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Venezuela Sells Billions In Gold To Repay Its Debt
Just under a year ago in the aftermath of the "OPEC Thanksgiving Massacre" of 2014 which sent oil crashing when Saudi Arabia effectively ended the oil cartel, we predicted that Venezuela (with its CDS trading at 2300 bps back then) would become the first casualty of the "crude carnage." Since then not only has Venezuela, which relies on crude oil for 95% of its export revenue, suffered a dramatic episode of hyperinflation (which is only accelerating) coupled with total economic collapse, but its CDS has, as expected, blown out to reflect a default of probability at 96% over the next five years as shown below.
Yet while everyone promptly jumped on the "Venezuela will default bandwagon" it has so far avoided bankruptcy.
How can this country with a massive debt load and a paralyzed economy have avoided default so far?
For one thing, it has been drawing down on its FX reserves at an unprecedented pace. Venezuela's international reserves are hovering near a 12-year low of $15.2 billion.
According to Barclays economist Alejandro Arreaza, the latest figures support estimates that Venezuela had about $42 billion of total assets, including off-budget funds, at the end of the third quarter, of which $15 billion was liquid. He said liquid assets will fall to about $8 billion by year end. The country and its state oil company have $12 billion in bond payments coming due next year.
But before we get to next year, there are still two more months left in 2015, as well as two immediate bond payments due this week and next, amounting to $3.5 billion.
Where did Venezuela obtain the funds needed to make these debt payments?
The answer: it has been dumping its gold, which its former ruler Chavez worked hard in 2011 to repatriate from London, and which its current president Maduro, just four short years later, is busy sending back to its creditors.
According to Bloomberg, "in a sign of how Venezuela is growing increasingly desperate to acquire hard currency, a report released this week showed the country has been stepping up its sales of gold."
The value of the central bank’s bullion holdings fell 28 percent at the end of May from a year earlier, while the spot price for the metal declined just 12 percent. The figures, while reflecting transactions that took place five months ago, underscore the efforts the government is taking to raise the cash to repay creditors and fund imports amid a punishing recession, inflation exceeding 100 percent and a collapse in the price of its main export, oil.
Reuters adds that just in 2015, Caracas has parted with 19% of its gold holdings: "Central bank financial statements posted this week on its website show monetary gold totaled 91.41 billion bolivars in January and 74.14 billion bolivars in May. At the strongest official exchange rate of 6.3 bolivars per U.S. dollar, which the bank uses for its financial statements, that decline would be equivalent to $2.74 billion."
Reuters in March reported that the central bank was in talks with Wall Street to monetize about $1.5 billion of gold in reserves, an operation the bank did not confirm at the time. The central bank declined to comment.
The good news is that as of May, gold comprised roughly 58% of Venezuela's international reserves, or about $11.8 billion according to Bloomberg calculations. It is unclear how much more gold Venezuela has sold in the past 5 months.
The bad news is that this gold will also be gone soon: with $12 billion in debt due in 2016, it is likely that the Latin American nation will run out of liquid reserves in the next 12 months.
Barclays analysts said in a research note on Wednesday that they expect Venezuela will use gold reserves to gain liquidity to ensure bond payments through at least the first quarter of 2016.
After that, barring a miraculous surge in the price of oil, Caracas is on its own.
But the worst news, if only for Ben Bernanke, is that Venezuela has one again proven, without a doubt, that when it comes to Venezuela's all too sophisticated Wall Street-based creditors, gold is perfectly equivalent to money.
As for Venezuela, after it runs out of gold in its inexplicable quest to placate creditors and postpone a default which at this point is unavoidable, at least it will have toilet paper.
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Funny... sell low.. sell lower...
Short On Toilet Paper, Venezuela Buys More WeaponsDictatorship which is try control market is not so much understand market function.
This is what the banksters have in mind for us too. Sell your real stuff for their phony debts. If you can make it through that period without selling, you should be good. Strong hands, strong hands...
"in a sign of how Venezuela is growing increasingly desperate to acquire hard currency, a report released this week showed the country has been stepping up its sales of gold."
