Venezuela is a mess. The Guardian has this article on the sham elections in Venezuela where President Nicolas Maduro claims a victory for his policies, such as 844%.inflation and chronic shortages in this command economy.
Riots are spreading thoughout Venezuela which Maduro claims is excitement over his enlightened economic and monetary policies.
And then there is the problem that the US is weighing sanctions against Venezuela that could severely restrict the OPEC nation’s crude exports and starve its government of hard currency.
(Bloomberg) — U.S. sanctions against Venezuelan officials include a key figure in some of the oil-for-cash deals with China that are central for the survival of Petroleos de Venezuela SA.
Simon Zerpa, vice president of finance for PDVSA, is the only current official of the state-owned oil company among 13 Venezuelan nationals who were sanctioned by President Donald Trump Wednesday. A self-taught diplomat and socialist financier, he’s managing the debt of one of the most distressedborrowers in emerging markets. Zerpa, 33, also helps direct the $45 billion that Venezuela has borrowed from China to boost crude production.
The sanctions come at a time when PDVSA is struggling to make ends meet. Oil production is slumping, despite the world’s largest proved reserves. The company has an upcoming debt payment of $3.2 billion this year, most of it due in October and November. Earlier this month, Zerpa sought to improve communication with investors through invitation-only conference calls, after Goldman Sachs Group Inc. was grilled for buying Venezuelan “hunger bonds” that, according to the opposition, helped to keep president Nicolas Maduro in power.
“It’s a huge blow in terms of new financing to Venezuela,” Alejandro Grisanti, director of the Caracas-based consultancy Ecoanalitica, says by phone. “After all, Zerpa manages all the finances not just for PDVSA but also for the Venezuelan government.”
The result? Venezuela’s 2 year sovereign yield now tops 62%.
Meanwhile, the Venezuela basket (oil) remains depressed relative to neighboring Colombian oil prices.