if the deal goes down, it is a half win for Venezuela, who at least will get 40% up front, and will not have to deal with the distinct possibility of an outright default by the DR. at least they walk away with something for all the oil they supplied. Goldman cannot lose, since they do not plan to hold on to the debt and try to play debt collector.
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venezuela sells petrocaribe DR debt
if the deal goes down, it is a half win for Venezuela, who at least will get 40% up front, and will not have to deal with the distinct possibility of an outright default by the DR. at least they walk away with something for all the oil they supplied. Goldman cannot lose, since they do not plan to hold on to the debt and try to play debt collector.
Upon reading many blogs and financial news. This is a deal that will be done. It clears the books for the DR to put themselves in more debt..LOL and Goldman Sachs to make a quick profit by flipping said debt. Think about it Venezuela is not holding a 4 billion dollar debt. That more than likely will never be paid (DUE TO THE LACK OF ENOUGH BEANS). The old saying applies here. "A Bird in the hand beats a Dominican default"
The fire sale continues......................
Venezuela to Use Diamonds to Boost International Reserves
Central Bank to Also Incorporate Easily Convertible Foreign Currencies
By KEJAL VYAS
Dec. 4, 2014 6:25 p.m. ET
CARACAS—Venezuela, facing default fears amid an economic crisis and falling oil prices, will use diamonds as well as other precious stones and metals stored in its central-bank vaults to boost international reserves, the central bank said Thursday.
It will also incorporate easy-to-convert foreign currencies into its reserves, the bank said in a statement explaining changes to a law regulating its activities. Venezuela’s international reserves have dropped 28% in the last three years to $21.7 billion.
The country is likely to start holding some reserves in Chinese Yuan, a central bank official familiar with the matter said.
It is the latest effort by President Nicol?s Maduro —whose approval rating hit a record low of 24.5%, according to a poll released this week—to try and salvage the oil-rich, but cash-poor economy. The country is facing crippling dollar shortages and scarcity of imported food and consumer goods. Its local currency, the bol?var, is in free fall, reaching new lows almost daily.
But analysts said the new accounting methods for international reserves would do little to build trust among investors, who currently charge Venezuela one of the highest borrowing rates in the developing world.
“It looks like a cosmetic boost to the reserves which doesn’t improve investor confidence and doesn’t improve reserve liquidity,” said Siobhan Morden, head of Latin America strategy at Jefferies in New York. “This is a strategy of counting pennies to see how long they have.”
Venezuela holds more than 70% of its reserves in gold bullion. Having a small portion of the reserves in cash has been a concern for investors who worry about the country’s ability to honor debt payments. Venezuela’s benchmark 2027 sovereign bond offered a yield of more than 19% Thursday.
Mr. Maduro this week authorized a 20% cut in government spending in light of the more than 30% drop in the price of oil, which Venezuela relies on for 96% of its dollar income. Finance Minister Rodolfo Marco is in China this week seeking financing and will next head to allied countries like Russia and Iran, Mr. Maduro said.
Last month, Venezuela used a $4 billion loan from China, funds that are typically earmarked for infrastructure investments, to beef up its reserves. But reserves since have declined again by $1.8 billion.
“We have a special plan to strengthen our reserves,” the president said in a speech Tuesday. “They’re going to rise further in the upcoming weeks and beginning in January and February,” he said, promising to open up the country’s access to “freely convertible currencies.”
But those measures will only buy Venezuela time without changes to its heavily interventionist economy and simplifying rigid currency controls that maintain three different exchange rates for the dollar and deter investment, analysts said.
Barclays estimates that Venezuela’s economy will be an outlier in the region this year, shrinking by 4.4%, followed by contractions of 6.2% and 1.5% in 2015 and 2016, respectively.
