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How Goldman Sachs Became Broke Venezuela's Loan Shark

Tyler Durden's picture




 

Add the title of "loan shark to Dictatorships" to Goldman Sachs many varied roles around the world. As Venezuela teeters on the brink of tearings its utopian social fabric apart (by which we mean paying its soldiers while impoverishing its people to in order to maintain 'peace') crushed by plunging oil revenues, everyone's favorite American bank 'generously' offered to buy (from Venezuela) $4bn worth of oil debt owed by the Dominican Republic for 41% of its value, according to El Nuevo Herald. Doing god's work indeed. "This is a tremendous bargain for Goldman," said one source, as Venezuela is "liquidating the few assets they have, trying to find the cash flow, cash, they do not have."

 

Venezuelan bonds continues to crash

 

As El Nuevo Herald reports,

Cornered by liquidity problems, the regime of Nicholas Maduro sold to US investment bank Goldman Sachs obligations for more than $4,000 million Dominican Republic owed to Venezuela for oil supplied through Petrocaribe, receiving only 41 percent the total value of debt, sources close to the operation.

 

The transaction would involve a gain of 59 percent for Goldman Sachs, equivalent to $ 2.360 billion, on payment of $ 1.750 million grant to Venezuela for the obligations in August this year totaled about $ 4.090 million.

 

According to the sources, who spoke on condition of anonymity, Goldman Sachs is currently holding talks with the Venezuelan government to reach a similar agreement on oil debt that Jamaica has with the South American nation.

 

...

 

"This is a tremendous bargain for Goldman Sachs," said one of the sources. "The only negative is that it is a debt to 20 years, but the discount is as bestial, Goldman snatched from the hands in exchange for giving PDVSA a little liquidity."

 

But the operation denotes a high degree of desperation of the Venezuelan state whose oil sales generate more than 95 percent of the dollars entering the country.

 

"They're liquidating the few assets they have, trying to find the cash flow, cash, they do not have," said the source.

 

...

 

"They're scraping the pot" from New York said Venezuela's former ambassador to the UN, Diego Arria, who has close links with the international financial sector.

 

It is also a clear signal to the international markets on the economic problems facing the regime.

 

"A discount as significant [59 percent], besides the great monetary loss for the nation, is a great loss of credibility on the Venezuelan financial situation," said Arria.

 

"But it could also be a crime," the diplomat added. "Giving such obligations at a discount from those proportions, is attacking the national heritage".

 

...

 

But the financial crisis facing the regime generated great doubts about the country's ability to continue to support the costs of subsidizing oil economy with Cuba and its other allies.

*  *  *
Instabiliteee.....

 

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Tue, 12/02/2014 - 10:16 | 5508201 pachanguero
pachanguero's picture

What could go wrong for them. Hey goldman is doing God's work!

Tue, 12/02/2014 - 10:17 | 5508208 Took Red Pill
Took Red Pill's picture

more like doing the work of the US gov't

Tue, 12/02/2014 - 10:26 | 5508247 NoDebt
NoDebt's picture

If somebody's bleeding out, you can be sure Goldamn will be there with a straw and some vodka to mix up Bloody Marys with it.

Tue, 12/02/2014 - 10:42 | 5508308 Latina Lover
Latina Lover's picture

Nothing will go wrong with Goldman's trade.  If Venezuela refuses to pay, either they will direct the President to invade, or will have the Fed Reserve bail them out.  They never lose, only you.

Tue, 12/02/2014 - 11:59 | 5508612 SafelyGraze
SafelyGraze's picture

listen.
just default already.

Tue, 12/02/2014 - 12:33 | 5508738 DJ Happy Ending
DJ Happy Ending's picture

Scum feeding on scum.

Tue, 12/02/2014 - 12:55 | 5508856 Buckaroo Banzai
Buckaroo Banzai's picture

Hard to feel sorry for the Venezuelan government here. Of course it's the Venezuelan people who are getting fucked in the end-- probably doesn't make any difference to them whether they are getting fucked by their government, or by GS bankers.

