Venezuela Sells Billions In Gold To Repay Its Debt

Tyler Durden's picture

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.

Actually, no it won't.

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Boris Alatovkrap's picture

Dictatorship which is try control market is not so much understand market function.

coinhead's picture

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...

nope-1004's picture

"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

Tyler Durden's picture

"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"

nuubee's picture

That's a lot of toilet paper, cigarrettes and feminine sanitary supplies...

Stuck on Zero's picture

That's why you save gold.  To have when you're in desperate need of life's essentials.

BlindMonkey's picture

Indeed.   It is a fact that you can't wipe your ass with gold bars.

nuubee's picture

After Demolition Man, I'm fairly certain anything will work for wiping your ass, it might just be less comfortable.

pods's picture

If you have gold bars, you can pay someone else to wipe your ass.

pods

83_vf_1100_c's picture

  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.

Money Counterfeiter's picture
Money Counterfeiter (not verified) 83_vf_1100_c Oct 29, 2015 3:12 PM

Venezuela got ass raped hard buy the bankers.  4th grade idiots elected, debt, banker heaven.

Oh fuck that would be Obama and Bush. 

Theosebes Goodfellow's picture

~"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.

bid the soldiers shoot's picture

 

Get a colostomy bag!  

You'll never wipe your ass again.

 

Automatic Choke's picture

why not just print more?  works for everyone else.....

/s

Spitzer's picture

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

Benjamin123's picture

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.

Bay of Pigs's picture

Good ole Marty sold out long ago on meaningful discussions about gold issues (the fucktards here defending him notwithstanding).

lehmen_sisters's picture

Ya, what a moron, just sell them shares of GLD instead, its the same thing.

silver sword's picture

Keep stacking, baby - and keep your powder dry!!

y3maxx's picture

Only those who have both gold and toilet paper are true 1%'ers.

NoDebt's picture

I just realized another good reason gold prices are kept artificually low.

nuubee's picture

To get it out of the hands of smaller, poorer managed countries? Yep.

NoDebt's picture

"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?

Spitzer's picture

They could just default. But nope. Too stupid for that.

mtl4's picture

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.

SWRichmond's picture

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.

Urban Redneck's picture

Maduro is even moar stupid than he looks if he'e actually selling in bulk, to Wall Street, at spot.   

Kaiser Sousa's picture

fucking idiots...

 

nosam's picture

Seems to me that this government was intalled by the CIA for the express purpose of destroying Venezuela.

yomutti's picture
yomutti (not verified) Oct 29, 2015 1:26 PM

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.

 

 

NoDebt's picture

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.

centerline's picture

Those creditors must be nuts.  Oh well.  Live and learn they say.  A fool and his money are soon parted.  Etc. and so on.

83_vf_1100_c's picture

  The Chinese don't mind trading paper for that barbaric yeller metal.

  Texas is still waiting for its AU to be delivered.

dexter_morgan's picture

much ado about a worthless barbarous relic.......

Latitude25's picture

Maduro has been having conversations with little tweety birds again named JPM and GS.  What could you expect from a minibus driver?

Kirk2NCC1701's picture

I expect that he'll get paid handsomely by his NY masters, for this act of treason.

One And Only's picture

Does Bernie Sanders knows that Venezuela exist? I wonder why he doesn't move there?

Latitude25's picture

LOL.  He gravitates towards the Swedish belly flop.

matinee55's picture

how is this possible, it's just an old relic paper weight, not money?  LOL LOL

Omega_Man's picture

idiots... they need to sell it to Russia or China

debtor of last resort's picture

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.

Ace Ventura's picture

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?!!

PrimalScream's picture

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. 

chubbar's picture

How fucking stupid is it to get rid of all your assets THEN default? He should default with his gold intact, period.

samjam7's picture

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....