Write to Kejal Vyas at kejal.vyas@wsj.com
Venezuela to Use Diamonds to Boost International Reserves
Central Bank to Also Incorporate Easily Convertible Foreign Currencies
By KEJAL VYAS
Dec. 4, 2014 6:25 p.m. ET
CARACAS—Venezuela, facing default fears amid an economic crisis and falling oil prices, will use diamonds as well as other precious stones and metals stored in its central-bank vaults to boost international reserves, the central bank said Thursday.
It will also incorporate easy-to-convert foreign currencies into its reserves, the bank said in a statement explaining changes to a law regulating its activities. Venezuela’s international reserves have dropped 28% in the last three years to $21.7 billion.
The country is likely to start holding some reserves in Chinese Yuan, a central bank official familiar with the matter said.
It is the latest effort by President Nicol?s Maduro —whose approval rating hit a record low of 24.5%, according to a poll released this week—to try and salvage the oil-rich, but cash-poor economy. The country is facing crippling dollar shortages and scarcity of imported food and consumer goods. Its local currency, the bol?var, is in free fall, reaching new lows almost daily.
But analysts said the new accounting methods for international reserves would do little to build trust among investors, who currently charge Venezuela one of the highest borrowing rates in the developing world.
“It looks like a cosmetic boost to the reserves which doesn’t improve investor confidence and doesn’t improve reserve liquidity,” said Siobhan Morden, head of Latin America strategy at Jefferies in New York. “This is a strategy of counting pennies to see how long they have.”
Venezuela holds more than 70% of its reserves in gold bullion. Having a small portion of the reserves in cash has been a concern for investors who worry about the country’s ability to honor debt payments. Venezuela’s benchmark 2027 sovereign bond offered a yield of more than 19% Thursday.
Mr. Maduro this week authorized a 20% cut in government spending in light of the more than 30% drop in the price of oil, which Venezuela relies on for 96% of its dollar income. Finance Minister Rodolfo Marco is in China this week seeking financing and will next head to allied countries like Russia and Iran, Mr. Maduro said.
Last month, Venezuela used a $4 billion loan from China, funds that are typically earmarked for infrastructure investments, to beef up its reserves. But reserves since have declined again by $1.8 billion.
“We have a special plan to strengthen our reserves,” the president said in a speech Tuesday. “They’re going to rise further in the upcoming weeks and beginning in January and February,” he said, promising to open up the country’s access to “freely convertible currencies.”
But those measures will only buy Venezuela time without changes to its heavily interventionist economy and simplifying rigid currency controls that maintain three different exchange rates for the dollar and deter investment, analysts said.
Barclays estimates that Venezuela’s economy will be an outlier in the region this year, shrinking by 4.4%, followed by contractions of 6.2% and 1.5% in 2015 and 2016, respectively.
Write to Kejal Vyas at kejal.vyas@wsj.com
Jamaica is also involved, reports the Financial Times when covering the Goldman Sachs and Venezuela debt story.
See first paragraphs here:
By John-Paul Rathbone and Andres Schipani
Socialist Venezuela would never sell out its friends to Wall Street, right? Yet it appears that is exactly what Caracas wants to do. Pressed by the oil price collapse, rattled by fears of default, facing rising social tension as imports collapse due to lack of foreign exchange, and seemingly unable to put its economic house in order, the country is trying to raise desperately-needed cash by selling debts owed to it by the Dominican Republic and Jamaica on to Goldman Sachs. Chavismo turns to the vampire squid?
The idea has been circulating for a while in the investment banking community. But now details have emerged in the press, as reported by El Nuevo Herald, and Petroleum Argos. Essentially, the trade involves Venezuela securitizing debts owed under its $3.5bn a year subsidised oil program, called Petrocaribe.
In this case, that reportedly means selling the $4bn owed by the Dominican Republic for $1.75bn to Goldman Sachs. The DR will then issue fresh bonds, and with the proceeds buy the debt off Goldman. The US investment bank is also reportedly holding conversations about doing the same for Jamaica’s Petrocaribe debts. Along with Nicaragua, these two countries account for $10bn of the total $14.5bn owed to Venezuela under the 13-country program that, in the past, has bought Caracas valuable support in fora such as the United Nations and the Organisation of American States. But not for much longer, it seems.
