To refinance is not to rip off

July 1, 2003


For the last four days (excluding weekends) Tal Cual, the afternoon newspaper, has been carrying a series of investigative pieces on transactions done between the Ministry of Finance and Government institutions. Thursday and Friday were devoted to a peculiar transaction by which the Government Development Bank, Bandes, swapped Venezuelan sovereign bonds maturing mostly in 2007, which are highly liquid in exchange for Ministry of Finance Notes, which are not only illiquid, but may even be questionable from the point of view of whether they are authorized or not by the National Assembly. The bonds were worth US$ 600 million. Now, to make this even more interesting or suspicious, the swap is done through a small New York broker, owned by Venezuelans. From the perspective of credit risk the operation made little sense, since the broker likely had to sell the bonds in the open market, to pay the finance Ministry with cash, that broker was the least likely market-maker you would go to. Moreover, it would also be the least likely credit risk either side would or should assume in such a transaction. Today, the Minsiter of Finance, Tobias Nóbrega, in El Nacional indirectly accused Tal Cual of making this political. Well, this is Teodoro Petkoff’s response to the Minsiter under the pseudonym “Simon Boccanegra” in page 2 of today’s Tal Cual. (Note: Not only are El Nacional and Tal Cual only readable by subscription, but even if you have a subscription, you can not link to individual stories):


Tobias Nóbrega responded with the proverbial argument of all of those that are caught with their hands in the dough: The criticism is “political” and are only looking to “aggravate fiscal problems” and torpedo the refinancing operations with national debt. This mini-reporter believes that refinancing debt is an entirely valid option and that to postpone reckoning is what all debtors in the world do. But what is not valid is to take advantage of the fiscal tribulations of the Republic to obtain personal gains. One thing is to refinance and another is to rip off. Some of the operations that have been made, have been performed using a triangulation, introducing a third actor which was completely unnecessary, who makes money and makes a commission that God knows how afterwards, how it is split, but to which should not be foreign to the Mephistopheles who prepares the pot for this stew., I want to correct the Director in his Editorial where he explained the case, because the profit, while large, is not as large as it was said. The consideration of the “amortization factor” was obviated, which reduces the current price of the DCB’s and Flirb’s and thus the profit. But a robbery is a robbery, no matter how big the bag. This will be explained tomorrow.


What an elegant way of calling people corrupt!

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