Archive for February 6th, 2004

Rumors, rumors, rumors

February 6, 2004


There was little hard news this week as rumors seemed to dominate over actual facts the last two days. Among others, this is what was heard this week:


-The President of PDVSA might be removed over the conflict he had with Chavez’ former lawyer who had been named chief counsel for the company. PDVSA’s President Ali Rodriguez, fired Fabian Chacon as Chacon began making accusations of corruption within the oil industry, including a huge rip off in which PDVSA sol Diesel to a local company as an additive and this company exported it making millions. Luis Marin, the Head of CITGO is reportedly going to be Rodriguez’ successor.


-There were rumors that the Superintendent of Banks was ready to resign, which actually became official yesterday. Reportedly, Minister of Finance Nobrega will also leave and would be replaced with the Head of Cadivi, the foreign exchange control Office, Edgar Hernandez Behrens. I wonder if he will transfer the motto of the exchange control office: “God is love and prosperity” to the Ministry. Reportedly, former President of Central University and former head of the tax office, Trino Alcide Diaz will be named as Superintendent of Banks.


-A third rumor was that the Government was ready to: 1) Devalue, 2) Swap Bolivar debt held by banks for dollar denominated debt and 3) Issue a US$ 1.5 billion bond in local currency but denominated in US$. I understand all three have been proposed, but Chavez objected 1), the Central Bank 2) and 3) will only take place after 1) and 2) are decided on.


While, in my opinion, the swap makes sense form a technical point of view. It would seem that if the budget was calculated at an exchange rate of Bs. 1920 per US$, the swap should only take place after the currency has been devalued. Otherwise, it would be giving a huge windfall to the Venezuelan banking system, which has no justification.