Tue, 12/02/2014 - 14:59 | 5509565 economics9698
economics9698's picture

Venezuela should default, kill the central bank, legalize silver as money, and sign a defense pact with China ASAP. 

Fuck Goldman.

Tue, 12/02/2014 - 15:30 | 5509723 tarabel
tarabel's picture

 

 

Always amusing to count the "upvote regardless of the content" totals among the Okhrana.

So let's go back and read the story. What do we see?

We see that Venezuela sold an obligation owed to it by the Dominican Republic. So Venezuela already has its money and therefore your observation that there is a possibility that it "refuses to pay" Goldman Sachs is, quite simply, idiotic. As are the mindless adherents who automatically agreed with your scintillating content. It is Goldman Sachs who pays in this transaction and Venezuela that gets paid. Hope that clears things up for you and your posse.

Tue, 12/02/2014 - 16:07 | 5509921 quadratic_equation
quadratic_equation's picture

You mean if the Dominican Republic refuse to pay Goldman Sachs.  Venezuela is already out of the deal Goldman already paid them off.  It's like saying Venezuela owns a title of your house and you're the Dominican Republic, Golman Sachs buys the title from Venezuela then you (Dominican Republic) owe Goldman Sachs.

Tue, 12/02/2014 - 10:47 | 5508322 Greenskeeper_Carl
Greenskeeper_Carl's picture

Of course the squid will go there and do this. It's what they do. At this point, knowing all we know about Goldman, if you still do business with them you deserve to get fucked over. It's their business model and everyone knows it. And honestly, it's hard to feel sorry for Venezuela. They are a case study in why socialism doesn't work. All that oil they are sitting on and they can't even supply themselves with energy. Just like Argentina, all that fertile land and they can barely feed themselves. Yet the people of both countries keep voting for moar socialism.

Tue, 12/02/2014 - 11:09 | 5508410 whatthecurtains
whatthecurtains's picture

Vote for Capitalism you get Goldman.

Vote for Socialism you get Goldman.

All roads lead to Goldman.

Tue, 12/02/2014 - 11:17 | 5508436 Greenskeeper_Carl
Greenskeeper_Carl's picture

what goldman does is not capitalism. Making shitty bets with customer money and then getting bailed out, with the implied promise that the USgov and fed will not allow them to go under becuase they are 'too big to fail' is not capitalism. With out bankrupcy clearing out bad banks and bad debts, there can be no honest capitlism. What we have now is the worst of both worlds- privatized gains with socialized loses. Also, regulatory capture, in which the people who are supposed to be enforcing laws on these banks are all former(and future, once their stint as a "public servant" is over) are the ones supposedly regulating them, is also not capitalism. Heads I win, tails you lose is not capitalism. Honest, sound money, and ending the fed, would ruin these peoples business model

Tue, 12/02/2014 - 11:40 | 5508533 JR
JR's picture

Goldman is the ultimate ambulance chaser, with one exception. It only collects; it does not provide a service. As well, Goldman’s vehicle often is what ran over the victim.

The aim of monopoly capitalism, “the graveyard of civilization,” is to weaken all nations, particularly the US, and fold them into a “new world order.” Dominated by the Fed banking system (Goldman et al.), this collectivist system as you say will not be allowed to fail; instead, as the Fed has done for 100 years, the international bankers will bail themselves out of all risks – even bankruptcy - with Fed paper or inflation money.

In this collectivist world system, all major decisions will be made at the top by the non producers with the rest of the people engaged as hi-tech serfs; it's central planning via banker oligarchy.

Collin Kettell summarizing G. Edward Griffin’s video, The Creation of the Federal Reserve, writes: The Fed, “as one of the greatest cartels in the world, gives the banks flexibility to do whatever they please.”

Says Kettell: “Griffin points out that as a direct result of the Fed, banks can now take financial risks that they wouldn’t otherwise take, knowing that they will be bailed out by the American tax payers if they fail. Then they take more and more risks. ‘They privatize their profits and socialize their losses.’”

