by Tyler Durden
June 09, 2014
2013 was a good year for Goldman Sachs
investments in Emerging Markets,
most notably Venezuelan bonds (as they bet
on socialism and won).
A year later and Goldman's EM debt portfolio is
still loaded with Venezuelan bonds... and the arrears are mounting.
As Bloomberg reports, at a time when
Venezuelaís record $25 billion in arrears to importers has its
citizens waiting hours in line to buy drinking water and crossing borders in
search of medicine, President Nicolas Maduro
is using the nationís dwindling supply of dollars to enrich bondholders.
Venezuela, which imports just about
everything, and its state oil producer have paid $2.8 billion in
interest to overseas creditors this year, according to Barclays Plc.
Including debt principal,
bondholder outlays will balloon to
almost $10 billion by year-end, the London-based firm
putting off the local companies responsible for supplying everything
from diapers to cancer medications, Maduro can preserve access to debt
markets and protect oil shipments that would be vulnerable to bondholder
seizure, said Alejandro Arreaza, an
analyst at Barclays.
Even if that means fanning the worldís
fastest inflation and inflaming protests over shortages that have left
at least 42 people dead since February.
governmentís priority is to pay the sovereign debt,"
Alejandro Arreaza, an analyst at Barclays Plc, said in a telephone
interview from New York.
Of course, it's not just the government
state-owned entities that need the USD and are getting priority over the
State oil company Petroleos de Venezuela SA
is seeking a loan to pay off $3 billion of debt that matures this year
and isnít planning additional dollar bond sales in 2014, a company
official said yesterday.
PDVSA, as the Caracas-based company is
known, is working to refinance an additional $11.9 billion of dollar
debt due through 2017 to bring its annual maturities to no more than $3
billion, said the official, who asked not to be identified because he
isnít authorized to speak publicly.
the first time that itís ever reached this critical level,"
he said by telephone. "And itís clear that they canít pay it off at
"There has been a
divergence between what happens to
Venezuelan bonds in the international market and what happens to
businesses that operate inside of Venezuela,"
As one analysts noted... just like everywhere
else in the world...
is giving Venezuela the benefit of the doubt and hopes that it applies
other economic measures that in one form or another will guarantee its
capacity to repay bondholders."
And so it goes...