Venezuela is negotiating with its international creditors how to restructure the repayment of $60 billion.
But despite the ongoing debt talks, analysts do not see strong reassurances that Venezuela will honor its financial commitments, even if its creditors are in a generous mood.
"It's going to be one of the messiest defaults ever," Bill Blain, head of capital markets and alternative assets at Mint Partners, told CNBC via email.
President Nicolas Maduro began talks with creditors last Monday to restructure $60 billion of debt.
China, one of the creditors, said it is confident about Venezuela's ability to repay.
The South American country has managed to get some help from Russia. Moscow announced Wednesday that it had agreed to restructure the $1.35 billion owed by Venezuela, providing Maduro with some breathing space.
However, this hasn't convinced analysts that Venezuela is able to pay back its creditors.
"What have they paid, what they say they will pay and what they can't possibly pay is very unclear," Blain told CNBC. "It's no surprise that such a mismanaged economy is going into a mismanaged default, and the emerging market players holding the debt know that and are gaming their positions to try extract the best exit."
"Declining oil output has aggravated the problem; production sunk below 2 million barrels per day in October, the lowest level since the 1980s," Nicholas Watson, senior vice president of Teneo Intelligence, said in a note Wednesday.
The Venezuelan economy — heavily dependent on the revenues from its oil exports — has been significantly affected by the drop in oil prices in the last few years. Production has fallen to below 2 million barrels a day and, without financial resources to invest in the sector, it is set to keep declining.
At the same time, Venezuela has been hit by sanctions, which has restrained its liquidity in dollars. The U.S. administration has banned dealings in new debt from both the Venezuelan government and its state oil firm, arguing that those funds help Maduro's government, described as "dictatorship."
"The combination of sanctions against Venezuela and key officials, the regime's lack of legitimacy and its failure to come up with any credible economic reform program, means skepticism towards any refinancing will be difficult to untangle," Watson said.
Venezuela failed to make $200 million in coupon payments for its global bonds. As a result, S&P declared Tuesday that Venezuela had fallen into a "selective default" and that "there is a one-in-two chance that Venezuela could default again within the next three months."
Fitch Ratings also downgraded the Venezuelan state oil firm PDVSA due to "payment default."
"Regardless of the term (default), it seems clear they have missed their payments on those specific obligations and have therefore defaulted on them and are open to legal action from bondholders," Fernando Freijedo, Latin America analyst at the Economist Intelligence Unit, told CNBC on Thursday.
He noted that bondholders, however, have not yet demanded payment in the U.S., probably to give Caracas some time and thus increasing their chances of getting their money back.
Blain from Mint described the situation more bluntly: "From an objective perspective you have to conclude that Venezuela is in default and now it's a matter of going through the process, which won't be easy."
"Officially, it has not defaulted — but to all intents and purposes confidence has gone and the country is bust," he added.
"We do not expect the government's debt talks will succeed," Freijedo said, because of the ongoing sanctions and the fact that Maduro does not have an economic plan that would please creditors.
The debt talks are ongoing and it is unclear when they will come to an end.
"If the Venezuelan government were cohesive and in full control of the various arms of the state and not burned bridges with the International Monetary Fund, then it could avoid default with some diligent management and external support," Jan Randolph, director of sovereign risk rating service at IHS Markit, told CNBC via email.
"But the problem is that it is not and does not have IMF support and the risk of policy and debt mismanagement is high, and could yet lead to further defaults."