Read more:
http://blogs.ft.com/beyond-brics/2014/12/03/venezuelas-new-best-friend-goldman-sachs/
See first paragraphs here:
By John-Paul Rathbone and Andres Schipani
Socialist Venezuela would never sell out its friends to Wall Street, right? Yet it appears that is exactly what Caracas wants to do. Pressed by the oil price collapse, rattled by fears of default, facing rising social tension as imports collapse due to lack of foreign exchange, and seemingly unable to put its economic house in order, the country is trying to raise desperately-needed cash by selling debts owed to it by the Dominican Republic and Jamaica on to Goldman Sachs. Chavismo turns to the vampire squid?
The idea has been circulating for a while in the investment banking community. But now details have emerged in the press, as reported by El Nuevo Herald, and Petroleum Argos. Essentially, the trade involves Venezuela securitizing debts owed under its $3.5bn a year subsidised oil program, called Petrocaribe.
In this case, that reportedly means selling the $4bn owed by the Dominican Republic for $1.75bn to Goldman Sachs. The DR will then issue fresh bonds, and with the proceeds buy the debt off Goldman. The US investment bank is also reportedly holding conversations about doing the same for Jamaica’s Petrocaribe debts. Along with Nicaragua, these two countries account for $10bn of the total $14.5bn owed to Venezuela under the 13-country program that, in the past, has bought Caracas valuable support in fora such as the United Nations and the Organisation of American States. But not for much longer, it seems.
Read more:
http://blogs.ft.com/beyond-brics/2014/12/03/venezuelas-new-best-friend-goldman-sachs/
Diamonds will not help them much. The South Africans will see to that. DeBeers has that market on lock they only allow a certain amount of diamonds to be released per year. If they want fast cash they will have to sell their diamonds on the black marker or to DeBeers and a fire sale price.
Have You Ever Tried to Sell a Diamond? - The Atlantic
Have You Ever Tried to Sell a Diamond? - The Atlantic
They are not going to sell them...yet. They are just going to count them and their value and use them to bolster their international reserve numbers.
It is clearly an act of desperation.
Respectfully,
Playacaribe2
Do you really trust anyone in that Gov't to "COUNT" anything? What they declare as the value and what the "CARTEL" say there are worth will be the great divide. If and that's a big if they try to use the diamonds to bolster their reserves it will be held as collateral. Again would you trust them to hold onto the diamonds? Their Gov't is in the ****ter. Their best bet is to sell off all outstanding bad debt. and move forward.
GS has already counted their gold...so they have a pretty good idea of its value.
But that is neither here nor there....no one trusted Venezuela before they decided to count their gold, etc., and I suspect no one's opinion will change.
It's a feel good exercise followed by a press conference to announce they really have X more international reserves. No one will buy it.....but it is done as a way of saying to the masses that they have plenty of money...it is those evil capitalists who are trying to thwart the Revolution, etc., etc.
It's a political shell game....and its almost over.
They can buy time by selling the Petrocaribe debt of the DR, Jamaica etc., but the handwriting is on the wall. Without $100 a barrel oil....they are toast.
Respectfully,
Playacaribe2
I have to change my tune on this. I agree that GS will sell this to investors. Mainly because the got well over a 50% discount on face value. They will probably make a security sausage out of it. Like MBS, sell it in a foreign debt back security with a mix foreign debits with the DR thrown in to make the ROI look good.
But as far as the DR walking away from it's debits, you have to believe the government represents the people. It is just not the case, the government always honors debits because as long as debits are honored, the world bank provides the government some money for funny money projects where a good portion ends up in the hands of friends and family of the administration. It is the same reason African country's rarely walk away from debits.
But as far as the DR walking away from it's debits, you have to believe the government represents the people. It is just not the case, the government always honors debits because as long as debits are honored, the world bank provides the government some money for funny money projects where a good portion ends up in the hands of friends and family of the administration. It is the same reason African country's rarely walk away from debits.
the government always honors debt? then explain the sovereign debt default of over a billion in 2005, then.
