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Foreign Exchange

Venezuela: PDVSA issuance counteracts dollar shortage

Clampdown on black market FX trade; Long-term fears about default

PDVSA, Venezuela’s state-owned oil company, is issuing larger amounts of debt in the international markets so that individuals and corporations in the country have access to US dollars, after the government stopped local brokerages from exchanging dollars on the black market last year.

The company issued a total of $10.8 billion of debt last year maturing in 2014, 2017 and 2022, according to Barclays Capital. It pays the highest yield – more than 16% on the 2017 paper and 17.5% on the 2022 paper – of any sovereign or corporate in the emerging markets.

Last May, Venezuelan police and prosecutors raided 30 of the country’s brokerage houses to stop them from trading on the parallel foreign exchange market. The official exchange rate is 4.2 bolivars to the US dollar but the black market rate can be as high as 8.7 bolivars.

However, the clampdown led to a shortage of dollars and the government has had to find other mechanisms to obtain them, especially for individuals who are friendly towards president Hugo Chávez’s government.

"Venezuela has been using PDVSA as a tool to support the country’s fiscal and monetary policy"

Juan Cruz, Barclays Capital

"Increasingly, Venezuela has been using PDVSA as a tool to support the country’s fiscal and monetary policy," says Juan Cruz, a Venezuela analyst at Barclays Capital.

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