Venezuela Approves Terms for 45 Billion Bolivars of Bonds

Venezuela’s Congress approved terms for the sale of 45 billion bolivars ($10.5 billion) worth of bonds this year that can be denominated in either the local currency or dollars, opposition lawmaker Rafael Guzman said.

The National Assembly’s finance committee approved the terms in a vote late yesterday, Guzman said. The government was authorized to issue dollar bonds with maturities between 5 years and 30 years and local debt that matures between 2013 and 2021, according to a copy of the plan provided by Guzman.

Venezuelan President Hugo Chavez signed a bill to expand the debt ceiling by 45 billion bolivars earlier this year as the government looks to finance housing and agriculture projects. Finance Minister Jorge Giordani said yesterday that the government has increasingly turned to China for financing as interest rates in capital markets are too high.

“Venezuela can issue when it wants and however it wants with the authorization given yesterday by the majority of the lawmakers in the finance commission,” Guzman said in a phone interview. “The opposition, which is a minority, voted against the terms because we feel there’s a lack of information on what the money will be invested in.”

Proceeds from the sales will be used for investments that will bolster the Venezuelan economy, Giordani said yesterday.

“This will give additional impulse to the economic growth we’ve already experienced this year -- if you take your foot off the pedal the car stalls,” Giordani said in comments carried on state television.

Treasuries Spread

The extra yield investors demand to own Venezuelan government bonds instead of U.S. Treasuries rose 19 basis points, or 0.19 percentage point, to 1,068 as of 1:01 p.m. New York time, according to JPMorgan Chase & Co.’s EMBI+. That’s the highest relative borrowing cost among emerging market countries tracked by the index.

The government sold $3 billion of bonds due in 2022 with a coupon of 12.75 percent last August. State oil company Petroleos de Venezuela SA, known as PDVSA, also sold bonds with the same coupon in February.

Venezuela may sell new bonds due in 2018 or 2024 sometime after July with a lower interest rate than 12.75 percent, Caracas-based newspaper El Nacional reported today, citing analysts and government officials it didn’t identify. The government and PDVSA may issue an additional $4 billion each of bonds this year, the newspaper said.

China and Venezuela set up a joint development fund that has received $32 billion since it was established in 2008. Under the terms of the fund, China must double any contribution made by Venezuela. Venezuela repays China’s contributions with future oil shipments.

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