Friday, August 29, 2014

Venezuela debt watch ( August 29 , 2014 ) - Venezuela has 15 billion in foreign reserves - 6 billion due to be paid in October - December 2014 ! If 2015 debt is similar to 2014 ( USD 9.6 billion to be paid in 2014 ) , it's not clear how Venezuela meets its debt obligations - while paying the rest of its bills .....

Foreign debt maturity puts pressure on Venezuelan public accounts

USD 6 billion is expected to be paid in October-December

The figures of the central bank show Venezuelan repaid USD 7 billion in foreign debt in 2013 (Vicente Correale)
Saturday August 23, 2014  12:00 AM
In order to raise expenditure above oil revenues and tax collection, the Venezuelan government took on debt by selling bonds now nearing their maturity date, which forces authorities to allocate significant funds to meet such liabilities.

The figures of the Central Bank of Venezuela show that the debt in US dollars is no longer at a comfortable level as it has grown sharply by 105% to USD 104 billion, from the third quarter of 2008 to the third quarter of 2013.

Since the central bank lacks enough cash in US dollars to pay the foreign debt and imports, the repayment of maturing capital and interests is a difficult task. 

The figures of the central bank unveil that Venezuela paid USD 7 billion in foreign debt, 86% higher than in 2012 (USD 3.8 billion). Based on the projections of economic firm Arcanálisis, Venezuela will have to pay USD 9.6 billion this year.

Most payments will have to be made by the end of the third quarter. As much as USD 6 billion will have to be paid, 242% above the amount of cash reserves the country held by the end of the first half.

Although investment banks have noted oil giant Pdvsa is likely to sell new bonds to obtain foreign currency to meet such liabilities, Economy Vice-President Rafael Ramírez asserted that "Pdvsa will not issue new bonds this year. We are working with loans."

So far the plan involves financial engineering for extending the maturity date of the debt due in 2014-2015, yet no concrete action has been announced.

The effect of the due foreign debt can be seen clearly by comparing the amount of money required to pay capital and interest with oil revenues, which are Venezuela's virtually sole source of foreign currency.

Barclays Capital estimates the debt service amounted to 7% of oil revenues in 2007. Today the ratio stands at 25%.

Although such ratio can still be handled, the country's vulnerability to an eventual decline of oil prices is clearly higher.

Also noteworthy is the fact foreign currency demand has shot up due to higher dependence on imports and the country's artificially-low forex rate (VEB 6.30 per US dollar).

Consequently, the government's has tried to bridge the US dollar gap by cutting the foreign currency sales by the National Center for Foreign Trade (Cencoex) to the private sector.

Adding the amount of foreign currency allocated to the private sector in January-July at the exchange rate of VEB 6.30 per US dollar and the amount sold to the private sector under the Ancillary Foreign Currency Administration System (SIcad), the foreign currency supply totals USD 13.2 billion.

Economic firm Síntesis Financiera says the figure is a 27% setback with respect to the USD 18.1 billion sold by the Foreign Exchange Administration Commission (Cadivi) and the Ancillary Foreign Currency Administration System (Sicad) in 2012. 

Consequently, production has plummeted in different sectors of the economy as companies lack enough supplies and commodities.

The Central Bank of Venezuela has not disclosed yet the figures of the GDP in the first quarter, yet indicators such as output in the car industry show the country is on the brink of recession.

Translated by Jhean Cabrera


Black Market Record Low 

Bloomberg reports Venezuela’s Black Market Bolivar Slides to Record Low.
 Venezuela’s bolivar fell to a record low against the U.S. dollar on the black market today as the government tightens currency rationing to pay maturing debt.

A dollar fetched 89 bolivars on the Colombian border today, compared with the official exchange rate of 6.3 bolivars, according to, a rate-tracking website. Two black market traders in Caracas, who asked not to be named because the trading isn’t legal, confirmed the record-low rate.

Inflation reached 60.9 percent in May, the last month for which figures are available, while according to economists surveyed by Bloomberg gross domestic product shrank 2.1 percent in the second quarter. The economic decline is pushing people to seek out dollars to protect the value of their savings, at the same time that the government tightens supply, Henkel Garcia, director of Caracas-based consulting firm Econometrica, said by telephone.

“The government has reduced disbursements of dollars at the secondary markets in recent weeks,” said Garcia, citing non-public data from the Venezuelan Banking Association. “They are trying to save up as many dollars as possible to meet obligations to bondholders.”

Venezuela has $4.5 billion of bonds maturing in October, according to data compiled by Bloomberg. The country’s foreign reserves reached an 11-year low of $20.1 billion on Aug. 21.

Officials have tried jailing traders, shuttering brokerages and setting up four parallel exchange systems to stem the rise of the unofficial rate in the 11 years since former President Hugo Chavez began controlling the bolivar’s price. Currency controls have failed to slow the world’s fastest inflation, while leading to shortages of everything from razors to cars.

Venezuela’s benchmark dollar bonds due in 2027 fell 0.44 cent at 12:37 a.m. in New York to 79.01 cents on the dollar. Yields on the note rose 8 basis points to 12.56 percent.