World Economy

Mercosur Threatens to Suspend Venezuela

Mercosur Threatens to Suspend VenezuelaMercosur Threatens to Suspend Venezuela

The four original nations of South America's Mercosur trading bloc announced that they are giving Venezuela until Dec. 1 to comply with its commitments when it joined in 2012 that it would comply with all the group's requirements.

Brazil's foreign minister tweeted that Venezuela would be suspended from the group if it failed to meet the deadline, AP reported.

The ultimatum was contained in a statement from Mercosur founders Argentina, Brazil, Paraguay and Uruguay that was released by the Foreign Ministry of Paraguay, where the group has its headquarters.

The statement gave no details about the requirements that Venezuela had not met. But Paraguayan Foreign Minister Eladio Loizaga recently said that among the things Venezuela needed to do was protect human rights and enact a law guaranteeing free movement of citizens of the member nations. He also said Venezuela was not allowing opposition groups to protest freely.

On Twitter, Brazilian Foreign Minister Jose Serra said the group would suspend Venezuela as a member if the group's demand is not met. He also said that the four countries agreed that Venezuela would not take over the bloc's rotating presidency as scheduled and instead Mercosur will be presided over by a commission of one member each from the four founding states. For Serra the action "was adopted in the spirit of preserving and strengthening Mercosur". If Venezuela ‘persists in not fulfilling obligations’ the South American country could be suspended from the group.

  Bond Swap

Venezuela's state-owned oil giant PDVSA is seeking to swap $7 billion in bonds as it struggles to pump the socialist-run economy out of a deep crisis.

The proposal was announced Tuesday by PDVSA President Eulogio Del Pino. He said investors who exchange bonds coming due this year and next would receive a new bond maturing in 2020 backed by shares in PDVSA's Citgo unit in the US.

Del Pino said the swap would free up strapped resources amid low crude prices the government blames for Venezuela's widespread shortages and economic slump. The $7 billion represents more than half of Venezuela's international currency reserves.

While the debt deal gives PDVSA some breathing room investors remain skeptical Venezuela can turn around years of production declines amid heavy government intervention in the oil industry.