Venezuela is trying to force through one of the most complex debt restructurings ever attempted, with claims approaching $200 billion, even as last month's earthquakes killed more than 3,000 people and damaged hospitals, schools and other infrastructure.
Who Pays First
The people at the bottom are already paying. The earthquakes hit an economy that has been battered for years, and the damage is estimated at $7 billion. That blow lands on top of a recovery that was already crawling, with the country’s economy contracted by an estimated 75% since 2013 under the weight of sanctions, corruption and years of underinvestment. Now Caracas wants to move fast on the debt of the sovereign and state oil firm PDVSA, launched in May, with bondholders saying the early stages could be secured as soon as November to unlock billions in investment in oil, power and other sectors.
That’s the language of the apparatus: unlock investment, secure recoveries, restore market access. The people living through the wreckage get the bill.
Debt experts say the rush itself is the danger. Mitu Gulati, a sovereign debt expert and University of Virginia professor, called it "the most complex sovereign debt restructuring of my lifetime" and said, "I've never seen anything done like this." He’s talking about a pile of claims that includes arbitration awards, oil-backed loans by China, bonds and past-due interest, all wrapped in opacity because Venezuela has not published full debt or economic statistics for years.
Numbers for the Creditors, Not the Public
At the center of the process is a Debt Sustainability Analysis, or DSA, the kind of accounting ritual that decides what lenders can expect to recover. Lee Buchheit, a veteran sovereign debt lawyer who has represented many countries in restructurings since the 1980s, said the timeline is far too short for a credible DSA. He warned that authorities may be eager to signal a return to international markets and avoid a more rigorous International Monetary Fund-led assessment that could reduce recoveries.
Buchheit, who was hired in 2019 by then-opposition leader Juan Guaido to advise on a debt restructuring, said, "What may be presented as a DSA will in fact just be a manufactured set of numbers that appears to support some form of bond restructuring." He added that could spell trouble down the line. That’s the whole game in one sentence: numbers assembled fast enough to satisfy creditors, not necessarily to reflect reality.
Analysts estimate Venezuela’s total liabilities at nearly $200 billion. Greece’s restructure of its $200 billion debt took roughly a year after its 2012 default. Here, the pressure is to move even faster. Venezuelan government officials did not respond to Reuters requests for comment.
Earthquakes, Then the Debt Machine
The earthquakes have made the situation worse in ways no spreadsheet can smooth over. The need to fully assess the damage adds another layer of complexity, and Sintesis Financiera, a Caracas-based financial consultancy, said the government should pause the process because using economic data and assumptions made before the earthquakes would be a "costly mistake" that risked underestimating the debt relief required.
Joan Domene, Oxford Economics' chief economist for Latin America, said the earthquake damage is a "massive blow" to an economy already facing a slow recovery. He said, "It will make the case for the government to plead for an even bigger haircut," referring to the loss creditors take when debt is restructured. In other words, the wreckage on the ground becomes leverage in a negotiation over who absorbs the losses.
Caracas announced in May that it had hired Centerview Partners and aimed to complete the DSA by end-June. Investors now expect it this month. The IMF said it was not involved in Venezuela's restructuring, and the lack of an independent audit for the figures has deepened concerns about credibility. Centerview Partners declined to comment.
Christopher Sabatini, Chatham House's director of the Latin America Programme, said, "If you don't have a process that can be verified by independent observers, the IMF, then you run the risk of cronyism and corruption." That’s the polite version of what happens when the powerful write the numbers and call it discipline.
The Financial Times reported last month that Venezuela's debt burden could reach $240 billion, $40 billion above previous estimates, without explaining the additional amount. That alarmed some creditors and spurred calls for IMF involvement. Elina Theodorakopoulou of Manulife Investment Management, which holds Venezuelan bonds, said, "It's right to have a healthy degree of skepticism. But surely you would believe that the people that are putting that together realize the significance of doing that credibly."
What They Call Recovery
Venezuela has been in limbo for years, according to Rodrigo Olivares-Caminal, professor at Queen Mary University, who is advising some private investors on Venezuela. He said, "We want to unlock funding...(but) publish a DSA that will not be contested." That’s the real demand from the top: a process that can survive scrutiny just long enough to move money.
Gulati said, "If you give away all of your goodies now... my worry is that we're just pushing the real restructuring problem down the road." The warning hangs over the whole operation. A rushed deal may satisfy bondholders and signal a return to international markets, but the country still faces the earthquakes, the damaged infrastructure, and the long shadow of a debt load that could trap it for decades.
The state, the advisers, the creditors and the institutions are all circling the same wreckage. The people who lost homes, hospitals, schools and basic stability are left waiting while the debt machine tries to turn catastrophe into a clean balance sheet.