With its bonds trading at 50% of face value, CDS implying an 84% chance of default, a black-market FX rate that signals massive devaluation is likely, and a teetering-on-the-brink of social unrest population entirely dependent on President Maduro's generosity (and the military junta), it is perhaps not entirely surprising that they are trying any trick in the book to bolster reserves. The Venezuelan Central Bank issued a statement today (akin to Europe's hookers-and-blow GDP adjustment) that enables them to count a whole new set of 'assets' as potential international reserves including "stones" and "precious metals held in their vaults on behalf of foreign financial institutions." Hey presto... new reserves.
Risk is rising...
And Reserves are sliding
So make up some new ones...As Bloomberg reports, Central bank sends e-mailed statement explaining parts of new central bank law issued by President Nicolas Maduro.
“Foreign currencies that are easily converted in the principal international marketplaces and that are used as a unit of account or payment in commitments assumed by the Bolivarian Republic of Venezuela will make up part of international reserves”
“Assets that can be added as reserves include diamonds and stones or precious metals defined as reserve assets by the bank board and that have been deposited in the bank’s own vaults or those of financial institutions abroad rated as first class”
Venezuela’s intl reserves have traditionally been made up of sources including monetary gold, deposits and FX-denominated securities issued by foreign financial institutions or foreign public entities where Venezuela has a stake and interest: Central bank
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Did Venezuela just say they will use foreign-deposited gold in their vaults as reserves? Confiscation?
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And if that wasn't enough, a massive blackout just hit Caracas...
Caos en el centro de Caracas por el apagón pic.twitter.com/qrT0VtDOrJ— RAFAEL FINOL. (@finolprensa) December 4, 2014
Venezuela electricity minister Jesse Chacon says in post on Twitter account that failure at Boyaca substation affected power service in parts of central Caracas including Sabana Grande, La Florida and Chacaito.
Authorities are currently restoring power to affected areas: Chacon