Former Venezuelan CenBank Pres Ruth Krivoy to Deliver Keynote at EMTA Seminar on Venezuela (NYC) - January 12
EMTA SPECIAL SEMINAR: ECONOMIC AND
POLITICAL UPDATE ON VENEZUELA (NYC)
Thursday, January 12, 2017
Sponsored by
EMTA
360 Madison Avenue, 17th Floor
(on 45th St. between Madison and 5th Aves.)
New York City
3:00 p.m. Registration
3:15 p.m. Keynote Address
Ruth Krivoy
GlobalSource Partners, Venezuela and former President of the Central Bank of Venezuela
4:00 p.m. Panel Discussion
Hernan Yellati (BancTrust) – Moderator
Casey Reckman (Credit Suisse)
Jonathan Kelly (Fidelity)
Siobhan Morden (Nomura)
Mike Conelius (T. Rowe Price)
5:00 p.m. Cocktail Reception
Registration fee for EMTA members: US$95 / US$695 for Non-Members.
This event is now sold out. We hope to see you at a future EMTA event.
Former Central Bank President Krivoy Addresses EMTA Venezuela Seminar
Venezuela would continue to service its debt despite dramatic shortages and dismal economic management, according to panelists at EMTA’s Special Seminar on Venezuela. The event was held on January 12, 2017 and drew an overflow crowd of 150 to EMTA’s New York office. BancTrust sponsored the event with the additional support of Credit Suisse and Nomura.
Former Venezuelan Central Bank President Ruth Krivoy delivered the event’s keynote address. Krivoy discussed a wide range of topics including GDP growth, inflation and the recent surprise demonetization announcement. She also reviewed the outlook for the country’s oil sector and the recent government cabinet changes. Following her formal remarks, Krivoy took a wide variety of audience questions on topics such as future US-Venezuelan relations.
Following Krivoy’s presentation, Hernan Yellati (BancTrust) moderated a panel discussion that further explored the Venezuelan economic and political situation. Panelists concurred that any regime change in the near-term was unlikely. Casey Reckman (Credit Suisse) commented that, “all institutional avenues have been closed off for the opposition…and our base case is that President Maduro will stay in power for the next two years.”
Jonathan Kelly (Fidelity) found it equally difficult to have an optimistic outlook on the country’s political future. Vatican-sponsored talks between the government and the opposition, “were an opportunity that didn’t happen,” and the recent cabinet changes were, on the whole, a negative development. Mike Conelius (T. Rowe Price) concurred that regime change had been reduced to a “tail possibility,” and lamented that the opposition was “weak and not cohesive.”
Discussing the potential for hyperinflation, Reckman noted that her firm’s inflation forecast was lower than some estimates, while acknowledging that, “at 800%, or 1000%, there isn’t much of a distinction to be made.” She added that high inflation was unlikely to prompt an end of the administration, noting that any catalyst for a regime change would be more abrupt in nature.
Yellati initiated a discussion of the electoral process. Any interference with the scheduled presidential elections in 2018 would be a major surprise, according to Conelius. Siobhan Morden (Nomura) stressed that, while the population might tolerate a postponement of municipal elections, a delay in the presidential election could be a turning point for the country; although international response was likely to be muted because of Venezuela’s low geopolitical relevance.” Reckman added that the military’s reaction to any delay in the 2018 elections, and whether violence would erupt, would be key factors to monitor. Finally, Kelly found it difficult to foresee a peaceful transition of power, adding that the Maduro government had “taken off its gloves…and showed it will do almost anything to stay in power.”
Despite the grim political outlook, speakers agreed that debt service was likely to continue. “At least in theory, I can see a muddle-through scenario for 2-3 years,” commented Morden, who had previously expressed greater payment concerns. Conelius suggested additional liability management operations were possible. The government’s willingness to pay (at least in the short-term) was not an issue; for him a greater risk was Chevron or Crystallex forcing a default as part of their attempt to claim arbitration awards.
Speakers admitted that Venezuelan debt returns have been strong, and above expectations, although Kelly cautioned that the “risk of accidents is growing.” He cited the delayed payment of the PDVSA ’35 bond coupon as the sort of accident investors should be wary of. “The margin for error is lower,” he stated. Morden warned that investors shouldn’t assume that China would continue to assist Venezuela by extending debt maturities indefinitely.
Recovery value in the event of a default was something that needed to be recalculated on a daily basis, as variables such as oil pricing and liabilities change, stressed Morden. She offered a range of anywhere from $30 to $50, with the worst case scenario that a default would occur under the Maduro government, and entailed years of litigation and attachment attempts.
Kelly viewed a default and regime change as linked, and “a race between the people rising up and the depletion of reserve assets.” He anticipated that bond pricing would fall below recovery value at some point, as in the case of Argentina, and the process would be messy, while seeing it long-term as a good asset.