"Making motions towards selling these assets signals two things: a liquidity problem within the government and deterioration in the quality of the bonds," Bianca Taylor, a sovereign analyst at Loomis Sayles & Co., which oversees $210 billion, said by telephone from Boston. "In the case of a default there will no longer be those assets."
An official for the state oil producer known as PDVSA, who asked not to be identified because he isn't authorized to speak publicly, declined to comment on the potential divestment of the company's Citgo assets.
Ramirez told reporters on Aug. 5 that Citgo is worth more than $10 billion and that PDVSA has received offers for the Houston-based unit's assets, without providing details on the value of the bids.
"Their value is much, much more," he said.
Argus reported July 24 the government has received offers in the range of $10 billion to $15 billion. PDVSA acquired a 50 percent stake in Citgo in 1986 and has been its sole owner since 1990, according to Citgo's website.
Citgo has a refining capacity of 749,000 barrels a day at its three refineries in Texas, Illinois and Louisiana, markets more than 600 types of lubricants and has 48 petroleum product terminals, three fully-owned pipelines and six jointly owned pipelines. It also operates the sixth-largest U.S. retail gasoline chain through locally owned and operated locations, according to the National Association of Convenience Stores.
Since Maduro succeeded his late mentor Chavez in March 2013, the economy's stagnation has deepened as currency controls crimped imports and factories shut down.
The economy will probably contract by as much as 1 percent this year and next, according to the International Monetary Fund. Annual inflation reached 61 percent in May after the government in March carried out its biggest devaluation since the introduction of currency controls in 2003.
On the black market, the bolivar has lost 56 percent of its value in the past year, according to dolartoday.com, a website that tracks the rate on the Colombian border.
With Venezuela's foreign reserves close to an 11-year low of $20.3 billion, the country has lacked the dollars to pay for imports, triggering shortages of basic goods. Street protests against the government earlier this year left at least 43 people dead.
The sale of Citgo suggests the government's finances are worsening, according to Francisco Rodriguez, an economist at Bank of America. "The news of the planned Citgo sale is negative and has become a catalyst for people who are negative on Venezuela to start selling," he said by phone from New York.
Steffen Reichold, an emerging-market economist at Stone Harbor Investment Partners, which manages around $63 billion of assets, said that while the sale of Citgo would reduce the number of assets bondholders could seize in a default, the move would bolster Venezuela's finances.
"The potential sale could improve the liquidity position quite a bit," he said by telephone from New York.
Reichold said Stone Harbor holds Venezuela's bonds.
Selling Citgo would also prevent companies that have sued Venezuela over contract disputes and expropriations from seizing its U.S. assets as compensation, Risa Grais-Targow, an analyst at Eurasia Group, said in a note to clients Aug. 1.
About 28 cases are filed and unresolved at the International Centre for Settlement of Investment Disputes by mining and oil companies that operated in Venezuela. They include those filed by Exxon Mobil Corp., ConocoPhillips, Gold Reserve Inc., Phillips 66 and Highbury International.
The first three cases alone represent potential damages of about $12 billion, according to Bank of Nova Scotia.
Venezuela may also struggle to find a buyer because the country is overvaluing Citgo, according to Gurpal Dosanjh and Vincent G. Piazza, analysts at Bloomberg Intelligence.
"The value may be too high for refiners, who may prefer to cherry-pick assets to complement operations," they said in an Aug. 14 report. "A quarter of the value of Citgo may be in the refineries and inventories, with the remainder in infrastructure that includes 38 refined product terminals."
In 2005, Chavez, who dubbed his socialist movement the Bolivarian Revolution, created the Citgo-Venezuela Heating Oil Program to help poor and vulnerable communities in the U.S. cover rising fuel costs, saying he wanted to share Venezuela's wealth of natural resources.
The country has the world's largest oil reserves.
Citgo and Citizens Energy Corp., a non-profit created in 1979 by former U.S. Rep. Joseph P. Kennedy II to provide fuel assistance, have donated more than 235 million gallons of heating oil since the start of the program in 2005, benefiting more than 1.8 million people, according to Citgo's website.
"Citgo was the crown jewel of PDVSA assets outside Venezuela," Jorge Piedrahita, chief executive officer of New York-based Torino Capital, said in an emailed response to questions. "Like any other populist government, the Bolivarian revolution will go broke so that a default and a restructuring are a very likely scenario over the next few years."