Maduro says Venezuela oil prices drop to $48 per barrel, blames the U.S.
President Nicolas Maduro said on Monday that the Venezuelan's petroleum export price dropped to $48 a barrel and accused who for flooding the market with oil with the aim of destroying both his country and Russia.
"Did you know there's an oil war? And the war has an objective: to destroy Russia," said the president in a speech to state businessman in Caracas.
"It's a strategically planned war ... also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse," he added, accusing the United States of trying to flood the market with shale oil produced by fracking, a technique designed to recover gas and oil from shale rock.
According to Maduro, U.S. President Barack Obama himself recently admitted "that everything has been done to break President Putin and destroy the Russian Federation."
He declared that despite the "global economic war" against Venezuela, the falling oil prices were "a huge opportunity" to make 2015 the year of "the great change of consciousness in the Venezuelan economic model."
Oil prices in Venezuela began falling in September going from $95 per barrel to the current $48.
The world's fifth largest crude oil exporter, Venezuela sells close to 2.5 million barrels daily, mainly to the U.S. and China.
Oil accounts for more than 90 percent of the country's foreign exchange revenues and half of the revenues of the national budget.
Maduro says Venezuela oil prices drop to $48 per barrel, blames the U.S.
President Nicolas Maduro said on Monday that the Venezuelan's petroleum export price dropped to $48 a barrel and accused who for flooding the market with oil with the aim of destroying both his country and Russia.
"Did you know there's an oil war? And the war has an objective: to destroy Russia," said the president in a speech to state businessman in Caracas.
"It's a strategically planned war ... also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse," he added, accusing the United States of trying to flood the market with shale oil produced by fracking, a technique designed to recover gas and oil from shale rock.
According to Maduro, U.S. President Barack Obama himself recently admitted "that everything has been done to break President Putin and destroy the Russian Federation."
He declared that despite the "global economic war" against Venezuela, the falling oil prices were "a huge opportunity" to make 2015 the year of "the great change of consciousness in the Venezuelan economic model."
Oil prices in Venezuela began falling in September going from $95 per barrel to the current $48.
The world's fifth largest crude oil exporter, Venezuela sells close to 2.5 million barrels daily, mainly to the U.S. and China.
Oil accounts for more than 90 percent of the country's foreign exchange revenues and half of the revenues of the national budget.
Maduro says Venezuela oil prices drop to $48 per barrel, blames the U.S.
hard to disagree with him actually.
despite all the stupidities that venezuelan government made in last years (and despite good things that chavez made, too )
Exactly, GS may believe they have an edge on the DR but the DR gov't has been quite adept at bamboozling other external agents in its financial history. Going all the way back to Buenaventura Baez, the DR gov't has been in the business of hornswoggling external agents. They did it to the Spanish, the English, the Americans, everyone. In today's world, they have done it to the IMF, WB, and best of all the American providers of energy who are deep in and have no way out but to accept garbage payments.
GS is also a player in the games of bamboozling and hornswoggling. So, they'll create the financial products within the DR to sell around the world to fund the payments that are needed to satisfy that debt. Venezuela does not have that level of financial sophistication. As long as world interest rates continue to decline and the US rate stays at its doomsday level of 0%, the DR and GS will have a happy relationship together. I am the most negative regarding the future of the DR economy but on this deal two crooks have met each other-the DR gov't and GS.
They both love the art of bamboozling and hornswoggling. The exchange rate is a tool that GS advisors will "persuade" the DR central bank to cautiously continue to depreciate. So, 50 to 1 is a no brainer. As I have said before in the RECESSION thread, the exchange rate will reach 50,60,70,80,90, and 100. That's a done deal. It is a tool that is used to create the faux economy that is currently in effect the world over. This deal will probably benefit the DR in ways the Venezuela deal could not.
