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Washington — The prospects for a default in 2017 by Venezuela's PDVSA will depend on how much flexibility the troubled state-owned oil company negotiates with bond holders in a multi-billion dollar debt swap closing next week, two analysts said Friday.

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Investors have until Monday to respond to sweetened terms for swapping $5.3 billion of 2017 notes for new bonds due in 2020.

"If the swap doesn't happen, they're in big trouble for next year," said Francisco Monaldi, Latin American energy policy fellow at the Baker Institute for Public Policy. "I think they're really worried about that."

Speaking at an Inter-American Dialogue forum in Washington, Monaldi said PDVSA had been counting on the swap deal and a recovery in oil prices to save the day -- but both factors are looking uncertain.

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Raul Gallegos, senior analyst for Control Risks, said the deal's initial terms were not attractive enough and even the adjusted terms are not "doing much for investors."

"But, conceivably, if oil prices start inching up a little bit, that might make it enough for them to just make it by next year, although that will be tough, definitely," Gallegos said.

"In our view, certainly this year we don't see [a default], and next year, we believe they could still scrape through," he added.

Venezuela's third-quarter 2016 crude production dropped 12% year on year to 2.11 million b/d, according to Energy Information Administration data released Thursday. That compares with the 2.33 million b/d that Venezuela reported to OPEC for August.

"I would take those numbers with a grain of salt -- there's a lot of opaqueness," Gallegos said, adding that he does not expect output to drop much below 2 million b/d next year.

Venezuela's oil exports are falling slower than its production because of a sharp drop in domestic demand and the country's dependence on imported diluents and oil products for the domestic market, Monaldi said.

He said January-September exports dropped 7% year on year, compared with a 12% drop in production for the same period.

--Meghan Gordon, meghan.gordon@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com