Hugo Chávez, Venezuela?s unpredictable president, will face a referendum on his six-year rule on August 15 that could oust him from office. The move has unnerved investors, as even though Chávez is sometimes accused of dragging the country towards communism, he uses oil revenues to pay his debts on time.
Venezuela has been one of Latin America?s best-performing credits so far this year. Total returns on its debt have contracted by around 1%, compared with a fall across the JPMorgan Emerging Market Bond Index Plus of 4%. Since last month?s referendum announcement, however, Venezuela?s 2027 benchmark bonds have begun to slide in price and the country?s risk spread widened to 615 basis points over US treasuries.
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