GS knows how crooked the DR is. They'll be able to do things within the DR they could never ever dream of doing in the USA. The DR gov't, being a lover for the free and the easy, will jump on board with GS and thus will be wed two crooks. The money will be pouring in from GS to fund their money laundering schemes. The invention of Special Purpose Vehicles, the complicity of the DR gov't and the creation of money out of thin air to transfer from one entity to the next is the game that will be played. Expect short term benefits to the DR gov't.
Chavez lived his Kommunist/Socialist dream in denial.
Another failed state caused by it's politics.
Predictably Maduro is blaming the USA. State owned enterprises 63.7% inflation and looming default ......no es mi culpa.
Maduro blames plunging oil prices on U.S. 'war' vs Russia, Venezuela | Reuters
Venezuela: Inflation steigt auf mehr als 63 Prozent - SPIEGEL ONLINE
Another failed state caused by it's politics.
Predictably Maduro is blaming the USA. State owned enterprises 63.7% inflation and looming default ......no es mi culpa.
Maduro blames plunging oil prices on U.S. 'war' vs Russia, Venezuela | Reuters
Venezuela: Inflation steigt auf mehr als 63 Prozent - SPIEGEL ONLINE
Venezuela’s Maduro Delays Changes to Exchange System Until New Year
Mr. Maduro’s Comments Followed Release of Grim Economic Data
By EZEQUIEL MINAYA
Dec. 30, 2014 9:23 p.m. ET
CARACAS, Venezuela—President Nicol?s Maduro said on Tuesday that the country’s three-tier currency exchange rate system, derided as a major contributor to Venezuela’s economic crisis by detractors, would be revamped sometime in the new year.
Mr. Maduro made the comments during an end-of-year review that he previously signaled would include concrete measures to revive an economy that was revealed to be in recession by the country’s central bank earlier in the day.
Instead, the president repeated accusations that Venezuela’s economic woes were the work of Washington, among other ideological enemies of his leftist government. The leader vowed next year would see sweeping policy changes, with him personally taking over management of the economy in a newly installed “war-room” type center slated to be up and running in the presidential palace Jan. 3.
“You will see me every day and in real time making decisions,” Mr. Maduro said. “I’m convinced that 2015 will be the year of a great transformation in Venezuela.”
The president, however, has repeatedly delayed making major policy adjustments that many experts have said should include cutting lavish domestic fuel subsidies and scrapping the cumbersome exchange system.
“The central theme of this announcement was the exchange,” said Caracas-based analyst and pollster Luis Vicente Leon in a Twitter post. “But the president limited himself to saying a change was coming without saying how or when or what.”
Though many analysts agree changes could keep the cash-strapped country from edging toward a default of state-issued debt, Mr. Maduro lacks the political clout to take potentially painful measures with his approval rating at record lows. The 52-year-old leader, who narrowly won office in a contested 2013 vote, will lead his fractious ruling party into legislative elections in late 2015.
“The announcements could shed some light about the conviction and the political capacity of the administration to introduce meaningful corrections to the currently unsustainable policy mix,” said analysts for Goldman Sachs in a client report.
Mr. Maduro said major revisions of the currency exchange rate system would be announced by the finance minister and central bank president at an unspecified time in 2015. He also said that he hasn't ruled out raising the price of gasoline but was convinced that the appropriate time had not arrived. The fuel subsidy costs the government some $12 billion annually.
Venezuela has three official currency exchange rates that include a swap of 6.3 bol?vares per dollar for priority items and weaker rates of around 11 and 50 bol?vares to the dollar for other goods.
Economists say that the tight controls have sparked a shortage of dollars in the country that has deepened with the recent swoon in oil prices. In Venezuela’s robust currency black market, a reference point for many retailers, a greenback fetches nearly 200 bol?vares.
Before the president’s address, the central bank released long-delayed data on economic output that was last released in April.
