The Strange Case of Venezuela’s National Debt

Venezuelan economist Luis Salas wades through a sea of politically motivated alternative data and a lack of official figures to evaluate the issue.


As is the case with most of the complexities of Venezuela’s economy, the exact amount of the country’s national debt is unknown. This is not surprising, as the lack of official up-to-date data is also evident in a range of other sensitive issues, including the national budget.

The most up-to-date official figure available is from October 2019, when the Venezuelan Central Bank (BCV) published the total external debt up to the first quarter of that year. The BCV placed it at US $110.1 billion, of which US $91.5 billion was public sector and the rest was private sector debt.

A couple of years earlier, in June 2017, the National Public Credit Office (ONCP) published its last report in which it stated that the government’s national debt – not including [state-run oil corporation] PDVSA – amounted to US $143.4 billion. Of those US $46.4 billion corresponded to external debt and US $97 billion to domestic debt.

Consequently, the only official debt indicators available to analyze today are these partial updates: the BCV referring to the external debt two years ago and the ONCP from four years ago.

As is to be expected, in the midst of this official statistical blackout, parallel indicators have proliferated. But one should remember that the figures offered by analysts and the press are not very precise, to the point that they differ from each other by several billion dollars. No small disparity!

To this lack of precision we must add additional uncertainties generated by political interests behind many of these figures. Also no minor detail. Likewise, personal interests are involved: several of those who publicly reveal figures are employees of the creditors or the creditors themselves. In other words, interested parties.

An additional issue which is no less important is that the institutional architecture that goes with the process of taking out a loan first and paying it later is complex and makes it difficult for ordinary people to track. After sanctions appeared in 2015, this complexity was doubled. Today, under the protection of the Anti-blockade Law, state secrecy in public domain matters is part of our new political-institutional normality.

A more technical approach must bear in mind that the differences between the amounts may derive from the concepts that are included when talking about Venezuelan debt.

In the case of external accounts, for example, some calculations include not only public debt (acquired by the state) but also private debt. The issue with this is that although it is correct to assume both as debts the country holds, private debt should not be counted as public in the sense that it is not the responsibility of the state to pay it. Some, who are confused or look to confuse, make this mistake.

Additionally, in the case of debt acquired by the state, sometimes only so-called sovereign debt is counted (issued by the BCV through bonds). However, this ignores debt generated directly by the executive through bilateral agreements with governments, multilateral organizations or with private banks, as well as bonds issued by PDVSA and other public companies. There are also commercial debts with public and private providers and, for some time now, debts derived from litigation in nationalizations and expropriations cases.

Finally, the fact is that external debt is not the only Venezuelan state debt which should be taken into account: a no less important amount is internal, derived from bonds and other loans generated by individuals in the country.

In short, the reality is that these factors combine to make Venezuela’s debt and everything about it a mystery. Specifically, regarding the amounts, no one outside those who directly handle the issue can properly say how much it is since the official information is incomplete and out of date while unofficial information is imprecise and biased.

If it is now known how much is owed, is it at least known how much has been paid?

If it is already difficult to find out how much Venezuela owes in public debt, we should add to that the fact that we do not know how much has been paid in recent years with any certainty. The little that we know offers more questions than answers.

In this regard, President Nicolás Maduro offered valuable information as a starting point to reconstruct what happened in his annual address to the National Assembly earlier this year. We cannot say that the data offered by the president is, strictly speaking, an indicator, since it is not published anywhere that can be publicly verified, but who is more authorized than the president to speak on the matter?

On January 12, during his speech, just when he denounced the effects of the sanctions and the blockade, President Maduro said the following:

In the midst of all this, Venezuela has historically demonstrated its willingness to administer debt and its recognition of its external commitments at a financial level. We Venezuelans are responsible people who honor our obligations, and proof of this is that during the period 2013-17, during which I have been president, the country paid the creditors of our external debt a total of US $109.6 billion despite the economic war and sanctions.

However, the BCV indicates that by the end of 2012, the public sector’s external debt was US $110.8 billion. This would mean, according to the president, that between 2013 and 2017 practically all of the external debt contracted up to 2012 was paid.

Obviously – despite the enormous sacrifice that such an outlay would have meant in the midst of a situation as critical as the one we have experienced – this would be extraordinary news for the future of the country.

Yet when the complete picture is reviewed, it turns out that the BCV at the end of 2017 reported a reduction in foreign debt of only US$18.8 billion, going from US $110.8 billion at the end of 2012 to US $91.9 billion at the end of 2017. This figure remained practically unchanged up to the last reported by the bank for the first quarter of 2019 when it was US $91.5 billion.

What this seems to mean is that the data offered by the president is not based on the information published by the BCV. This does not mean that the president’s statement is false; all it means is that the BCV does not reflect the data for the same period while bearing in mind that we are talking about data that is two years old.

On the other hand, there are several potential explanations for the lag, including the fact that some of the payments were paid through the emission of new debt. Another fact is the extraordinary interests generated by the political manipulation of the country’s risk indicator by the rating agencies – to which the financial siege was later added within the framework of the blockade – which shot up interest on loan payments.


A debt that grows the more you pay?

