As the war of attrition between Venezuelan president Hugo Chavez and workers on a national strike drones on, a once untouchable giant has begun to totter. Oil production at Petroleos de Venezuela has dried up, imperiling the company's heavily used SPV, PDVSA Finance.

With its $3.6 billion and E200 million in outstanding cross-border debt, a default by the vehicle could bruise many emerging market bond portfolios in the US. Already, rating downgrades are forcing investors into damage-control mode.

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