Maduro Preparing To Swap Venezuela's Gold For Dollars

Tyler Durden's picture

It was almost exactly two years ago when a cash-strapped Venezuela quietly conducted its first, little-noticed gold-for-cash swap with Citigroup, as part of which Maduro converted part of his nation's gold reserves into at least $1 billion in cash courtesy of the US bank. As Reuters reported then, the motive was simple: convert $1 billion of the country's gold into much needed dollars to fund imports and keep the economy from sinking. However, instead of selling the gold outright, a move which would have been met with a firestorm of protests from political opponents and allies alike, Maduro merely leased it to Citi instead.

Specifically, Venezuela provided 1.4 million troy ounces of gold to Citi in exchange for cash. And while Venezuela would have to pay interest on the funds, it got the key benefit of being able to maintain the gold as part of its foreign currency reserves. After all, the gold was "merely rehypothecated", if only on paper, the actual physical gold would be transferred to an unknown vault of Citi's choosing where it would become an asset effectively controlled by the bailed out US ban (there was a brief scare last July when Citi warned it would close the account of the Venezuela Central Bank, which prompted us to ask if Citigroup was about to confiscate $1 billion in Venezuela gold).

While it is still unknown if Citi did in fact confiscate a substantial chunk of Venezuela's sovereign gold, what is worth noting is that even just two years ago, Venezuela was in far better economic and social shape than it is currently, which ultimately prompted Maduro's choice of picking a swap instead of an outright sale of the country's gold. Now, however, with hyperinflation rampant, with daily protests, many of which turn violent and deadly, and with the opposition set to unleash the "mother of all protests" on Wednesday even as Maduro has ordered the army to take to the streets, the president has far fewer qualms about preserving even the illusion of stability at this point. What he does need, however, is access to dollars, be it to pay Venezuela's creditors, provide funds to the cash strapped state-owned energy company PDVSA, or simply to pay the army which is the only thing keeping the nation away from a revolution, and Maduro from facing a deadly endgame.

Which is why Maduro is about to do what he did two years ago, only on a vastly greater scale, and perhaps simply sell Venezuela's gold outright.

That is the allegation made by Venezuela’s opposition, which according to Bloomberg has reached out to Wall Street banks to dissuade them from helping Maduro sell Venezuela's $7.7 billion in gold reserves (as of February) With Venezuela's foreign reserve hoard rapidly declining, gold now represents one of its most valuable assets; total foreign reserves stood at $10.3 billion on Monday, near a 15-year low

The letter sent by the opposition-led congress on Monday to top US banks, warns that Venezuela is going to try to stave off default by seeking to swap its gold reserves into cash, and any investment bank that helps will be effectively “supporting a government recognized by the international community as dictatorial." Furthermore, lawmakers also approved a measure today that they say would nullify any government debt issuance, as well as any debt swaps and pledges of gold as collateral, not explicitly approved by congress.

“The national government, through the central bank, is going to try to swap gold held as reserves for dollars to stay in power unconstitutionally,” according to the letter signed by National Assembly President Julio Borges. “I have the obligation to warn you that by supporting such a gold swap you would be taking actions favoring a government that’s been recognized as dictatorial by the international community.”

Lawmaker Angel Alvarado, a member of the National Assembly’s Finance Committee, said the letter has gone to banks including Citigroup Inc., Goldman Sachs Group Inc. and Bank of America Corp.

Meanwhile, as Maduro rides a wave of anger over triple-digit inflation and chronic shortages of basic staples, investors are trying to determine the odds that the country will continue servicing its debt amid a dollar shortage worsened by the collapse in oil prices.

And speaking of Maduro, on Tuesday evening, speaking on state television the president said he would make declaration later Tuesday. “I will reveal tonight the right wing’s complete plans for the coming days and I will make a special declaration so the republic is alert,” Maduro said, adding that supporters should be alert to “defeat the coup d’etat and intervention.” And then, moments ago, Maduro accused opposition leader Borges of calling for a coup.

As a reminder, we reported yesterday that Maduro has ordered the army into the streets as the insolvent nation braces for what the opposition has vowed will be the "mother of all protests" on Wednesday.

Whatever the outcome of tomorrow's protest, or Maduro's upcoming gold lease or sale, one thing is certain: Hugo Chavez, who spent the last years of his life repatriating Venezuela's gold is spinning in his grave.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
nsurf9's picture

Put me down for at least a 100 ounces, if I can get a health discount.

DirtySanchez's picture

This act of swapping gold for dollars will only buy him some time.

A fools errand.

THE_WATCHER's picture

Wow, what a bold faced lie. Around Nov of 2016, almost all their gold went to Switzerland. There was two seperate shipments. Their broke, like dead broke, this statement is to placate and buy time.

THE_WATCHER's picture

Maybe he can sell some of those oil drilling rigs he confiscated when he nationlized. They were given 7 days to vacate the country. I'm sure Exxon would love to buy back a couple of their own rigs.

NoPension's picture

Hollywood should start a Go-Fund-Me.

Sean Penn can make the first donation.

Spectre's picture

Why isn't China or Russia buying the Gold ??

J bones's picture

Nooooooooooooooo

youngman's picture

I think he has a few billion short in the international bank of trades right now...he already owes it to other people...its been spent already....so from here on forward he has nothing....and noone will ship to him anymore...its over now...just what they can produce in house...and without feed...chickens dont live..neither do pigs..and production comes to a halt...and all that imported gas from our refinerries...stopped...

yngso's picture

Correct, the inMaduro himself has talked about autosuicidio, self-suicide...

