Venezuela’s socialist government welcomed scores of creditors on Monday for talks intended to renegotiate a crippling foreign debt and avert a default that could compound the once-prosperous OPEC nation’s economic crisis.

About 100 investors — including some bondholders from New York, and lawyers and representatives for others — gathered at the ornate “White Palace” opposite President Nicolas Maduro’s office in downtown Caracas for the afternoon meeting.

His chief negotiators Vice President Tareck El Aissami and Economy Minister Simon Zerpa — both on U.S. sanctions lists for drug and corruption charges respectively —  entered the building at around 3 p.m. local time (1900 GMT) and then departed around 20 minutes later.

Maduro had said more than 400 investors would attend — or 91 percent of Venezuela’s foreign debt holders, according to him.

But many were skipping the meeting, largely over concerns about meeting those sanctioned officials.

For those who did attend, a red carpet awaited them at the entrance, and a poster of Maduro’s predecessor Hugo Chavez at the entrance to the meeting room, witnesses said. With journalists kept outside, it was not immediately clear if El Aissami and Zerpa had sat down with the creditors.

The government wants to renegotiate some $60 billion in junk bonds in an attempt to shore up public finances squeezed by the unraveling socialist economy.

Markets appeared optimistic Venezuela would continue servicing debt, given that the government has made close to $2 billion in payments in the past two weeks, albeit delayed.

Bond prices were up across the board on Monday, with the benchmark 2022 notes issued by state oil firm PDVSA rising 3.25 percentage points.

But some investors fear Maduro’s promise to restructure and refinance debt rings hollow when U.S. sanctions make both options all but impossible, and that his government may in fact be paving the way for a default, despite vows to the contrary.

The economic implosion has already taken a brutal toll on Venezuelans. Citizens are increasingly suffering from malnutrition and preventable diseases because they cannot find food and medicine or cannot afford them because of triple-digit inflation.

The sight of poor Venezuelans eating from garbage bags has become a powerful symbol of decay. It contrasts sharply with the era of Chavez, when high oil prices helped fuel state spending.

‘Nothing to say to them’

Sanctions put in place by the administration of U.S. President Donald Trump, aimed at punishing Maduro’s government for undermining democracy and violating human rights, block U.S. banks from acquiring newly issued Venezuelan debt.

The European Union approved economic sanctions and an arms embargo on Venezuela on Monday, although it has yet to name who will be subject to the sanctions.

Maduro said earlier said this month he wanted to speak with creditors about restructuring, but also promised to continue making payments — leaving investors baffled.

“If they’re going to continue paying, I don’t have anything to say to them,” said one bondholder who asked not to be identified and who was not attending Monday’s meeting. “It’s when they say they’re going to stop paying that I’d have reason to talk to them.”

Separately, a committee of derivatives industry group ISDA delayed a decision on whether PDVSA triggered a credit event through a late payment of its more than $1 billion 2017N bond. It said was reconvening on Tuesday after meeting on Monday.

Investors have told Reuters the money has reached their accounts, albeit delayed.

It is not clear how a potential default would affect struggling Venezuelans.

Halting debt service would free up an additional $1.6 billion in hard currency by the end of the year. Those resources could be used to improve supplies of staple goods as Maduro heads into a presidential election expected for 2018.

But the strategy could backfire if met with aggressive lawsuits.

A default by PDVSA, which issued about half of the country’s outstanding bonds, could ensnare the company’s foreign assets such as refineries in legal battles — potentially crimping export revenue.

Bondholders would have fewer options if Venezuela rather than PDVSA defaults.

But the consequences of a default by the country could still be significant, said Mark Weidemaier, a professor of law at the University of North Carolina at Chapel Hill and an expert on international debt disputes and resolution.

Creditors could seek to block shipments of goods from leaving the United States for Venezuela or seize payments for those goods, Weidemaier said in a telephone interview.

“The real impact that a creditor can have in a sovereign default is to make it complicated for a government to engage in foreign commerce,” he said. “Companies may have to use complicated transaction structures to prevent seizures, which is going to make them wary of doing business with Venezuela.”

 
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