As for the future, write Kettell, Griffin is pessimistic. “What has happened lately is that all the world’s central banks have joined together to cooperate, they are all inflating their currencies at the same time, they’re all passing draconian laws benefiting themselves. What we see is a transformation of the world’s former system into an amalgam of government and banking, so that the two are now inseparable. There might not be a collapse of the banking system, but a collapse of freedom. In his view, if we don’t turn this around, this thing might end up in a huge worldwide, Soviet-like police state.”

Tue, 12/02/2014 - 15:04 | 5509592 economics9698
economics9698's picture

If the people of Venezuela and Argentina want to break free of Goldman and Oppenheimer then legalize silver as money. 

And the parasites will leave. 

Sign a defense pact with Russia and China while you are legalizing silver.

Tue, 12/02/2014 - 12:50 | 5508836 KnuckleDragger-X
KnuckleDragger-X's picture

ND, that's how vultures work, just strip the carcass and leave the bones....

Tue, 12/02/2014 - 10:19 | 5508209 GetZeeGold
GetZeeGold's picture

 

 

I wouldn't go that far......pretty sure Goldman would be a pretty good pimp to Venezuela.

Tue, 12/02/2014 - 10:36 | 5508290 SethDealer
SethDealer's picture

the only thing good to come out of venezuela is pussy

Tue, 12/02/2014 - 13:31 | 5509051 daxtonbrown
daxtonbrown's picture

Bullish Venezuela.

 

Hmmm, isn't this the same sort of economic philosophy Obama follows?

Tue, 12/02/2014 - 10:21 | 5508202 mayhem_korner
mayhem_korner's picture

 

 

41% is better than GM bondholders got.

 

And so rather than risk being priced in to transactions as a regular course of business, the M.O. is to allow the latent risk to paint creditors into a corner, then monetize all the risk (losses) at once.  To the liquidity holders (squids) go the spoils.

Tue, 12/02/2014 - 10:18 | 5508204 Yen Cross
Yen Cross's picture

  What does the Squid want from the Dominicans? My guess is that they're looking to rebuild the Yankees franchise, or they need a bunch of cheap latin hookers for their holiday parties for the next 10 years.

Tue, 12/02/2014 - 10:22 | 5508229 mayhem_korner
mayhem_korner's picture

 

 

How 'bout they just want to reap an ROI?  Dominica can default on a huge % of the debt and Squid still gains a better return than pretty much anything in the tradeable "market".  I'm guessing they didn't "advise" their clients to go in on this one...

Tue, 12/02/2014 - 10:25 | 5508243 Government need...
Government needs you to pay taxes's picture

The best scams Goldman keeps for itself.  When a muppet is needed, Goldman deploys their sellside 'analysts' to attract the counterparty size they need to launch their prop trades.

Tue, 12/02/2014 - 10:52 | 5508338 monoloco
monoloco's picture

They will offer it to their clients about the time it looks like the DR will default.

 

Tue, 12/02/2014 - 10:47 | 5508319 booboo
booboo's picture

The elite have upgraded to little boys, haven't you read the news? Oh wait....you're not supposed to know this, national security and all that. Wink wink nod nod

Tue, 12/02/2014 - 10:51 | 5508330 Greenskeeper_Carl
Greenskeeper_Carl's picture

Maybe they can get some cheap underage hookers to bribe sen menendez with. I'm sure he'd accept that instead of the usual 'campaign contributions'

Tue, 12/02/2014 - 10:18 | 5508211 MegaOlmecanManiac
MegaOlmecanManiac's picture

Pro-form for vampires.

The only negative is that some folks will be eatin' some other folks.

Tue, 12/02/2014 - 10:19 | 5508217 yogibear
yogibear's picture

Goldman is doing Satan's work.

Tue, 12/02/2014 - 10:38 | 5508300 JRobby
JRobby's picture

Goldman is Satan

Tue, 12/02/2014 - 11:13 | 5508423 chunga
chunga's picture

It totally pisses me off that Robbie Robertson walked off with most of The Band's money.

