Venezuela: Banks and businesses negotiate loan restructuring

www.latintrade.com 02/14/2003 - Source: BNamericas Venezuela's banks are restructuring the loans of small- and medium-sized enterprises on a case-by-case basis, rather than in a blanket agreement as suggested by business leaders, banking association Asobanca chairman Ignacio Salvatierra told BNamericas. "This is already in motion, there are clients talking with their banks and in the process of restructuring. It is a process that is on the march," he said. Asobanca has adopted a policy whereby each member bank is free to negotiate with its clients. Salvatierra rejected the proposal floated by Miguel Perez, chairman of small business association Fedeindustria, earlier this week that called for a general freeze on principal and late payment penalties as well as the restructuring of debts. Salvatierra said that Fedeindustria had never hinted at a moratorium on debt payments rather a renegotiation of loan terms and conditions. "Each client is in charge of his relationship with each bank, and if some form of restructuring is justified a bank will obviously be disposed to restructure debt on an individual basis. But in no case [accept] a suspension or cessation of payment," he said. Fedeindustria argues that the two-month nationwide strike that started on December 2 last year has driven many small businesses to the verge of bankruptcy. According to Perez, as many as 25,000 companies that employ 200,000 people could fold. The strike was orchestrated by groups opposed to President Hugo Chavez, who they accuse of mismanaging the economy under an increasingly dictatorial rule. However, strike organizers underestimated Chavez's staying power and the strike collapsed at the end of January as businesses opened their doors to avoid bankruptcy. The long-term damage to the Venezuelan economy remains to be seen. Oil production, the main source of government revenues, remains disrupted and a foreign exchange freeze decreed last week has made it difficult for businesses to import raw materials.