Venezuela

The late Hugo Chávez once rubbished Citgo as a “bad business”. But the US refining unit of PDVSA, Venezuela’s state oil group, may now be coming to the rescue of its socialist owners in Caracas, and in a thoroughly capitalist way.

Venezuela is in deep recession, its citizens are struggling to buy food and the government is struggling to meet debt commitments of at least $10bn this year. Step forward Citgo, which is reportedly preparing to issue $2.5bn in loans and bonds to raise some much-needed cash for its embattled parent company, and hence its embattled sovereign. Read more

Shortages in Venezuela are leading to unrest and worrying bond markets. Russ Dallen, head of Caracas Capital Markets, explains that policy failures have reduced production capacity and the country cannot afford to import or pay its debts.

While crude prices extended losses, Venezuela’s President Nicolás Maduro extended his trip abroad, seeking support to stop the collapse in the price of oil, which accounts for some 96 per cent of his country’s foreign earnings.

Meanwhile, back home, something else also extended: queues and discontent. Read more

Investors used to studying Venezuela’s financials for signs of impending default might want to switch their attention to the queues building outside supermarkets across the country, as Venezuelans find it harder and harder to buy the most basic household goods.

The threat of rising social unrest leaves the government in Caracas with a choice: should it use its scarce resources to pay bondholders, or to put groceries on the country’s shelves? Read more

There are few more sure signs of economic meltdown than a run on a country’s banks. In Venezuela, however, the currency is losing its value too quickly to be worth running after. Instead, Venezuelans are going after groceries. The country is seeing a run on its supermarkets that is gathering pace by the hour. Read more

Venezuela’s President Nicolás Maduro had many words of praise for his Chinese counterpart, Xi Jinping, after their meeting in Beijing this week.

However, as fastFT reports, the announcement that he had taken more than $20bn in investment from China for various types of projects left many wondering if the president of the oil-dependent Caribbean nation had really got what he wanted. Read more

Another year, another announced change to one of the world’s tightest and most complex foreign exchange regimes. Unsurprisingly, however, the long-awaited change has fallen short of the full scale reform of currency controls promised last week by Nicolás Maduro, Venezuela’s increasingly isolated president. Read more

By Russ Dallen, Caracas Capital Markets

Trying to predict what will happen in South America’s wildest emerging markets in 2015 has the degree of difficulty of trying to compute pi to the 100th digit in your head.

With Venezuela, in particular, the range of options of what could happen next year is almost as infinite – ranging from more of the same and muddling through, to default, violence, coup, civil war and international brigades. On the economic front, whether Venezuela survives 2015 will depend almost purely on the price of oil, however. Read more

Last week, Cleary Gottlieb – the US law firm representing Argentina in its debt negotiations – held a packed closed-door session on Venezuela. The question of the day was: what if Venezuela defaults? This week, the US Senate passed a bill that seeks to sanction Venezuelan officials for alleged human rights violations. Although these two events are not obviously related — and the sanctions bill still has to be approved by Congress, and signed into law by Barack Obama — they could become so. They both also illuminate the horrible mess that Venezuela could be heading into. Read more

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 PetrocaribeRead more

Among the many woes afflicting Venezuela, one of the most pressing is the rapid decline in its reserves of hard currency. These fell from some $29bn at the start of 2013 to a low of about $19bn last week. But Beijing’s generous hand has since boosted them to $23.5bn, according to the central bank.

The fall in reserves had raised concerns about Venezuela’s ability to pay its debts, so the influx brought some relief to rattled markets, fuelling a small rally off recent lows in Venezuelan bonds, which remain among the highest yielding in the world.

But is the influx all it appears to be? Read more

One could talk about Venezuela’s economic policy in Shakespearean terms. To devalue or not to devalue; to converge foreign exchange rates or not to converge; to raise the price of the world’s cheapest gasoline or not to raise; to sell Citgo or not to sell; to default or not to do so – these are the questions.

The distortions created by the government’s foreign exchange and price controls – covering even Barbie dolls – keep playing a treacherous role in Venezuela’s unfolding tragedy. Why is this happening instead of not happening? To some analysts, that is the question. Read more

Ali al-Naimi, Saudi Arabia’s oil minister (pictured above on the right), and Rafael Ramírez, Venezuela’s foreign minister (on the left) met on the resort island of Isla Margarita late on Wednesday on the sidelines of a climate conference. As the continuing oil price drop keeps adding pressures to some Opec members, particularly Venezuela, there were expectations.

