The Medina administration says it has cut the PetroCaribe debt by 98% by paying off half the total owed in a transaction that went through on Tuesday, 27 January 2015.
Speaking for the government at a press conference yesterday, Thursday 29 January, Minister of Hacienda Simon Lizardo and his deputy minister Magin Diaz announced that the deal for the 98%, or US$4.03 billion is the largest debt transaction in the country’s economic history.
After a year of negotiations, PDVSA agreed to discount 52% of the debt and the Dominican government paid US$1.93 billion, or 48% of the debt. As of December 2014, the Dominican Republic had owed Petroleos de Venezuela (PDVSA) US$4.12 billion dollars for fuel purchases from 2005 to 2014.
The transaction reduced the Non-Financial Public Sector Debt by US$2.09 billion or 3.3%, says the Presidency. At the close of 2014, the total sum owed was US$23.81 billion, equivalent to 37.2% of the GDP. This has now declined to US$21.71 billion (34%).
The government announced that the PetroCaribe debt was paid with US$2.5 billion in sovereign bonds placed on 20 January 2015. Of the US$2.5 billion in sovereign bonds, they said US$1.93 billion was paid to PDVSA, US$563.5 million was transferred to the Central Bank and US$3.2 million was invested in the cost of issuing the bonds. The bonds were placed US$1 billion at 10 years and 5.5% interest, and another for US$1.5 billion for 30 years and 6.85% interest.
The government spokesmen said the transaction should improve the country’s risk rating, which should be reflected in a decline in interest rates for financing abroad.
They added that while the new interest is higher at an average 6% than the 1% with PDVSA, the country would save US$550 million. If the debt had remained at the same level, in the next 10 years the country would have had to pay US$210 million to PDVSA, but with the new debt it will only have to pay US$120 million.
http://presidencia.gob.do/noticias/republica-dominicana-logra-reducir-deuda-publica-en-2094-millones-de-dolares