JPMorgan has worked with Citgo’s parent company since April
Opposition seeks to avoid losing control of main asset Citgo
Venezuela opposition leaders are preparing for potential talks with three large creditors whose legal claims may jeopardize their control of Citgo Petroleum Corp., the main foreign energy asset under control of the challengers to the country’s socialist regime.
Citgo’s parent company, PDV Holding Inc., contracted JPMorgan Chase & Co. in April to act as an adviser and has since been engaged in an “exploratory process” for potential talks with creditors, according to a statement from the PDVSA ad hoc board, which oversees the companies. The board is controlled by the Juan Guaido-led opposition, which is seeking to oust Nicolas Maduro as Venezuela’s president.
Creditors including mining company Crystallex International Corp., oil company ConocoPhillips and holders of a PDVSA bond that matured in 2020 partially secured by Citgo shares are pushing for a sale of PDV Holdings to recover some of the billions that they are owed.
“We are trying to explore if some creditors would be willing to talk about possible alternative options to resolve the disputes,” said Horacio Medina, president of the PDVSA ad hoc board. There are no formal proposals yet, he said. If creditors are willing to talk, the board will need approval from the opposition-led National Assembly before starting negotiations.
PDVSA doesn’t have much time to persuade creditors to negotiate. A judgment ordering the sale of Citgo’s parent company’s shares has already been approved by a Delaware court to satisfy the claims from the creditors.
For now, the U.S. government is prohibiting any sale from going forward, as part of its strategy to support Venezuela’s opposition.
Despite JPMorgan’s involvement, this latest attempt on negotiations has been met with some skepticism from some creditors, more than two years after the Guaido opposition took control of the companies. Francesco Marani, head of trading at Madrid-based Auriga Global Investors said creditors are waiting to see how nationwide mayoral and gubernatorial elections play out.
“Guaido efforts to engage bondholders ahead of November elections is likely short lived,” he said. The brokerage trades the 2020 PDVSA bonds, which are currently exchanging hands at around 27 cents, according to data compiled by Bloomberg. “Everyone wants to see what happens after the election.
Venezuela rivals report more progress at political talks
Venezuela's government and opposition reported further progress toward resolving their differences during a third round of talks in Mexico City that wrapped up on Monday.
Venezuela's government and opposition reported further progress toward resolving their differences during a third round of talks in Mexico City that wrapped up on Monday.
The two sides' "positions moved closer in the search for solutions to the challenges in social, economic and political matters," said a statement read by Norwegian mediator Dag Nylander.
The parties did not go into detail about the areas of progress in negotiations aimed at solving the political crisis that has marked President Nicolás Maduro's eight-year rule.
They reported an advance in efforts to establish a mechanism for consultations with "national and international political and social actors" to support the negotiations, which are mediated by Norway.
Caracas is pushing for Western sanctions relief, while the opposition led by Juan Guaidó wants guarantees of fair regional elections in November.
Neither Maduro, who is accused by the opposition of fraudulent reelection in 2018, nor Guaidó, who is considered president by about 60 countries, is personally taking part in the talks.
The United States has urged Maduro, a former bus driver who became president on the death of his mentor Hugo Chávez in 2013, to make serious efforts toward holding elections if he wants sanctions relief.
In comments to Venezuelan state television, Maduro welcomed what he called "another successful step" in the talks.
"I believe that we continue to advance in Mexico... towards a permanent, stable and deep peace for Venezuela... and the recovery of our assets abroad," he said.
Both sides condemned "acts of xenophobia and violence" against Venezuelans during a protest against undocumented foreigners over the weekend in Chile's northern port city of Iquique.
The events "constitute a very serious violation" of migrant rights, said the statement, which also deplored "hate campaigns" against Venezuelans in "various countries."
About 3,000 protesters took to the streets of Iquique on Saturday, some burning the belongings of rough-sleeping migrants who had been occupying a public square for months.
Venezuela is in an unprecedented economic and political crisis that has led millions of people to leave their country.
In the previous round of talks earlier this month in Mexico, the two sides found common ground on the country's pandemic response and vowed to continue looking for ways out of the political crisis.
The latest round had got off to a rocky start after Maduro's representatives turned up a day late on Saturday for reasons that were unclear.
Previous negotiations in the Dominican Republic in 2018 and Barbados the following year failed to resolve the crisis.
Nicolas Maduro and Juan Guaido have sparred for control of Venezuela for more than two years, each claiming to be country’s rightful president. Now, massive protests and police crackdowns have been replaced by sessions at the negotiating table. They’ve tried before, to little effect. What might be different this time? For one thing, Guaido and other members of the opposition have all but conceded that their attempts to oust Maduro have failed. On his side, Maduro has proved unable to stop Venezuela’s continuing economic collapse, in part because of tight economic sanctions imposed by the U.S. and other nations that continue to back Guaido.