It spoils the music a little bit. Levon barely avoided getting foreclosed.

/slightly off topic but not much

Tue, 12/02/2014 - 12:54 | 5508846 KnuckleDragger-X
KnuckleDragger-X's picture

No, GS is Satans accountant....

Tue, 12/02/2014 - 10:19 | 5508218 Philo Beddoe
Philo Beddoe's picture

Correct me if I am wrong, but does this mean  Goldman is 41 percent sure or more that they will be able to collect from the Dominican?  That said, the 59 percent gains occurs if and only if the Domican pays back all of this debt. 

Tue, 12/02/2014 - 10:32 | 5508264 Government need...
Government needs you to pay taxes's picture

I'd chop that 41 in half.  Goldman will have negotiatied to lead manage anything lucrative between now and maturity.  When PDVSA comes to market next, I bet Goldman is the lead manager.  Also, I expect some Goldman muppeteers are down there now, evaluating other natural resources (mineral deposits, art, etc).  The vig on the debt is one 1 of several ways the squid will claw out its pound of profit.

Tue, 12/02/2014 - 13:53 | 5509165 tenpanhandle
tenpanhandle's picture

Psst...psst...Dominique, I give you your oil debt for the loan of your gold.  I promise I will give you your gold back in 20 years.  You'll be in line right behind Germany.

 

p.s. Dominican Republic has at least one worldclass gold deposit.

Tue, 12/02/2014 - 10:31 | 5508265 NoDebt
NoDebt's picture

Correct.  However, I wouldn't bet against Goldman on that risk.  The main component of this deal was Maduro's desperation for cash.  Desperation costs money.  A LOT of money.

 

Tue, 12/02/2014 - 10:36 | 5508287 highly debtful
highly debtful's picture

So the Spanish word for muppets is Venezuelans now? 

Tue, 12/02/2014 - 10:52 | 5508334 Dien Bien Poo
Dien Bien Poo's picture

True but GS money isnt the only money out there. Way better deals to be had with the Chinese. Bilateral oil swaps, etc are much larger and more meaningful. This is small change.

Tue, 12/02/2014 - 10:32 | 5508269 Unknown Poster
Unknown Poster's picture

Bonuses are calculated way before NPLs are realised.

Tue, 12/02/2014 - 10:40 | 5508301 buzzsaw99
buzzsaw99's picture

they are 100% sure the fed gub will do everything in their power to make sure they DO get paid. furthermore they are 100% certain that if they don't get paid that the fed will buy them at par. zero risk bitchez.

And if you don't pay, the market will. [/Leonard Smalls, aka the Warthog From Hell]

Tue, 12/02/2014 - 10:40 | 5508302 JRobby
JRobby's picture

CDS

Riskless market while Janet is running the preess full speed till it smokes.

Where there is smoke there will eventually be fire.............

Tue, 12/02/2014 - 10:20 | 5508219 Government need...
Government needs you to pay taxes's picture

Lovely to see the sleazy Goldman moneypimps working the corner down in dictator land.   I wonder how they play the arms market. . . Do they offer collaterized finance vehicles?  How many cents on the dollar does Goldman lend for blood diamonds in Africa?

If God were a financial undertaker, Goldman would in fact be doing His work.

Tue, 12/02/2014 - 10:34 | 5508281 Bangin7GramRocks
Bangin7GramRocks's picture

If I was Venezuela, I would do the deal then kidnap Blankfein and 5 other archcriminals and demand $4 billion ransom. Fuck with South Americans and you deserve what you get!

Tue, 12/02/2014 - 10:42 | 5508307 GetZeeGold
GetZeeGold's picture

 

 

and demand $4 billion ransom

 

They've got that in petty cash.....I would up that figure drastically.

Tue, 12/02/2014 - 10:23 | 5508228 techstrategy
techstrategy's picture

It's the playbook people.   Get them loaded on debt and then tighten.   Buy the assets in the default firesale.  The nearly infinite abuse of what is actually quite finite real leverage.   Liquidate the trillions in float scams and buy gold.   You will restore integrity and investment signal to the market. 

