Archive for December 9th, 2014

Maduro’s New Script

December 9, 2014


PDVSA 2022 bond in the last three months. It was losing 14% of its value today, with a yield to maturity of 31.4%

As Venezuela and PDVSA bonds were tumbling today (see graph above) on their worst day in memory, people were taking Maduro’s words about the country’s inability to borrow in jest. But think again.

For the past four or five days, Maduro has been following what is clearly a new script. He began by attacking the US Embassy, saying he would reconsider the relations between the two countries, as the local Embassy was a constant source of conspiracies against Venezuela. He followed up by insulting the Head of the IMF, Christine Largarde, saying she had spaghetti in her head and finished with saying rating agencies were conspiring to push Venezuela into default by giving the country a credit rating below what it deserved.

Last night, Maduro went back to the narrative, blaming credit agencies and saying that Venezuela was suffering from an economic blockade for political reasons that made it such that the country no longer had access to international loans or financing.

You may laugh all you want at what he says, but I don’t. He is making a very specific narrative out of all this and I am not sure where it is heading. It may be that he just wants to blameĀ  the US for the intensification of the crisis in the next few months or simply, that he is preparing the ground in case there is no money to pay international investors. There is a one billion Euro payment in March, which looks doable, but there are much larger maturities in October 2015. But investors have so far believed that Venezuela had a “willingness” to pay, and the action in the markets today indicated some people were losing faith.

It did not help that Bloomberg reported today on a meeting with investors at a New York law firm, which actually took place like ten days ago. This meeting actually ended in a somewhat positive note, as many suggested that Venezuela and PDVSA could not get away with a restructuring below current prices for most bonds, as the oil cash flow would not justify it.

Meanwhile, the adjustment continues, very few things are being imported and long lines have begun appearing at gas stations, a suggestion that PDVSA may be importing less and gasoline is being selectively distributed.


But I would take Maduro’s words seriously, he is following the script, wherever he wants to take it…