Venezuela Prepares To Liquidate Its Remaining Gold Holdings To Pay Coming Debt Maturities

Tyler Durden's picture

Last Thursday when we recounted the story of how Venezuela is now literally flying in paper money (using three dozen cargo Boeing 747s), we wrote that "Venezuela's hyperinflation, already tentatively estimated at 720%, will likely add on a few (hundred) zeroes by this time next year. It is also quite likely that Venezuela the country, as we know it now, will no longer exist because once any nation is swept up in hyperinflationary rapids two things occur like clockwork: social uprisings and political coups.

But before it gets there, Venezuela's president Maduro will be busy liquidating the nation's roughly $12 billion in gold reserves, which his late predecessor fought hard in 2011 to repatriate back to Caracas. Sadly that gold was never meant to stay in Venezuela after all."

And sure enough, just a day later, Reuters writes that Venezuela's central bank has begun negotiations with the suddenly troubled Deutsche Bank to carry out gold swaps "to improve the liquidity of its foreign reserves as it faces heavy debt payments this year", payments which it won't be able to fund unless it manages to "liquify" its gold.

One look at Venezuela's CDS which imply a 78% probability of default in the next year reflect the $9.5 billion in debt service costs this year.

The problem is that around 64% 15.4% of Venezuela's $15.4 billion in foreign reserves, or around $10 billion, are held in gold bars, "which limits President Nicolas Maduro's government's ability to quickly mobilize hard currency for imports or debt service."

As Reuters reminds us, in December, Deutsche and Venezuela's central bank agreed to finalize a gold swap this year. 

Technically, gold swaps allow central banks to receive cash from financial institutions in exchange for lending gold during a specific period of time. They do not tend to affect gold prices because the gold is still owned by Venezuela and does not enter the market.

The problem is that a swap when arranged with a technically insolvent nation is the equivalent of pledging gold for cash, which is precisely what Venezuela will do. Said pledge implies that once Venezuela has to fund the unwind of the swap, which will itself cost billions of dollars Maduro will not have, it will effectively hand over the gold to the counterparty, in this case Deutsche Bank.

Reuters also adds that according to its sources "Venezuela in recent years had been carrying out gold swaps with the Switzerland-based Bank for International Settlements (BIS) in operations ranging in duration from a week to a year. One source said Venezuela conducted a total of seven such transactions. BIS halted these operations last year, both sources said, as a result of concerns about the associated risks. BIS declined to comment."

Meanwhile Venezula has been burning down its gold reserves:

Under the rule of late socialist leader Hugo Chavez, the central bank used billions of dollars in cash reserves to finance social programs and off-budget investment funds. This meant that gold became a larger percentage of reserves.


The value of Venezuela's monetary gold has declined by $3.5 billion in the 12 months ended in November to reach $10.9 billion, central bank data shows. This appears to reflect swap operations and a 10 percent decline in the price of gold. It was not immediately evident if the central bank has also been selling gold.


The central bank in 2015 carried out a swap with Citigroup Inc's (C.N) Citibank, according to one of the sources. Citi declined to comment in 2015.

And here is the punchline: "One of the sources said the central bank has taken an unspecified amount of gold out of the country so that it can be certified, which is required for gold that is used in such swaps. The gold lost its "certificate of good delivery" in 2011 when Chavez transferred it from foreign banks to central bank coffers, one of the sources said."

In other words, after Maduro's predecessor Chavez worked hard to repatriate the nation's gold in 2011, Maduro is already doing his best to unwind all such actions, which while proving that gold is indeed money contrary to popular misconceptions by U.S. central bankers, will likely leave a bitter taste in the mouth of Venezuela citizens who will soon realize that their ruler sold off the country's last remaining assets just to avert debt defaults for a few months.

Finally for those interested when the gold may officially change ownership, if only on paper for the time being, they should just keep track of Venezuela's upcoming bond maturities, which include $1.5 billion 2016 Global Bond comes due at the end of February, while state oil company PDVSA faces payments of $2.3 billion on its 2017N bond in October and $435 million on its 2016 bond in November.

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VinceFostersGhost's picture



Venezuela Prepares To Liquidate Its Remaining Gold Holdings


Then what?

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) VinceFostersGhost Feb 7, 2016 8:20 PM

Sale on the hot women.

Then they're done.

GhostOfDiogenes's picture
GhostOfDiogenes (not verified) LowerSlowerDelaware_LSD Feb 7, 2016 8:26 PM

Venezuala has some hot ass white womens brah.

RafterManFMJ's picture

Default and doom in 6 months or sell the only asset you have and default and doom in 9 months. More Central Bankster logic!

LetThemEatRand's picture

The real Central Bankster logic is to drive oil prices down so that countries like Venezuela have to sell their gold back to the Central Banksters.  Of course, the official Central Bankster story is that gold is a barbarous relic.  Yet the bankers just love dragging the relic back to their own barbarous hands.  As with every politician, watch what they [the central banks] do, and pay no attention to what they say.

Calmyourself's picture

Where you been Rand, missed ya..  Have you re-invented your persona once again, big programming upgrade maybe?

LetThemEatRand's picture

I'm afraid I can't tell you that, Dave Calmyourself.

38BWD22's picture



Yeah, good to see you again, LTER.

Calmyourself's picture

Agile programming indeed..  We shall see...

Chris88's picture

You really think central banks have been the cause of oil going down?  And further, you really think they're doing this (like they'd need to do anything) for that basket case country to default anyway?  Come on.

NoPension's picture

Don't blame the socialism. Couldn't be that. And a fucking bus driver for president.

Ralph Kramden.