“We’re great friends!” Ramírez was quoted as saying as he arrived in Margarita. He later tweeted of an “excellent meeting” of “brother countries”. But the talks were mostly about climate change and there was no real word on prices, Opec’s oil policy, or the crude supply glut. Ramírez reportedly said only that the sliding oil price was a “concern for everyone.” Read more

When oil prices fall, it’s a fair bet that Venezuela’s economy will suffer. After all, that has been the case every time oil prices have fallen in the past. When Venezuela’s official gazette then publishes a legal notice on October 10 saying that its oil-for-loans scheme with China had been tweaked, it is also a fair bet that this would be taken as a sign of Venezuelan economic distress and maybe even a default on loans from its closest ally, China. That is how beyondbrics and many others understood it. How wrong one can be — sort of. Read more

Wasn’t it the case that the compensation Venezuela was ordered to pay Exxon by a World Bank arbitration tribunal was a “favourable end” to a longstanding legal battle because it was considerably lower than the figure the company had sought?

It seems not, even if those were the words Venezuela’s foreign minister, Rafael Ramírez, penned in a statement this month. Fast forward two weeks and the International Centre for Settlement of Investment Disputes, or ICSID, said it had received a request from the Venezuelan government for a revision of the award.

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Venezuelans do not really dance the tango. But in the mooted sale of Citgo, the country’s US refining operation, that is what the socialist government has been doing – taking one step forward, two steps back.

In an interview published on Sunday by leading daily El Universal, Rodolfo Marco Torres, Venezuela’s finance minister, said the socialist government had scrapped any plans for a sale. “The sale of Citgo is discarded,” he told the paper. “Venezuela continues with Citgo and will continue making the investments in the refineries.” Read more

Blame the Empire.

Venezuela’s socialist President Nicolás Maduro on Wednesday accused the United States of oversupplying the market -in his words, “inundating the market”- to rattle oil prices. His government is maybe having a tough time coping with a sliding crude price as oil accounts for some 95 per cent of export revenues of the energy rich country.

The toxic combination of dropping oil prices, an economy in shambles and lower levels of foreign reserves, has been reinvigorating fears of a debt default. Alejandro Grisanti, head of Latin America economics research at Barclays, said on Wednesday in report titled “Venezuela: The perfect storm”: Read more

Last month Ricardo Hausmann, a normally mild Harvard academic, set off the equivalent of a financial bomb. The economist suggested that Venezuela had already defaulted on many of its suppliers, its oil service contractors, and its citizens. So who or what might come next?

When Hausmann suggested Wall Street, the market reaction was huge. Indeed Venezuelan bonds, undercut by the falling oil price, have been dropping ever since. Yet it turns out that Venezuela’s latest default has been, in fact, to China. Given that Beijing is one of Caracas’ closest allies, this is surprising. It is also bullish for Wall Street. Read more

By Pan Kwan Yuk and Andres Schipani

Thumbing his nose at critics, Venezuela’s finance minister, Rodolfo Marco Torres, said on Wednesday via a series of tweets that the socialist government has paid a $1.5bn government bond that was due.

As fastFT reported, Mr Torres took to Twitter, under the hashtag #VenezuelaSeRespeta, or Respect for Venezuela, to write:

Acknowledging the instruction of our president Nicolás Maduro, today we paid #GlobalBond2014 #RespectForVenezuela

Today we paid $1.561.665.000 in capital and corresponding interests of #GlobalBond2014 #RespectForVenezuela

The Boliviarian government shows its commitment to the Motherland and the capacity to honour its obligations #GlobalBond2014 #RespectForVenezuela

 Read more

Investor nerves are once again fraying over Venezuela’s $4.5bn worth of bond repayments due this month, sending the cost of insuring against a government default to its highest in over seven months and within a whisker of a six-year high, fast FT reports.

Caracas has a $1.5bn government bond due for repayment on Oct 8, and state-owned oil company PDVSA has a $3bn debt repayment on Oct 28. For most oil-rich countries that shouldn’t pose much of a problem, but Venezuela’s economy is a mess after years of poor management. Read more