Tue, 12/02/2014 - 11:41 | 5508542 Four chan
Four chan's picture

they almost pulled it off with detroit. thank god for the bk judge.

Tue, 12/02/2014 - 13:56 | 5509183 tenpanhandle
tenpanhandle's picture

Are you sure.  Last I heard it was lights out for Detroix.

Tue, 12/02/2014 - 10:28 | 5508253 Dazar Nummers
Dazar Nummers's picture

Anyone here watch Walter Martinez "DOSSIER" television program out of Caracas?  Excellent world news analysis.

Tue, 12/02/2014 - 10:28 | 5508256 insanelysane
insanelysane's picture

I would think the better story is how DR and Jamaica are buying oil on credit and not paying it back.

Tue, 12/02/2014 - 10:29 | 5508257 Spungo
Spungo's picture

Why don't they just stop borrowing money and stop having such a shitty economy? Venezuela has as much oil as Saudi Arabia. It greatly exceeds the amount of oil Norway has. If Norway is doing well, why can't Venezuela get its shit together?

Tue, 12/02/2014 - 12:24 | 5508703 graemepscott
graemepscott's picture

Because their Dear Leader is a criminal lunatic who is running the country in to the ground.

Tue, 12/02/2014 - 10:30 | 5508258 astoriajoe
astoriajoe's picture

isn't goldman every country's loan shark?

Tue, 12/02/2014 - 10:34 | 5508280 10mm
10mm's picture

Confessions of a Economic Hitman. Good book.

Tue, 12/02/2014 - 10:36 | 5508289 youngman
youngman's picture

The smell of easy money....and Goldman will be there....this is what they live for...nothing else....just money..

Tue, 12/02/2014 - 10:37 | 5508291 nowhereman
nowhereman's picture

When are the countries of the world going to wake up to this racket, grow some cahones, and just give the Goldmans of this world the middle finger?

Tue, 12/02/2014 - 12:10 | 5508653 Duude
Duude's picture

Venezuela had a choice here. How is it you don't follow what's going on?

Tue, 12/02/2014 - 10:38 | 5508294 Latitude25
Latitude25's picture

So I guess that means GS has already cleaned out the Venenzuelan gold?

Tue, 12/02/2014 - 10:41 | 5508310 astoriajoe
astoriajoe's picture

twice I think.

Tue, 12/02/2014 - 14:06 | 5509224 tenpanhandle
tenpanhandle's picture

It is safe to always assume that when the Squid acquires a Country's other assets, that their gold is already gone.

 

http://www.zerohedge.com/news/2013-11-21/venezuela-selling-gold-goldman-sachs

Tue, 12/02/2014 - 10:42 | 5508311 ThisIsBob
ThisIsBob's picture

The deal is probably already sold or syndicated at a nice profit.

Tue, 12/02/2014 - 10:43 | 5508315 fzrkid
fzrkid's picture

Good news for Dominican Republic.

 

At this point the DR can extend both arms and turn their fist up

Slowly raise their middle finger while keeping the rest of their figners and thumb closed.

 

And say FAHK you GS, you not gonna get a dime of that oil money.. Whats GS gonna do?

Tue, 12/02/2014 - 12:08 | 5508648 Duude
Duude's picture

Maybe the same that happened to Argentina. Not paying your debt has consequences when it comes time to borrow down the road.

Tue, 12/02/2014 - 10:46 | 5508320 Dien Bien Poo
Dien Bien Poo's picture

im 60 bid. FUCK U GS.

Tue, 12/02/2014 - 11:16 | 5508435 ThisIsBob
ThisIsBob's picture

Sold to you.  Thanks.  GS

Tue, 12/02/2014 - 10:53 | 5508339 SoDamnMad
SoDamnMad's picture

And the Squid helps to keep Maduro in business .  Is that sort of "traitorist"?  Oh, I forgot. That is the Squid doing it. God's work

 

Tue, 12/02/2014 - 10:54 | 5508352 q99x2
q99x2's picture

But it could also be a crime.

