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How to Restructure Venezuelan Debt (¿Cómo restructurar la deuda venezolana?)

37 Pages Posted: 27 Jul 2017 Last revised: 22 Aug 2017

Lee C. Buchheit

Cleary Gottlieb Steen & Hamilton LLP - New York Office

G. Mitu Gulati

Duke University School of Law

Date Written: July 21, 2017

Abstract

English Abstract: There is a growing consensus that Venezuela will not be able to persist for much longer with its policy of full external debt service. The social costs are just too great. This implies a debt restructuring of some kind. Venezuela, principally through its state-owned oil company, Petróleos de Venezuela, S.A. (“PDVSA”), has extensive commercial contacts with the United States. Not since Mexico in the 1980s has an emerging market country with this level of commercial contacts attempted to restructure its New York law-governed sovereign debt. Holdout creditors in a restructuring of Venezuelan sovereign debt will therefore present a serious, potentially a debilitating, legal risk. The prime directive for the architects of a restructuring of Venezuelan debt will be to neutralize this risk.

Spanish Abstract: Existe un creciente consenso que Venezuela no podrá continuar durante mucho más tiempo con su política de cumplimiento total del servicio de su deuda externa. Los costos sociales son simplemente demasiado elevados. Esto implica necesariamente algún tipo de restructuración de su deuda. Venezuela, fundamentalmente, a través de su empresa estatal petrolera, Petróleos de Venezuela, S.A. (“PDVSA”), mantiene amplios contactos comerciales con Estados Unidos de Norteamérica. Desde el caso de México en los años 1980, no ha habido ningún otro país emergente con un nivel similar de relaciones comerciales como los de Venezuela que haya intentado restructurar su deuda soberana regida por la legislación del estado de Nueva York. En una restructuración de la deuda soberana venezolana, los acreedores intransigentes, denominados “Holdouts”, constituirán un riesgo legal grave y potencialmente debilitante. El objetivo principal de los arquitectos de la restructuración de la deuda venezolana será neutralizar este riesgo.

Notes: Downloadable document is in English and Spanish.

Keywords: Venezuela, Sovereign Debt Restructuring, Bankruptcy, Contracts

JEL Classification: F33, F34, H63, H12, H81, K12, K22

Suggested Citation

Buchheit, Lee C. and Gulati, G. Mitu, How to Restructure Venezuelan Debt (¿Cómo restructurar la deuda venezolana?) (July 21, 2017). Duke Law School Public Law & Legal Theory Series No. 2017-52. Available at SSRN: https://ssrn.com/abstract=3006680

Lee C. Buchheit

Cleary Gottlieb Steen & Hamilton LLP - New York Office ( email )

One Liberty Plaza
New York, NY 10006-1470
United States

Gaurang Mitu Gulati (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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