As long as this lack of transparency exists, speculation will fly and national uncertainty will increase. These facts don’t contribute to the normalization of the political conflict and much less to economic recovery.

  • In 2017, a special report from news portal Prodavinci cited data from the economist Miguel Ángel Santos (an advisor to [opposition front man] Juan Guaidó and member of [Harvard economy professor] Ricardo Hausmann’s team, apart from being a well-known representative of Venezuelan debt holders). According to Santos, Venezuela’s external debt was estimated at US $184.5 billion, of which US $112 billion corresponded to the state (central government / BCV) and the rest to PDVSA.

  • In June 2019, Francisco Rodríguez, [US based financial firm] Torino Capital’s chief economist, former ministerial candidate for Henry Falcón in the 2018 presidential elections and one of the most exalted representatives of the holders of Venezuelan debt, estimated external debt to be US $150 billion.

  • Santos again estimated Venezuela’s debt in April 2019 at US $157 billion.

  • In August of the same year, the National Assembly’s Economic Commission − with an opposition majority at the time − estimated the external debt to be at least US $130 billion.

  • In a 2020 report, neoliberal think-tank CEDICE reported that “The government’s external debt (state bond debt plus PDVSA, arbitration awards and expropriations) is approximately US $162 billion.”

  • According to the World Bank, Venezuelan foreign debt at the end of 2019 amounted to US $160 billion.

  • Bloomberg Agency estimated Venezuelan foreign debt at US $160 billion in the introduction to journalist Erik Schatzker’s interview with President Nicolás Maduro.

For a blocked and harassed country that has probably lost 80% of the size of its economy over seven years and with its main source of income (oil) at its lowest historical levels, economic recovery cannot be seriously considered with a debt that may be twice the size of its current GDP.

Of course, we can always discard these estimates due to their political motivation (they surely are politically motivated). Nonetheless, the underlying problem is that as long as the informational and statistical gaps persist, there will always be room for politically motivated data to sneak in. The problem is not necessarily that this data generates “noise” or “confuses” people, but that the formulation of economic policy is influenced by it. To give an example, a good part of PDVSA’s current privatization process is based on the high level of debt that the company currently holds.

Last but not least, another two issues should be clarified: the origin of the debt and opposition leaders’ actions in aggravating the problem.

Regarding the first, it must be clear that although debt administration – which includes its payment – is the responsibility of the government, its origin is not. As of December 31, 2012, taking into account what was reported by the ONCP, the BCV and PDVSA, the total amount of public debt was around US $177.8 billion, which includes the internal debt. Strictly speaking, it was a manageable number. According to the World Bank, Venezuela’s GDP at the end of 2012 was US $381 billion, with debt representing only 46% of this figure. This is considered moderate by international standards (Spain’s debt for that same year amounted to 84% of its GDP).

The problem is that almost all of the debt was generated during a period in which oil revenues grew greatly. The most striking case is that of PDVSA, a company that generated a large part of its debts through bonds payable in dollars but issued in bolivars, and in so doing favored many of the holders who acquired the bonds in secondary markets to maximize profits by speculating against the bolivar. Another complex issue is that of deadlines. More than half of the debt with China was generated over three years, concentrating payment commitments into a short period of time. They could have been better distributed.

Had it not been for the abrupt drop in oil prices and extraction and all the post-2012 harassment, the debt might not have been a problem. But we already know that that was not the case. Even under ideal conditions, it was an extremely risky move based on unrealistic expectations that the oil market would grow indefinitely.

It is true that the government can be criticized for the fact that the strategy of paying debt maintenance regularly did not produce the expected results since it did not prevent the country’s risk ratings from increasing. In the long run it did not keep the country from falling into default either, nor did it enable debt restructuring, which would have allowed the government to negotiate in better conditions. It did, however, come with a sacrifice of resources that the country needed and which may have allowed Venezuela to better overcome the socioeconomic default to which the political conflict and blockade led us. However, it is also true that the debt was a largely inherited problem that had to be solved under far from normal conditions. PDVSA chiefs of the time owe us a convincing explanation of why such a debt was accumulated between 2004 and 2011 under such rigid conditions and based on such optimistic expectations for a historically volatile market such as oil.

Regarding the role of opposition actors in all this, it is a well-known fact that – as part of their efforts to seize power through non-legal means – they allied themselves with anti-national factors and used all weapons to affect governance. This included not only promoting and then supporting the economic blockade against the country, but also serving as instruments to deprive the state of very valuable assets, including the payment booty of hostile creditors.

In short, much has to be clarified about this topic. It cannot be reduced to wanting to pay the debt or not, to being able to pay it or not, because current policy has already cost us a lot and it will cost us even more to continue. If any issue may determine the country’s future, it is this: the satisfactory and fair resolution of the debt issue.

Luis Salas Rodriguez is an economist and sociologist, as well as being a lecturer and researcher at the Bolivarian University of Venezuela (UBV). He has also briefly served as the minister of productive economy and economic vice president in 2016.

Translation by Paul Dobson for Venezuelanalysis.

The views expressed in this article are the author’s own and do not necessarily reflect those of the Venezuelanalysis editorial staff.