Venezuelan President Nicolás Maduro announced on Sunday that he will visit China and several unspecified OPEC countries during a week-long tour aimed at improving the South American nation’s finances, which have fallen under pressure amid a tumble in oil prices.
“I’m leaving today for an international tour … a very important tour to take on new projects, given the circumstances of falling income that our country faces,” Maduro said during a televised broadcast on Sunday.
Maduro said that the first stop during his trip will be in China, where he will hold talks on energy matters and financing with Chinese President Xi Jinping.
China has become a key partner for Venezuela as it is now the nation’s principal financier through oil-for-loan agreements where Venezuela receives cash in exchange for future deliveries of crude and fuel.
“Also, I’m going to visit other OPEC countries to continue high-level efforts (to create) a strategy for a recovery of oil prices, a strengthening of OPEC,” Maduro said.
On Tuesday, Venezuela’s Central Bank announced that the nation’s gross domestic product (GDP) had contracted in the first three quarters of 2014: -4.8% in the first quarter, -4.9% in the second quarter, and -2.3% in the third quarter.
Venezuela’s Central Bank also announced that the nation’s twelve-month inflation had reached 63.6% in November.
The tumble in oil prices has raised concerns that Venezuela could default on its foreign bonds.
In a recent report Societe Generale (SocGen) said that Venezuela is likely to default in 2015, with some probability in the first quarter of this year and with a “high probability” in the fourth quarter of this year.
Petroleos de Venezuela, the state-owned oil company, needs to make $12 billion of interest and principal payments on hard currency debt in 2015. In order to pay such payments, they will need to tap into the nation’s already dwindled international reserves ($21.4 billion), while at the same time providing dollars to cover imports.
“At these debt levels, they may run out of reserves very quickly,” Regis Chatellier, a credit strategist at Societe Generale said. “They have to continue to import because there’s no substitution, but at the same time they need to pay external debt. They can’t sustain that. They won’t make it.”
Two weeks ago Fitch Ratings cut Venezuela’s credit rating by three levels – from ‘B’ to ‘CCC’ – amid the sharp fall in global oil prices and the nation’s dwindling International reserves of $21.4 billion – which are around half the level of end-2008 when Venezuela last faced a sharp fall in oil prices which led to the global financial crisis.
Last week Bank of America warned that Venezuela needed to devalue the nation’s currency, the bolivar, or risk inflation topping 1,000 percent as early as this year.