This debate is no longer theoretical. It will become increasingly relevant as the United States eases financial restrictions on Venezuela through new OFAC licenses allowing transactions with the central bank and state-owned banks, reopening channels to the international financial system. At the same time, the prospect of Venezuela re-engaging with the IMF—after years of isolation—has re-entered the policy horizon. Together, these shifts raise the stakes of how the country addresses its external debt and rebuilds its economic framework.
The discussion is often framed in familiar terms: how deep the haircut should be, how payments can be rescheduled, what instruments might restore market access. But this is not a typical sovereign restructuring.
Venezuela does not simply face a debt crisis. It faces a collapse of state capacity, an impaired economic model and a profound erosion of trust. In that context, restructuring cannot be merely financial—it must become a tool of reconstruction.
The scale of the problem is daunting. External liabilities—including sovereign debt, PDVSA obligations, arbitration awards, and bilateral and multilateral claims—amount to roughly $192bn, fragmented across creditor classes with different legal and political constraints. About a third corresponds to sovereign bonds, another third to PDVSA, while arbitration awards linked to expropriations represent a meaningful share alongside bilateral and multilateral debt .
Since the 2017 default, the composition of these claims has shifted significantly. A large portion now consists of accumulated past-due interest rather than original principal, in some cases approaching half of total claims . This complicates any restructuring and limits the scope for conventional solutions.
Any viable agreement will be constrained by IMF-style debt sustainability analysis. That imposes a hard reality: Venezuela cannot service its obligations unless debt is reduced to levels compatible with a gradual economic recovery.
Even under favourable assumptions, recovery values are unlikely to exceed 40 to 60 cents on the dollar. Payments will need to be back-loaded, allowing the economy time to stabilise. The implication is straightforward: Venezuela cannot repay without growth—but it cannot grow if its resources remain tied up in debt service.
Recent market dynamics reflect this logic. Defaulted Venezuelan bonds have rallied sharply, moving from deeply distressed levels into the 30–50 cents on the dollar range, broadly consistent with expected recovery values. In some cases, returns have approached 100 per cent, driven by a repricing of expectations rather than improvements in fundamentals. Investors are effectively converging toward the same recovery bands implied by debt sustainability analysis.
At the same time, the creditor base has shifted toward distressed funds and litigation-driven investors, whose strategies extend beyond financial recovery to asset enforcement. Without a coherent restructuring framework, rising bond prices risk translating into more aggressive claims on Venezuela’s external assets rather than a pathway to recovery.
This dynamic is most visible in the case of CITGO, the US-based refining subsidiary that sits at the centre of creditor litigation.
CITGO is not a distressed asset. In 2023, it reported revenues of roughly $38bn and net income of over $2bn, reflecting strong refining margins and solid operations. Its cash generation and liquidity underscore a viable and strategically important enterprise.
Yet the risk of a forced sale—driven by court-supervised processes in Delaware—raises the prospect of a transfer at a significant discount to intrinsic value. Recent reporting suggests that bidding has been constrained by legal uncertainty, creditor fragmentation and procedural limits, producing outcomes below what a normal competitive process might deliver.
A forced liquidation under these conditions would amount to a destruction of value. CITGO is not just a financial asset; it is an integrated energy platform with refining capacity, logistics and direct access to the US market. Losing it would weaken Venezuela’s long-term recovery prospects.
The lesson is clear: resolving debt cannot come at the cost of destroying the assets that make recovery possible.
This is why Venezuela must move beyond traditional restructuring tools. Debt-for-assets and debt-for-equity mechanisms offer a way to convert liabilities into productive investment, aligning creditor recovery with economic growth.
Such mechanisms are particularly relevant for arbitration awards linked to past expropriations. These claims are not only financial liabilities—they are also a barrier to renewed foreign investment. Treating them solely as obligations to be paid in cash is fiscally unrealistic and economically counterproductive.
Instead, they can be addressed through structured settlements in which claimholders exchange awards for participation in assets or projects. This would reduce debt, resolve litigation and help restore productive capacity. More importantly, it would signal a credible re-establishment of property rights.
In this framework, creditors become stakeholders in recovery rather than obstacles to it.
The alternative is less attractive. Without a structured approach, litigation risks will intensify, asset seizures will proliferate, and the limited pool of external resources will be diverted away from reconstruction.
This is not just a financial negotiation. It is a negotiation over Venezuela’s economic future.
A narrow focus on haircuts and maturities risks producing an orderly outcome on paper but an insufficient one in practice. An integrated strategy—combining debt reduction, asset preservation, and the conversion of claims into investment—offers a more credible path.
Because in Venezuela’s case, the question is not how much to pay.
It is how to rebuild.
*Leopoldo Martínez Nucete is an international lawyer and former Venezuelan congressman. He is the founder of the Center for Democracy and Development in the Americas (CDDA) and served as Senior Counselor at the U.S. Department of Commerce during the Joe Biden administration.