According to the bank’s report, Venezuela’s economy contracted 4.8% in the first three months of the year compared with the same period in 2013. It shrank 4.9% in the second quarter of the year, followed by a retreat of 2.3% in the July through September period.
The figures also registered inflation at 63.6% in the 12 months through November, the highest mark in the region.
The central bank release blamed the poor-performing economy in large part on antigovernment protests that spread nationwide in February and claimed more than 40 lives before easing months later. Critics of the leftist government have said that ever increasing centralized control over the economy has resulted in deep distortions and pushed the economy toward collapse.
The central also reported that the country’s balance of payment posted a surplus of $6.8 billion at the end of the July through September period with the current account showing a $899 million surplus and the capital account registering a $568 million deficit.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com
Mr. Maduro’s Comments Followed Release of Grim Economic Data
By EZEQUIEL MINAYA
Dec. 30, 2014 9:23 p.m. ET
CARACAS, Venezuela—President Nicol?s Maduro said on Tuesday that the country’s three-tier currency exchange rate system, derided as a major contributor to Venezuela’s economic crisis by detractors, would be revamped sometime in the new year.
Mr. Maduro made the comments during an end-of-year review that he previously signaled would include concrete measures to revive an economy that was revealed to be in recession by the country’s central bank earlier in the day.
Instead, the president repeated accusations that Venezuela’s economic woes were the work of Washington, among other ideological enemies of his leftist government. The leader vowed next year would see sweeping policy changes, with him personally taking over management of the economy in a newly installed “war-room” type center slated to be up and running in the presidential palace Jan. 3.
“You will see me every day and in real time making decisions,” Mr. Maduro said. “I’m convinced that 2015 will be the year of a great transformation in Venezuela.”
The president, however, has repeatedly delayed making major policy adjustments that many experts have said should include cutting lavish domestic fuel subsidies and scrapping the cumbersome exchange system.
“The central theme of this announcement was the exchange,” said Caracas-based analyst and pollster Luis Vicente Leon in a Twitter post. “But the president limited himself to saying a change was coming without saying how or when or what.”
Though many analysts agree changes could keep the cash-strapped country from edging toward a default of state-issued debt, Mr. Maduro lacks the political clout to take potentially painful measures with his approval rating at record lows. The 52-year-old leader, who narrowly won office in a contested 2013 vote, will lead his fractious ruling party into legislative elections in late 2015.
“The announcements could shed some light about the conviction and the political capacity of the administration to introduce meaningful corrections to the currently unsustainable policy mix,” said analysts for Goldman Sachs in a client report.
Mr. Maduro said major revisions of the currency exchange rate system would be announced by the finance minister and central bank president at an unspecified time in 2015. He also said that he hasn't ruled out raising the price of gasoline but was convinced that the appropriate time had not arrived. The fuel subsidy costs the government some $12 billion annually.
Venezuela has three official currency exchange rates that include a swap of 6.3 bol?vares per dollar for priority items and weaker rates of around 11 and 50 bol?vares to the dollar for other goods.
Economists say that the tight controls have sparked a shortage of dollars in the country that has deepened with the recent swoon in oil prices. In Venezuela’s robust currency black market, a reference point for many retailers, a greenback fetches nearly 200 bol?vares.
Before the president’s address, the central bank released long-delayed data on economic output that was last released in April.
According to the bank’s report, Venezuela’s economy contracted 4.8% in the first three months of the year compared with the same period in 2013. It shrank 4.9% in the second quarter of the year, followed by a retreat of 2.3% in the July through September period.
The figures also registered inflation at 63.6% in the 12 months through November, the highest mark in the region.
The central bank release blamed the poor-performing economy in large part on antigovernment protests that spread nationwide in February and claimed more than 40 lives before easing months later. Critics of the leftist government have said that ever increasing centralized control over the economy has resulted in deep distortions and pushed the economy toward collapse.
The central also reported that the country’s balance of payment posted a surplus of $6.8 billion at the end of the July through September period with the current account showing a $899 million surplus and the capital account registering a $568 million deficit.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com