Venezuela's Potential Debt Restructuring and Economic Recovery Efforts: Some Key Legal and Policy Challenges
| Autor | Steven T. Kargman |
| Cargo | Founder and President of Kargman Associates, a New York-based international restructuring advisory firm |
| Páginas | 163-190 |
Venezuela’s Potential Debt Restructuring
and Economic Recovery Efforts: Some Key Legal
and Policy Challenges
Steven T. kargman*
RVLJ, N.º 13, 2020, pp. 163-190.
Sumario
1. Role of Venezuelan Professionals in Addressing the Crisis
2. Brief Overview of Key Issues 3. Major Issues in a Debt
Restructuring/Economic Recovery Scenario 3.1. Debt Res-
tructuring 3.1.1. Applying Standard Restructuring Tools and
Techniques 3.1.2. Applying Less Commonly Used Sovereign
Debt Restructur ing Tools and Techniques 3.1.2.1. Debt-for-
Equity Swaps 3.1.2.2. Potential Invalidation of Recent Debt
Issuances 3.2. Insolvency Matters: Reorganizing Pdvsa and In-
sulating Pdvsa from Creditor Actions 3.3. Economic Recovery
–Reviving the Venezuelan Oil Industry– 3.4. Economic
Recovery –Diversifying Venezuela’s Economy– 3.5. Asset
Recovery Conclusion
* Founder and President of Karg man Associates, a New York-based international res-
tructu ring advisor y firm. He for merly served as the Gene ral Counsel of the New
York State Financial Control Board and Lea d Attorney of the Expor t-Import Ban k
of the United States. Th is article draws on a four-part series of ar ticles by the author
published in following issues of The Int ernational E conomy: Fall 2018 («Venezuela
Needs Debt Restr ucturing» pp. 58-61), Spring 2019 («Venezuelan Debt Conu ndrum»
pp. 38-41, p. 56), Summer 2019 («Oh! What a Tangled Web» pp. 50-55), and Fall
2019 («Shrinking Pie» pp. 52-56). BA, Swarthmore College ; JD, Yale Law School.
164 Revista Venezolana de Legislación y Jurisprudencia • N.o 13 • 2020
Unfortunately, Venezuela is currently facing an unprecedented crisis on
a truly tragic scale. It is first and foremost a grave humanitarian crisis, with
untold suffering on the part of the Venezuelan people resulting from wides-
pread malnutrition, growing poverty, the spread of otherwise preventable
diseases such as malaria, a nd a breakdown of Venezuela’s health care system.
Beyond that, it is also a major financial and economic crisis. By many di f-
ferent indicators, the Venezuelan economy is in a state of virtual collapse,
with the economy estimated to have contracted by approximately fifty
percent or more in recent years1. As many observers have noted, the contraction
of the Venezuelan economy is even greater tha n the contraction experienced by
the US during the Great Depression2.
Among many major economic and financial woes, Venezuela is suffering
from serious hyperinflation, a deeply devalued currency, high unemploy-
ment, and dwindling foreign exchange reserves. Venezuela is also facing
what is considered to be a completely unsustainable debt burden with
outstanding debt that is believed to exceed one hundred fift y billion dollars3.
1. Role of Venezuelan Professionals in Addressing the Crisis
For Venezuela to tackle the huge challenges it is now facing, it will need
a cadre of top-notch professionals from Venezuela who are public-spirited
and can bring a wealth of experience and knowledge to bear in addressing
these challenges. In this section, I will br iefly discuss the role that Venezuelan
professionals, particularly Venezuelan lawyers, can play in helping resolve
1 See, e.g., kurmanaeV, Anatoly: «Venezuela’s Collapse Is the Worst Outside of War
in Decades, Econom ists Say», The New York Times, May 17, 2019.
2 See, e.g., Vyas, Kejal: «Venezuela Quietly Loose ns Grip on Market, Tempering
Economic Crisis», Wall Street Journal, September 17, 2019, «… cautiously begun
implementing fre e-market policies to tame hyperin flation and correct an economic
contraction worse th an America’s Great Depr ession…».
3 For background on Venezuela’s current economic plight, see, e.g., Colleen Walsh,
«Understanding Venezuela’s Collapse», The Harvard Gazette, February 12, 2019
(interview with P rofessor Ricard o hausmann, Ha rvard University) .
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