Then arrest Loyd Blankfein M'Fers.

Tue, 12/02/2014 - 10:58 | 5508367 SmallerGovNow2
SmallerGovNow2's picture

Why was the ZH site down this morning?  Was for me on two different computers and locations....  Anybody else have problems this morning?

Tue, 12/02/2014 - 11:05 | 5508400 Government need...
Government needs you to pay taxes's picture

NSA spy here, we apologize for a glitch in the ZH board earlier today.  We were just backing up all your comments for our beta-test drone targeting program, but we accidentally had the same computer bank operating the drones and the back-up simultaneously.  Fortunately, no Sidewinders were released onto ZH posters positions.  I'm sure when you understand the choice we made (shut downt he site for a bit or drone your asses), you'll appreciate our leniency. . . this time.

Tue, 12/02/2014 - 11:19 | 5508445 PGR88
PGR88's picture

Crony-capitalists in bed with socialists - what else is new?

Tue, 12/02/2014 - 11:28 | 5508488 AcidRastaHead
AcidRastaHead's picture

I'd like to visit Venezuela Sachs someday.

Tue, 12/02/2014 - 11:32 | 5508501 MansaMusa
MansaMusa's picture

How does GS make money from buying Venezuela's debt?

Tue, 12/02/2014 - 12:04 | 5508628 Duc888
Duc888's picture

...same with Greece, loan them money you know they can't possibly pay back and then short the fuck outta them on the other side of the trade.

Tue, 12/02/2014 - 12:05 | 5508633 Duude
Duude's picture

First, understand "Venezuela's debt" is in Venezuela's receiveables column, not their payables. But GS makes money like any other debt collector. They buy it at a discount, then work to collect the full amount from the debtor.

Tue, 12/02/2014 - 12:46 | 5508800 RaceToTheBottom
RaceToTheBottom's picture

Or collect from the US via the US taxpayer.  Probably not the case in Venezuela's case, but previously in Mexico, etc...

GS never gets caught with the risk.  Never.

Tue, 12/02/2014 - 12:06 | 5508638 Duude
Duude's picture

Frankly, I don't like any of the parties, so I don't really care. Maybe the Domincan Republic will be more comfortable sticking GS than Venezuela being they may have worried about their future ability to buy oil from Venezuela on credit.

Tue, 12/02/2014 - 12:28 | 5508717 Downtoolong
Downtoolong's picture

The friend of my enemy is also my enemy, unless he’s got money and power to pay me, in which case we are all friends.

Lloyd.

Tue, 12/02/2014 - 12:35 | 5508748 RaceToTheBottom
RaceToTheBottom's picture

Dealing with GS= Dealing with the Devil.

Everything flows from that point.

Tue, 12/02/2014 - 12:36 | 5508756 Peter Pan
Peter Pan's picture

The way the price of oil is going it too will be trading at 41% of what it was trading a before all the games began with Russia.

Nothing is for real anymore, Everything is at the disposal and whim of the puppeteers.

America is playing a very crafty game through the markets and would seem to be getting the upper hand but in my mind all these nations and their finances make them lepers of the worst kind.

Stay away from their games and invest in what history has always deemed to be real money.

Tue, 12/02/2014 - 12:55 | 5508861 arrowrod
arrowrod's picture

How do you collect from the Dominican Republic?  Or Jamaica?

I think GS just threw away $2B

Tue, 12/02/2014 - 14:38 | 5509419 Jano
Jano's picture

GS has now some collateral to isue oil-backed CDS ETFs.

S&P will go thru the roof.

A joke.

Tue, 12/02/2014 - 15:00 | 5509564 bondman1
bondman1's picture

PV 1.75.

FV 4.00

n = 20

i = 4.34% 4.34% annual appreciation + Dominican's rate whatever that is.

It sounds a lot better than it looks on paper.

 

Tue, 12/02/2014 - 15:11 | 5509631 venturen
venturen's picture

can we assume the US is about to annouce they will pay all Dominican's debts? 

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