Peter41's picture

Maduro will be a Cuban resident in less than a year.

cowdogg's picture

What a crock. Venezuela sold it's gold to Goldman Sachs a few years ago.

83_vf_1100_c's picture

  What do you suppose that bar he is holding weighs? Seems to me he should be grunting a bit to support it yet he holds it as if it weighs 2 lbs?

fasTTcar's picture

It looks like a London Good Delivery bar.  400 oz or about 28 pounds.

OliverAnd's picture

Of course all these responsible others could refuse to buy Venezuela's gold and help to take down this moron, but gold is gold...

Silversides's picture

Fuck that....hey Maduro....I'll sell you 100 grand in fiat for physical gold at 20% under spot....call me...

Anarchyteez's picture

Chavez brings it back home and this asshat blows it all like meth'd out whore.

ShakenNotStirred's picture

They can sell cocaine. They have tons of cocaine and that will make their economy skyrocket...

Oh damn, that's Colombia, not Venezuela. Me bad.

They are screwed.

yngso's picture

They move it for the FARC, get cash, pay military and stay in power.

seataka's picture

And does anyone think they will allow him to get 1293 an oz?

Anyone?

orangegeek's picture

Talking about everything else other than the obvious.

 

Venezuela - largest known oil reserves in the world.

 

Useless fucking goobmint shitbags.

 

Time for Trump to move in and take it.

yngso's picture

Just have the DEA stop them from moving FARC cocaine to Mexico. That'll do the trick.

just the tip's picture

why not get a "loan" from one of the pig looking daughters of hugo.  i don't know if it's the older or younger daughter.  she's estimated to be worth over $4 billion US.  repatriate some of her assets/cash.  it was stolen from the venezuelans. so just give it back to them.  actually it was stolen from the pezzonavante, but that's a technicality.

  if you see a picture of her she does put the ass in assets, and not in a good way either.

Know shit's picture

So gold is still functional :0)
The only problem is that it is not used at the right time or for the right reason.
It is used to fill a designed hole and used by someone who is not the owner.

So again the lesson is: make sure you have some gold, that it is used for the right reason and that you will be the one that will use it.

I do not think a lot of people will get that now or will sudden understand why the need some preparing.
It is not like this is the first or last good example we will see.

Most people do not want to see we all participate in a huge ponzi scam.
And to be honest I am also still far from being isolated from it when it blows.
So back to normal and just doing the next step possible at this moment.

Take care

Sudden Debt's picture

politicians aren't the best custodians of a nations wealth.

They spend as much as possible to secure their own job.

Maestro Maestro's picture

Maduro is a traitor to Venezuela. You don't give your gold to your enemy without a fight unless you're a traitor.

::::::::::::::::::::

Worse than the bankers rigging gold and silver prices and not having the gold that they sold you (or selling gold that they don't have via fraudulent COMEX Futures contracts) is the fact that we don't even have MONEY today.  Therefore all financial transactions and economic numbers predicated on the existence of money are FRAUD and FORGERIES presently.

Electronic digits and paper fiat currencies in use today are NOT money, according to the law of the country that issues the reserve currency of the world, the US Dollar (Article 1, Section 10 of the US Constitution); or by the tenets of the science of Economics (i.e., fiat currencies are not money because they are not a store of value nor a unit of account due to the fact that NOT ONE fiat currency's value is actually determined or stipulated in concrete legal terms).  Dollars and Euros and Yens are not even lawfully DEFINED as to what they all are exactly; what their economic worth and transactional value is. Hence, fiat currencies simply cannot constitute the legal foundation of any lawful contract!

(Also, there cannot be either inflation nor deflation in the ABSENCE of money.  Both inflation and deflation are monetary events which cannot take place where there literally is no money.)

What we have today is massive GLOBAL FRAUD mascarading as a monetary system based on the (fraudulent) US dollar because all fiat currencies are basically only a derivative of the US dollar, including the Euro, the Yen, the Yuan, the Rouble, the Shekel and the Riyal.

Furthermore,

Why do a few people get the right to print fake fiat money out of nothing and buy your goods and  services with it whereas you have to WORK to obtain the same worthless money created out of nothing?

THAT is the question at the heart of the matter.  That the bankers manipulate interest rates or the price of gold via fraudulent Futures trading (by selling gold that they don't have) with fiat money is a moot point.

To put it differently: why do the bankers get to have anything that they want without working for it and you, you don't?

All this talk about market rigging, monetary theory and fraudulent (paper) gold trading is a cover-up for INJUSTICE.

The US Constitution FORBIDS the use of debt as money; the US Constitution proscribes (debt) notes which is what the US dollar is presently.  Think, all other currencies are just another name for the US Dollar.

What passes for money today is a CRIME, no more no less.

 
People,

You are all aiding and abetting this crime every time you buy, sell, pay or get paid.

And then you ask, Why our leaders, the politicians, the bankers, and our military men and women are EVIL?

The answer is, because they are just like YOU. They are your sons and daughters.

Silverado91's picture

He should swap that gold for dollars held by either Russia or China as i'm betting he'll get a better deal. He get's those worth-less dollars that could and will go off the board unlike gold and silver that have NEVER gone off the board to zero value and they get all that gold he wants to trade in return. Plus the banksters wouldn't like that trade as they'd want that gold for themselves. Anyway this fool and his gold are going the way of Gordon Brown who was the Brit PM who sold almost all of England's gold for the lowball price when the gold market was down significantly earning him ridecule all over the world for doing such an idiotic deal. That's what he's best known for.

bluskyes's picture

Sell title to gold to citibank. Then sell phys to russia and china

bluskyes's picture

Trade the gold for a refinery