Did Goldman Sachs (NYSE:GS) Try to Make a Quick Buck Out of Venezuela?
The holder of the largest oil reserves in the world and one of the most troubled economies too. The country is facing inflation and civil troubles while the political landscape looks tattered and difficult to manage. In such a situation, the opposition controlled congress of Venezuela has blamed that Goldman Sachs tried to make a quick buck out of the crisis.
What Did Goldman Sachs (NYSE:GS) Do?
Goldman Sachs recently bought $2.8 billion worth of bonds in Venezuela for $865 million. The annualized yield of the bond would be 40 percent. The bank gets a 31 percent discount on bonds maturing the same year. The bonds have been issued by Petroleos de Venezuela SA, a state oil company, maturing in 2022. A few government officials confirmed the deal saying that the country needed some hard currency.
The Venezuelan Situation
Venezuela has been hit by the slump in oil prices. It owes large sums of money to China and Russia. The country’s economy, heavily dependent on its vast oil reserves, tumbled down after the price slump. The imports are reduced by 70 percent now. Nelson Martinez, Oil Minister, said that the government will be exploiting ‘all options’ to pay off its debt and restore the situation. Venezuela is desperate for finding hard currency as its failure to do so will mean seizure of its oil reserves by creditors.
The national assembly could be launching probe into the Goldman deal. The opposition said that the bond buying by Goldman has given a lifeline to the troubles Maduro administration. The detractors of the government have called international attention to this matter. They cited that Goldman has helped a government which is guilty of human rights violation. The opposition has threatened the bank saying that a successive government will not pay the debts owed to this bond.
Goldman Sachs (NYSE:GS) Writers Letter
In a letter to Goldman Sachs (NYSE:GS), leader of congress Julio Borges, said, “It is apparent Goldman Sachs decided to make a quick buck off the suffering of the Venezuelan people.”
Venezuelan opposition has been asking Wall Street not to indulge in upliftment of the government through financial transactions. However, Goldman’s asset management arm has recently shown more interest in the country’s markets. After facing opposition, sources close to the deal have said that the bonds are not bought directly from the central bank. Instead, Goldman bought them from London based Dinosaur group, a brokerage firm. The previous possessors of the bonds are still unknown and Dinosaur group has declined to comment on the sale.