Incredible propaganda continues from the bought and paid for media. What is the definition of "hard currency"? Is that US dollars? Treasuries? Or gold?
Laughable. It is also laughable that people like Martin Armstrong claim that gold has no place in the system as a means of monetary trade, yet this article above (based on real world events) proves something very different.
So Martin, who are the idiots accepting the gold? lol
"Central bank financial statements posted this week on its website show
monetary gold totaled 91.41 billion bolivars in January and 74.14
billion bolivars in May"
That's a lot of toilet paper, cigarrettes and feminine sanitary supplies...
Indeed sire.
That's why you save gold. To have when you're in desperate need of life's essentials.
Indeed. It is a fact that you can't wipe your ass with gold bars.
After Demolition Man, I'm fairly certain anything will work for wiping your ass, it might just be less comfortable.
If you have gold bars, you can pay someone else to wipe your ass.
pods
I might just like that! I wonder if the cheeto weeper is looking for work yet? I'd hire obozo but I don't trust him near my anus. Yeah, I am a teensy bit homophobic. So I got flaws, fuck em.
Venezuela got ass raped hard buy the bankers. 4th grade idiots elected, debt, banker heaven.
Oh fuck that would be Obama and Bush.
~"It is a fact that you can't wipe your ass with gold bars."~
Why sure you can. It's just getting them to flush that's a bitch.
Get a colostomy bag!
You'll never wipe your ass again.
Sure you can
http://www.toiletpaper.com.au/24-carat-gold-toilet-paper-1-roll/
why not just print more? works for everyone else.....
/s
could that mean the dollar went up vs gold and the blv ? doesn't mean gold was sold. Whatever... To stronger hands it goes hopefully
Bolivars are a meaningless unit of measurement. For starters no one knows how much they are worth. There are at least 3 exchange rates, going from 6 bolivars per dolar to over 1000 bolivars per dolar, with lots of trades done within that range.
Good ole Marty sold out long ago on meaningful discussions about gold issues (the fucktards here defending him notwithstanding).
Ya, what a moron, just sell them shares of GLD instead, its the same thing.
Keep stacking, baby - and keep your powder dry!!
Only those who have both gold and toilet paper are true 1%'ers.
I just realized another good reason gold prices are kept artificually low.
To get it out of the hands of smaller, poorer managed countries? Yep.
"it has been dumping its gold, which its former ruler Chavez worked hard in 2011 to repatriate from London, and which its current president Maduro, just four short years later, is busy sending back to its creditors."
You didn't think they were going to let you keep it very long, did you, Venezuela?
They could just default. But nope. Too stupid for that.
Glad I wasn't the only one thinking that.......politicians to debt are like junkies to a fix, just can't help kicking the can again and again.
Why do you think the US announced it was selling oil (keeping the price suppressed)? To force Venezuela off its gold. The gold from the overthrow of Ukraine is gone, gold from Libya is gone, needed a new supply.
Maduro is even moar stupid than he looks if he'e actually selling in bulk, to Wall Street, at spot.
fucking idiots...
Seems to me that this government was intalled by the CIA for the express purpose of destroying Venezuela.
Ha ha ha - just goes to show the value of holding physical gold. MAybe Chavez shoudl have spent his time on something more important, like not beeing a communist fuckhead.
I can't believe the creditors would even accept gold as payment. It's not money, it's just a barbarous relic. Ben Bernanke told me so.
Beat me to it, lol.
Those creditors must be nuts. Oh well. Live and learn they say. A fool and his money are soon parted. Etc. and so on.
The Chinese don't mind trading paper for that barbaric yeller metal.
Texas is still waiting for its AU to be delivered.
much ado about a worthless barbarous relic.......
Maduro has been having conversations with little tweety birds again named JPM and GS. What could you expect from a minibus driver?
I expect that he'll get paid handsomely by his NY masters, for this act of treason.
Does Bernie Sanders knows that Venezuela exist? I wonder why he doesn't move there?
LOL. He gravitates towards the Swedish belly flop.
how is this possible, it's just an old relic paper weight, not money? LOL LOL
idiots... they need to sell it to Russia or China
Most likely he will.
