Goldman under fire for buying Venezuela "hunger bonds"

Posted June 06, 2017

Anti-government protesters have taken to the streets nearly daily since early April, demanding elections, the release of political prisoners and access to humanitarian aid.

Nomura Securities said it also bought about $100m worth of the bonds last week, according to Reuters reports. But Maduro can still count on substantial support, among them the president of his so-called people's" constituent "assembly Elias Jaua: "For all of those who always doubt him, for those who are shocked by political audacity, today we can say Nicolas was right to call the Constituent Assembly, which is to say, to call on the power of the people". "We agree that life there has to get better, and we made the investment in part because we believe it will", the investment bank added. That represents a 31% discount to other Venezuelan securities that mature in 2022, these people said, and implies an annual yield of more than 40%. Venezuela has vowed to leave the regional group.

Venezuela's opposition is refusing to participate, saying the vote set for July is a sham, with biased rules to ensure the body is filled with Maduro supporters. "The problem is that there are only $3 billion of these bonds - so either at least one of the stories is incorrect, or the Venezuela Central Bank recalled the Fintech repo early, or Venezuela and PDVSA made more than $3 billion of this bond".

The opposition-controlled Congress also voted on Tuesday to ask its USA counterpart to investigate the deal.

The Mexican foreign minister said "the situation in Venezuela is extremely serious" and explained that he would expect the "international community to show interest". For another, its decision to buy the bonds at fire-sale prices was an expression of faith in the Venezuelan people.

After making a bond purchase from the Venezuelan government, Wall Street investment bank Goldman Sachs has been accused of backing Venezuela's "dictatorial regime".

A small group of protesters gathered outside Goldman's Manhattan headquarters on Tuesday holding signs referring to Venezuelan President Nicolás Maduro that said "Goldman Sachs Supports Maduro's Dictatorship".

Many of those foreign leaders, for their part, plan to meet Wednesday to discuss a possible way forward in negotiating with Maduro's government.

Members of the opposition party have threatened not to honor the bonds or do business with Goldman Sachs if they do come into power.

With worldwide pressure mounting on Maduro, foreign ministers from the 34-nation OAS bloc met in Washington to debate the situation in Venezuela.

He said he meant to recommend to "any future democratic government of Venezuela not to recognise or pay on these bonds".

The grave situation in the oil-rich nation was described by The New York Times which wrote May 30 that "Venezuela needs worldwide Intervention - now".

Latin American leaders and global organizations have lambasted Maduro for abandoning the country's democracy. Borges, the opposition leader, is supposed to be the guy who will one day justify Goldman's multibillion-dollar bet on the future of Venezuela.

"It may get them through the day", a senior USA official said Tuesday, "but the longer-term consequences seem to be quite damaging for the institutions as well as for the society".