Santos Says PDVSA Bonds Could Fund Venezuela-Colombia TradeMatthew Bristow and Nathan Crooks
Colombia is studying a plan to export about $600 million of goods to Venezuela in exchange for bonds of state oil company Petroleos de Venezuela SA.
President Juan Manuel Santos told a conference of Colombian exporters Sept. 13 that he discussed the idea with Venezuelan President Nicolas Maduro.
“There’s an initial demand for specific products with a value of about $600 million,” Santos said. “We’re discussing the means of payment. The method we found, and that we are discussing at the moment, is payment with bonds of PDVSA, bonds that have secondary markets.”
Shortages of goods in Venezuela ranging from sugar to beef are stoking the world’s highest inflation after Iran as importers struggle to obtain foreign currency. The annual inflation rate accelerated 45.4 percent last month from 42.6 percent in July, the central bank said on Sept. 10, while the country’s scarcity index, which measures the amount of goods not in stock on store shelves, reached 20 percent.
Maduro on Sept. 12 said that products should begin arriving from Colombia this week.
“The exporter who receives these bonds can sell them in the secondary market,” Santos said. The Colombian Finance Ministry didn’t immediately reply to an e-mail sent outside normal business hours asking for more details on how the plan would work.
Finance Minister Mauricio Cardenas flew to Caracas Sept. 3 to discuss bilateral trade with Venezuelan officials. Cardenas said in May that Colombian industry and agriculture can help supply Venezuela’s need for “essential and basic goods,” including powdered milk and paper, provided the two countries can agree on a means of payment.
Venezuela is expected to use government and PDVSA bonds to supply a new currency distribution system being designed to supplement the Cadivi currency system that sells bolivars at the official rate of 6.3 per dollar and the Sicad system that auctions dollars at an undisclosed rate. The bolivar currently trades at almost 45 per dollar on the black market, according to dolartoday.com, a website that tracks the exchange rate on the border with Colombia.
“The almost 600 percent gap between the official and unofficial exchange rates is producing a slow-motion balance of payments crisis, increasing the demand for cheap dollars, while creating high incentives for corruption to divert FX away from productive sectors, increasing scarcity to alarming levels,” Barclays Plc said in a note to clients on Sept. 13.
The yield on Venezuela’s benchmark sovereign bonds due in 2027 fell 26 basis points, or 0.26 percentage point, to 11.5 percent on Sept. 13. On average, Venezuelan dollar debt yields 11.74 percent, almost double the average in emerging markets, according to JPMorgan Chase & Co.