A warm bed awaits a handful of people that sold Venezuela's gold when they run to their choppers as soon as Venezuela blows up.
Wait a damn minute! Why and how are debts being settled with a stupid yellow metal? That shit isn't money, it doesn't make money, and you can't even eat it, FFS?!!
Just another bad decision by Venezuela, in a long line of bad economic decisions. But they are in a serious bind now.
The Western banking system has entrapped a lot of third world countries by selling them "cheap debt" when the economy looked good, and then getting them on the line for long-term interest payments. It's an enormous racket. Sooner or later some of these marginal countries will go belly up, abd debt will not be repaid. But it's always the fault of the "banana republics" who accepted the debt. It's never the fault of the "Banana Banking System" that offered the debt in the first place.
How fucking stupid is it to get rid of all your assets THEN default? He should default with his gold intact, period.
When he defaults he's done for. His government will cease to exist. So he's pushing out the inevitable where have we seen that before? Ah right....
but he still has power now. he should grab the gold and hightail it outta there. if he sells all the gold, defaults, and gets run out of office, he'll be eating rats with the rest of the unwashed masses.
Maybe he's a City of London stooge sent by grocery clerks to collect a bill.
gotta say that I agree with Chubbar. If they're going to go under ... KEEP THE GOLD. Hard to believe.
The western world did not force Venezuela to destroy its own industrial and agricultural base, allow bands of pirates to take over the highways, let armed thugs kill 100 people a day with impunity, set meat and milk prices by decree, double the money supply every year or forbid the purchase of foreign currency.
Plot twist: But what if they did?
Yep. They probably did.
When it comes down to it gold is not just some barbaric relic. It does have value.
Certainly more than what they purchased it for.
All fiats go to 0.
What do you expect a bus driver to know about the monetary system?
I did not know much when I was a bus driver (CTA...best relatively high paying job I've had...and I'm a doctor now).
This is a terrible example but this is an example of why we can't trust political leaders to fix our problems!
Even if we can find a guy to come in and set the nation/world on the proper course, a few years later some new guy will come in and flush it all down the toilet again.
The fix has to be deeper and grassroots and that can't happen until the population repudiates these puppet masters in disgust like the French revolution
This is my favorite quote from Bloomberg:
"in a sign of how Venezuela is growing increasingly desperate to acquire hard currency, a report released this week showed the country has been stepping up its sales of gold."
In this totally fucked up perverted world, somehow digital 1s and 0s have become "hard currency" and gold is a pet rock.
China says thank you very much and the DC whores keep their useless jobs.
Dolars or gold, does not matter. Anthing of value is leaving Venezuela. It might as well be cocaine.
Here's mine
First all the gold gets sold and then all the oil.
Nice country Venezuela - I wonder what the creditors will rename it next year??
Venezuela = Some Kind of Stupid
Actually, what they should have done was back their Boliva with Gold and payback Boliva's. Never, ever, let your Gold leave the country...
As always he rose to his position of power with backing from others.
Same as bathhouse Barry.
Well lets be realistic, GOLD should be the last thing we all sell to survive, and this story proves it.
Just more retail bagholders soaking up a few tons I suppose.
He should have taken bids from the Chinese and Russians. It's hard to get big deliveries.
Nonsense, it's easy to get big deliveries. All you have to do is PAY for it. Venesuela is only selling 45 tonnes, $1.6 billion dollars worth
Annual production of new gold is 2,400 tonnes, and much of that goes through Switzerland. Last year Switzerland exported $132 billion worth of gold.
Speaking of Bonds, looks like Germany and South Korea jumped on the Britain bandwagon and are opening new Yuan bond hubs.
http://www.examiner.com/article/germany-and-south-korea-rush-to-follow-britain-selling-yuan-bonds
Dovie'andi se tovya sagain (It's time to toss the dice)
The Daily Economist
thought it was just pet rocks, paying debts with it? Who would accept that
I just hope he was able to sell it all before 2pm Eastern yesterday, when Gold lost $40 for no fucking reason other than Mr Yellen is still breathing.
In theory, gold should be the ultimate insurance policy...something you part with only when everything else is lost.
