Venezuela, in oil trouble, seeking to ease debt plan, firm up markets
Battered by the sharp drop in oil prices, Venezuela is seeking concessions on its recently signed agreement to refinance its long-term foreign debt. At the same time, since oil provides 90 percent of the country's foreign exchange, it is acting to secure markets for its oil by becoming part owner of foreign refineries. The so-called ``internationalization'' policy charts a new direction for the country, which largely severed ties with foreign companies when it nationalized the oil industry 10 years ago.
President Jaime Lusinchi in late April notified foreign bankers that the country would seek easier terms on the $21.2 billion public-sector debt agreement, which was signed Feb. 26 in New York.
Mr. Lusinchi blamed the oil-price decline, saying that it has left the government without enough money either to meet debt payments or to finance public-works projects designed to pare the 15 percent unemployment rate.
The government signed the debt accord expecting that oil income would be $12.6 billion this year and higher in later years. The latest projection shows that oil revenue will be about $7.5 billion in 1986 and not much higher in succeeding years.
Bankers say they're willing to discuss concessions but warn of a possible confrontation if Venezuela insists on the deferment of the $750 million down payment of principal scheduled to be made this year.
``The banks understand that falling oil prices have hurt Venezuela and that the country needs help,'' one United States banker here says. ``But many of the smaller banks signed the debt agreement only because they were promised that the $750 million would be paid this year, so they'll strongly oppose deferment.''
Bankers say they'll discuss other changes as long as they get the $750 million, which, divided among the country's 450 creditors, will reduce their exposure in Venezuela by 3 percent each.
``If they say we'll pay the $750 million but want a deferral on principal debt payments for 1987-89, I don't think there'll be a problem,'' a second banker says.
This approach would delay more than $3 billion owed from 1987-89 to later in the 12-year agreement. The banks have already agreed to postpone the principal due in 1986, which reduced the country's debt payments this year by $1 billion, to $4.2 billion.
The Finance Ministry has declined to say what changes it will seek in the talks, expected to begin early next month.
One proposal the government is reportedly considering is to make the $750 million down payment if the larger creditors lend Venezuela an equivalent amount.
But bankers say they're cool to this idea. ``I know my bank and several other banks are not interested in increasing their exposure in Venezuela,'' the second banker says.
Complicating the negotiating stances is the price of oil, which has been on a roller coaster lately. Ironically, higher prices brighten the country's fiscal outlook but weaken the hand of debt negotiators.
In the meantime, the Lusinchi administration is seeking to ensure markets for its main foreign-exchange source by purchasing shares of foreign oil refineries under the internationalization policy.
The policy is shaped by the fear that while Venezuela, a leading producer in the Organization of Petroleum Exporting Countries, has plenty of oil to sell, it might not always find a buyer because of the fierce competition.
Earlier this year, exports fell to about 1 million barrels per day because the country could not find enough buyers for its oil.
Exports have since risen to about 1.5 million b.p.d., the country's OPEC ceiling, after price reductions. The foreign refinery deals make it less likely that Venezuela will have to cut prices to sell its oil.
Venezuela, which has been the most active of the foreign governments investing in oil refineries abroad, has carried out five deals this year, spending at least $400 million overall.
By the end of the year, these deals are expected to handle about 700,000 b.p.d., half of the country's 1.41 million-b.p.d. export target level for 1986.
In its largest and most ambitious venture thus far, Petr'oleos de Venezuela agreed in February to pay $300 million for a 50 percent partnership in Citgo Petroleum, the largest independent US oil marketer.
The deal with the Southland Corporation unit gives Venezuela access to retail outlets and a 330,000-b.p.d. refinery in Lake Charles, La., that is well suited to handling the country's heavy crude.
(The Lusinchi administration has held up the Citgo deal amid charges that Venezuela paid $50 million too much for the half share in the oil refinery.)
Venezuela has also purchased for $25 million a half share in the refining facilities of Sweden's Nynas Petroleum and bought for $11 million a 50 percent share of Steuart Petroleum, a fuel oil distributor and service-station operator in Washington, D.C. The country will send 30,000 barrels per day to Nynas and 42,000 per day to Steuart.
In another agreement, Venezuela will spend $54 million over five years to acquire interests in two refineries owned by Veba Oel in West Germany. The country already bought a share of a Veba refinery in 1983, in what was its only foreign refinery purchase before this year.
In the fifth deal, Venezuela will purchase 50 percent of Champlin Petroleum Company's Corpus Christi, Tex., refinery for an undisclosed price. Under the agreement, Venezuela can place 160,000 b.p.d.