But then again, look what we put in office.
Somebody who did literally nothing. Nothing. And, for all intent and purpose, did not exist before 2005.
But he speaks so well. The bars not to high for that crowd. Maybe, if Jesse Jackson didn't need subtitles, he'd a been first.

Money Counterfeiter's picture
Money Counterfeiter (not verified) GhostOfDiogenes Feb 7, 2016 8:35 PM

"Then what?"

Then Goldman Sachs buys the country for a couple of gold bars and some worthless FRN's.  Zion wins again.

KnuckleDragger-X's picture

Fairies and unicorns dancing underneath rainbows of course......

38BWD22's picture



Maduro is not only a scummy Socialist dictator, he is very dumb.  I'll hand it to Chavez, he brought the gold back to Venezuela..., only to see Maduro to piddle it away.

knukles's picture

Sitting here thinking about how politicians, world wide, down through all history have managed on balance, to do naught but fuck things up, get people killed, waste nation's wealth....
Nobody 2016

TeamDepends's picture

If all the truckers suddenly vanished tomorrow, there would be chaos. All the plumbers, pandemonium. All the teachers, confusion. If all the politicians suddenly disappeared, there would be parties, daisy chains, and spontaneous Kumbaya singalongs the world over.

Oldballplayer's picture

What do ya bet Maduro's money is neither in his own country nor in its country's fiat.

NoPension's picture

We would have a pool on where he's scats off to, when the wheels come completely off. You fucking know the plane is fueled, and well paid pilots are on standby.

bonin006's picture

Either oil goes to $200 or Venezuala goes down the toilet. (and oil doesn't go to $200 unless somebody nukes ths Saudis)

BarkingCat's picture

Don't have to nuke them but if Isis can be unleashed on Syria and Iraq, why not Anubis on Saudi Arabia???

Keyser's picture

Revenge is a dish best served cold... The US nukes Saudi Arabia, blames it on Russia, WTI goes to $189 and the shale / oil tar business is back on track... 

BadKiTTy's picture

Insane! Better to default on the bonds surely......


Oh and  the "unspecified" amound taken out aint going to show up in any .gov deal either! 




monk27's picture

Maybe they have to pay back the Chinese, or the Russians. You don't want to default on those debts... and they'll be only too happy to settle in gold !

actionjacksonbrownie's picture

Dumping true wealth to pay back lenders that created "money" out of thin air. Either this guy is completely brain-dead, or he is compromised. Either way, tptb win, citizens lose.

GhostOfDiogenes's picture
GhostOfDiogenes (not verified) actionjacksonbrownie Feb 7, 2016 8:20 PM

"Either this guy is completely brain-dead, or he is compromised. Either way, tptb win, citizens lose.

The gold goes first then the mineral rights.

That stuff going on with the bundy's and others out west is the .gov is selling "federal lands" to foreign companies to come in and exploit the resources.

Hillary sold uranium to the rus.

Its a big club. And we are not in it.

franzpick's picture

It's a big club alright, and Killary's going to be wielding it next year, and using it to beat down the 99% and protect her corporate patrons.

GhostOfDiogenes's picture
GhostOfDiogenes (not verified) franzpick Feb 7, 2016 8:42 PM

I am pretty sure having testosterone under a hillary dictatorshi....presidency could be fatal, if not, inducing of rebellion at most, self immolation at least.

Max Steel's picture

Maduro you failed the city. Turning Caracas into Carcass.

Chavez must be rolling in his grave. 

iggenFlot's picture
iggenFlot (not verified) Max Steel Feb 7, 2016 8:20 PM

Chavez was a step up from Maduro?

Who knew?

Chris88's picture

Not the unwiped assholes from a lack of toilet paper.

TeamDepends's picture

Inscribed on the Statue Of Liberated Gold in downtown Carcass: Give us your tired, your poor socialists, your unwiped asses...

NoPension's picture

Im sure, about now, they are wiping with currency.

ThroxxOfVron's picture

Have any of the Keynesians advised the Venezuelans to print money yet?

Even Steve fucking Keen seems to think that everything will be alright if Governments would just step up and print and distribute more fancy coupons.

iggenFlot's picture
iggenFlot (not verified) Feb 7, 2016 8:21 PM

I'm only getting 2-3 popups per minute on Zero Hedge.  Am I doing something wrong?  

knukles's picture

As long as they're not the underage dancing Afghan boys, you're doing well.

RafterManFMJ's picture

Never ever Google "Muslim sex habits".

NoPension's picture

Goats and little boys. There, you got it all.

Yen Cross's picture

lol> Hey Knuks," What goes on at the Kalahari Oasis Resort, stays at the, Kalahari Oasis Resort.

 Swedish public pools, not so much.

cheech_wizard's picture

It's part of the entrance exam... So far you're failing the test.

Calmyourself's picture

Dang it we all agreed if they cannot figure that out we DON'T help...  No captcha remember...

Scooby Dooby Doo's picture

Remember back in the early days. There was no advertising and they gave us an 800 number to prank call Tyler and Marla.

When the site changed hands the 3rd time to the NAMBLA guy he demanded ads. Lots of ads!


Dragon HAwk's picture

So if your a country you have to have some gold, if your a citizen of that country  it's a barbaric relic.. When they stop carrying it in armored cars I'll get worried..

Ms No's picture

"...their ruler sold off the country's last remaining assets just to avert debt defaults for a few months."

Maduro =  BIS bitch boy.  Godspeed to the Venezuelan people.   

Farqued Up's picture

Maybe they deserve it, Ms No.

NoWayJose's picture

Chavez may have been able to temporarily get his gold out of the hands of the banksters - but the gold was never out of their control.

Chris88's picture

Yes, this is the fault of banks, not socialism.  Chavez sure did a great job in Venezuela, it was a joyous land of gumdrops and unicorns.