has been stymied by the Maduro government which has been using the government-dominated Supreme Court to over-rule the National Assembly and allow President Nicolas Maduro to rule by decree.
"The opposition is clearly not afraid to use the nuclear option," says Russ Dallen, an investment banker at Latinvest that has offices in Caracas. "They are running out of options."
Strapped for cash, Maduro is working to find new sources of investment. With bond debt payments of $10 billion this year, the government is even working on trying to swap old debt for new. “They will have to suspend the Venezuelan Constitution in order to do that,” Guerra said, adding that Venezuela has almost $70 billion of foreign debt outstanding.
“It is a conflict between powers and that certainly does not spell an easy debt scenario," said Victor Silva, a foreign-debt expert with Kapital Consultores in Caracas. "The only relief we have seen recently is higher oil prices — that helps a country like Venezuela a lot from a debt valuation standpoint of outstanding debt. But still, Venezuela pays more interest on its foreign debt than, say Ukraine and double the interest of a country like Ecuador."
Specifically, Guerra said that a new loan for $5 billion, which was announced by Finance Minister Nelson Merentes last week, has to go through the legislature.
“The government is saying they want to contract $5 billion in new debt from foreign banks. Well, there is no way to do that without the Assembly,” says Guerra.
And what about a truce between the Assembly and the Court to help Venezuelan finances?
“No, no truce," Guerra says. "There can be no truce regarding something like that.”
Besides being the third largest provider of oil to the U.S., the Latin American country has a large amount of outstanding debt in the market. A default, or even difficulties servicing the existing debt, on Venezuela’s part could wreak havoc on its ability to ship and collect for its oil — the country’s only source of export earnings.