ReutersLeftist Venezuelan President Hugo Chavez was set to head off to Cuba for a check-up on his cancer on Sunday, leaving investors to wonder if his health will be a help or a hindrance to the value of the nation's debt. In June, when the 57-year-old Chavez revealed a cancerous tumor was removed from his abdomen, Venezuelan bond prices rose and the cost to insure its sovereign credit risk fell on prospects that his 13-year socialist policies might wane. A Chavez health premium has been priced into the market, helping soften the fall endured when global markets lurched down from July through September on Europe's sovereign credit woes and weak US economic data. His disappearance from public view for several weeks only helped, investors and analysts say. He has since returned to the airwaves with a vengeance and therein lies a problem for the government, which this week announced the sale of an additional $3 billion in debt, bringing the total for the year to $15.2 billion, by far the most issued in Latin America. State-run oil company PDVSA accounts for $8 billion of the issuance, with fears of more to come before the year is out. “At the moment, Chavez is not serving as an additional positive catalyst for Venezuela just because he is so active on the media front,” said Enrique Alvarez, Latin American debt and currency analyst at IDEAglobal in New York. “The more sick he is, the better it is for Venezuelan debt. Though perverse, that is the reality.” This week, the cost to insure both Venezuelan and Argentine debt nearly reached parity, collapsing from a two-year average spread where investors paid an extra $281,000 annually for five years worth of security from defaults or restructurings. Deterioration in Argentina's five-year credit default spread was behind much of the move. And while Argentina is a country with atypical debt dynamics itself, Chavez's cancer is seen as one main reason for Venezuela's steady performance. The costs have come down for both nations as the global market environment improves, but the gap is widening again. “Venezuela hadn't widened as much as the other higher-beta plays. They were already in bad shape,” said James Croft, head of EM fixed-income trading at Mitsubishi-UFJ in London. On Tuesday, the Venezuelan government launched a new $3 billion, 15-year debt offering during a week in which global market sentiment improved on hopes Europe made progress on its sovereign debt woes. Fitch rates the debt at a low B-plus. It was also a chance to announce more pre-election spending on flagship social projects for housing and agriculture as well as the day before one leading opposition candidate relaunched his challenge to Chavez just as the incumbent is off to Cuba. The debt, sold in local bolivars but paid in US dollars, is an important conduit for Venezuelans to get greenbacks amid tight exchange controls and 26.5 percent annualized inflation. __