1. How did the stalemate develop?
Maduro, 58, a former bus driver and foreign affairs minister, rose through the Socialist Party ranks and won a special presidential election after his mentor, the firebrand Hugo Chavez, died in 2013. In 2018, with the economy already slumping, Maduro was re-elected in a vote opposition leaders said was fraudulent. In January 2019, Guaido, 38, proclaimed himself interim president, saying that Venezuela’s constitution allowed him to take that step as head of the National Assembly, which he called the country’s last democratically elected body.
Nicolas Maduro
Photographer: Gaby Oraa/Bloomberg
2. What happened after that?
The U.S. and dozens of allies agreed and still recognize Guaido as leader. They’ve also repeatedly tightened sanctions first imposed in 2014. But the opposition has never wielded any real power in Caracas. Crucially, Maduro was able to retain the loyalty of the military leadership. He has, in fact, increased his power, by installing his own legislature and putting loyalists in key posts in the judiciary. In response, the opposition boycotted what they saw as tainted elections. But Guaido’s overseas and domestic influence gradually waned, although polls show that recent efforts to reconnect with followers at demonstrations on the streets have fanned a small revival in his popularity.
Double Disapproval
Both of Venezuela's main political leaders receive low approval ratings
Source: Datanalisis
NOTE: Survey data not available for every month
3. What prompted the talks?
Even before the standoff began, the economy was in a deep slump, hurt both by falling oil prices and by what the opposition termed Maduro’s incompetence and corruption. The tighter U.S. sanctions contributed to a collapse in oil production and the export revenue that was the mainstay of the economy. The U.S. and European governments also blocked Maduro’s access to more than $7 billion of state funds held abroad. The economy has contracted for seven years, hunger is widespread and more than 5 million people have fled the country. Both Maduro and Guaido want the talks to find a solution to the catastrophe.
Juan Guaido
Photographer: Gaby Oraa/Bloomberg
4. What’s on the table?
After a first round of talks in early September, the sides agreed to work together to respond to Covid-19 and hunger crises and to defend a disputed territory near the border with Guyana. They were low-stakes areas where the sides shared common ground. More complicated are negotiations around the key issues of guarantees for upcoming elections and the easing of sanctions. Other topics are political rights, economic measures, cooperation on Covid-19 vaccines and humanitarian aid and how to manage assets frozen abroad -- some under Guaido’s control. A memorandum of understanding signed in Mexico City in August and drafted by Norway -- which is brokering the talks -- outlined the negotiations and issues to be discussed. The second round of talks begin Sept. 24.
5. What would success look like for Maduro?
Maduro has repeatedly called for an end to sanctions against his government and the oil industry. He wants direct talks with Washington and the restoration of diplomatic relations. The Biden administration has said it would consider some demands provided Maduro meets conditions starting with electoral guarantees. In Mexico, Maduro’s negotiators, led by National Assembly head Jorge Rodriguez, is also seeking access to assets frozen by foreign governments who recognized Guaido. Maduro has already achieved one aim: The memorandum signed by the adversaries identifies the two parties to the talks as the Government of the Bolivarian Republic of Venezuela and the Unitary Platform -- implying recognition of the legitimacy of his government and presidency.
6. What does the opposition want?
The opposition sat out votes for president in 2018 and the legislature in 2020, saying they wouldn’t be free and fair, particularly without international observers. The myriad parties in the fragmented opposition coalition are running candidates under a unified ticket in the November election for mayors and governors. Opposition negotiators led by Gerardo Blyde, a former legislator and mayor, seek reassurance on the conditions for presidential elections set for 2024 and the legislature in 2025. They’re also calling for the release of political prisoners and for exiled leaders to be allowed back to participate in politics.
7. Are these talks any different from previous rounds?
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Previous rounds have failed, starting in 2014 in Caracas and most recently in Barbados in 2019. But this time there’s a crucial difference: The ground rules allow for interim agreements -- such as those reached after the first round -- before any final deal, which is unlikely for months if at all. Negotiators could, for example, agree on electoral guarantees for the vote in November or the lifting of some sanctions. Both sides have also dropped demands that foiled previous talks. The opposition is more divided and weaker than it was in 2019: While Guaido’s camp has taken more of a hard-line approach, former presidential candidate Henrique Capriles leads a group pursuing a long-term transition in the belief that a change of government is far off. This division strengthens Maduro’s hand.
8. What role is the U.S. playing? Other governments?
The U.S. isn’t playing a direct role, but it has advocated a negotiated solution and indicated it may ease sanctions if the talks go well. Norway is mediating the meetings in Mexico, which is seen as a neutral venue. Russia is advising the government and the Netherlands is assisting the opposition. In addition, several “friendly nations” including the U.S. are monitoring the talks.
The Reference Shelf
The agreements reached by the government and the opposition after the first round of talks.
A report by the Washington Office on Latin America and the U.S. Institute for Peace on lessons from 2019 talks.
An Inside Venezuela video report from the country.