And so it appears to be the case with Venezuela.
Gold in reserve is like the financial 2nd amendment.
Default and say fuck it.
The shit has already hit the fan there.
madness.
Is this why gold is being slammed?
yep, thinking same thing. increase in supply.
No, gold and silver are down because of speculation of a 0.25% rise in interest rates in Dec.
When US interest rates actually rise, gold and silver will go into freefall.
we no need no stinkin' gold ....
I'm curious if Venezuela and China are/could collaborate to circumvent Wall Street, and trade directly FRN's for gold.
I would assume China would have a sympathetic streak for Venezuela's pinkish hue, and extend a helping hand.
Possibly, they already are. http://www.bloombergview.com/articles/2013-11-25/what-is-goldman-sachs-d...
Don't know the details of the transactions, but it would be interesting to find out.
Venezuela's gold is already gone and been fed into the system in 2013-2014. They are just selling (monetizing) gold that has been already lent out and disposed of. Soon after Venezuela repatriated their gold, Goldman Sachs took delivery of 1.8 billion $ gold as collateral for a loan. Payback was 7 years. Do you think that Goldman just sat on that gold? Of course not. It was fed into the ponzi and then Goldman and other principles in the Ponzi made sure Venezuela would be forced to sell before Goldman had to give their gold back.
http://www.gata.org/node/13264
"Venezuela will deposit $1.8 billion worth of gold with Goldman Sachs as collateral for a $1.62 billion seven-year loan at 8% annual interest. Venezuela isn’t selling the gold, but is merely using it to secure the borrowed money."
http://www.wealthdaily.com/articles/venezuelas-gold-deal-with-goldman-sa...
It's not much different in this country:
"Between the comfortably numb and the willfully dumb, the country is turning to crumb." -Kirk2NCC1701
How stupid. So after all efforts to repatriate it they just sell it at the bottom of the downtrend. Rather than peg their fiat to it to stabilize it for good. LOL unbelievable.
Hasn't Venezuela sold its gold to Russia, under an agreement that they can buy it back at a later date?
Unless a US/Nazi regime is in power in Caracas?
Does Tyler know?
AFAIK, they entered in a gold backed funding agreement with none other than Goldman Sachs.
Thank you for your helpful reply. From Bloomberg November 2013.
I don't suppose you know the terms of the loan. But it seems to me, even if there is a penalty for early prepayment, Venezuela can give the pawn ticket to Russia, who would pay off the loan and all GS fees, and Venezuela would owe Russia for the gold.
Remember at the time of the GS's loan to Venezuela, Russia had it's hands full of gay marriage, Edward Snowden, the Winter Olympics at Sochi, the Kiev coup and the eventual annexation of Crimea.
Putin has less on his plate now and if an additional 1.45 million ounces of gold is something which will help Russia, the dude should go for it.
They should of backed their currency with it.. The banksters would of at least urinated down their suit leg, until assassinations were ordered.
I don't oftern sell my Gold,
But when I do, it is to pay an odius debt.
Nope. They will liquidate faster than that. They've only got about a billion in hard currency. The rest is in gold and oil company bonds, the latter of which is worth crap on the open market.
But most importantly, theirs is not a debt crisis. We are talking about money to buy imported food and medicine for their daily needs. 2016? They can probably make it until March. Their plan is to cross their fingers and hope oil doubles.
Chavez was not elected for his intelligence, good looks, honesty, or nobility. He was elected to give away free lunches by the venezulaian FSA. Now he needs lunch money. This story always ends the same way.
Now he need nothing. He is dead. Has been for a while.
And that's how it works folks. Central banks create "money" from nothing and countries have to give gold back. What a great business.
I just shake my head at the absolute lunacy of it. This is why your choice for president is Idiot R or Idiot D. Smart people would realize, hey wait... we have the military.
Obviously the author has not read about the shortages in Venezuela. Those shortages include toilet paper.
They are selling it to their Oligarchs, i.e. the Oligarchs are cashing out of currency into hard assets.
Thus, next step: hyperinflation!
Venezula and Argentina have a load of nazi gold.... No big deal...
Why not Join BRICS & dump the dollah