Goldman Sachs condemned for buoying Venezuela with $2.8bn bond purchase

[Eugene]

Source: The Guardian

Goldman Sachs condemned for buoying Venezuela with $2.8bn bond purchase

Dominic Rushe in New York
Tuesday 30 May 2017 16.36 BST

Goldman Sachs has confirmed it has bought $2.8bn worth of bonds from Venezuela’s crisis-torn government in a move opposition leaders have decried for propping up the country’s “dictatorial regime”.

The Wall Street Journal first reported on Sunday that the bank had bought $2.8bn worth of bonds held by the country’s central bank.

“Goldman Sachs’s financial lifeline to the regime will serve to strengthen the brutal repression unleashed against the hundreds of thousands of Venezuelans peacefully protesting for political change in the country,” Julio Borges, head of Venezuela’s opposition-controlled congress, said in a public letter to the bank’s chief executive, Lloyd Blankfein.

“It is apparent Goldman Sachs decided to make a quick buck off the suffering of the Venezuelan people,” he wrote. “I also intend to recommend to any future democratic government of Venezuela not to recognize or pay on these bonds.”

According to the Journal, Goldman paid just $865m for bonds valued at $2.8bn issued by the state oil company Petróleos de Venezuela (PDVSA) – paying about 31 cents on the dollar for the bonds. ...

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Read more: https://www.theguardian.com/world/2017/may/30/goldman-sachs-venezuela-bonds

[GatoGordo]

1. Maduro has prioritized

repayment of his debts in order to have access to dollars. He will gleefully let his countrymen starve.

What a shame about GS. I understand that their return on investment is enormous. But they risk losing their principal if the next government doesn't recognize old debts. (Maduro needs the VZ legislature to sign off on any new debt). I don't know what he can offer as collateral, as the state controlled oil company is already 100% leveraged.

Maduro has some HUGE interest payments coming up. I wouldn't loan him a thin dime.

[GatoGordo]

2. And what a great deal for ordinary Venezuelans!

Source: Caracas Chronicles

Meth Finance

By Frank Muci - May 29, 2017

"Let’s be explicit about what the graph means: in return for $865 million now, the government committed to dishing out a total of $3.65 billion through 2022, split between $2.8 billion in principal and $756 million in interest. It’s unbelievable. The government now has to fork up the $865 million three times over by 2022 to make good on the $2.8 billion in bonds —and has to pay a crippling $756 million interest on top of that.
The deal has an “internal rate of return” of 48%. That means this is equivalent to taking out a loan at 48% interest… in dollars!"

-snip-

https://www.caracaschronicles.com/2017/05/29/meth-finance/

The scam is as old at time itself. Taking out a loan to pay of the interest on another loan, in order to keep your lenders lending.