Chavez issues $5billion in bonds to finance new oil exploration.

Chavez plans to issue $5billion in bonds to finance new oil exploration. With inflation running at 20% people are not too enthusiastic about tying their cash up in government bonds, so Chavez has decided to issue bonds which will pay interest in US dollars and which will payoff the principal in dollars. The move has generated much interest with citizens who wish to convert their money out of bolivars.

Why didn't Chavez configure the bond issue to payout in euros? Didn't he jump on the Tehran band wagon to steam into the future?




Last Updated: Monday, 26 March 2007, 09:35 GMT 10:35 UK

Oil bonds for sale in Venezuela

by James Ingham
In Caracas, Venezuela


Investors in Venezuela are being encouraged to buy bonds in state oil firm Petroleos de Venezuela (PDVSA).
Bonds totalling $5bn (£2.5bn) are being issued to pay off debts and finance a huge expansion over the next few years. Venezuela has one of the world's largest reserves of crude oil, but getting to that oil is costly and hence the need for extra funds. PDVSA has pledged to nearly double its output over the next few years and must raise money for the investment.

Currency conversion
The government is reliant on the income from oil to fund spending on social projects, a key part of the socialist revolution pursued by President Hugo Chavez. The bonds are also being used by the government to try to lower inflation, which is currently running at 20%. With high public spending and strict controls on foreign exchange, there is an excess of the local currency in circulation.
Many investors will see this as a good opportunity to convert their savings into the more stable US dollar. They will be able to use the weaker local currency to buy the bonds, which will pay interest and the final repayment in dollars.
Order books open on Monday and will close in three days' time, giving investors little time to consider their options. President Chavez has described PDVSA as one of the world's most solid companies, but critics claim the business is being mismanaged and has been used as a political tool.



Venezuela Considers Selling Oil in Euros
Friday, May 19, 2006


By: Michael Fox - Venezuelanalysis.com

Caracas, Venezuela, May 18, 2006—Venezuelan President Hugo Chavez declared on Tuesday that Venezuela would consider putting the sale of its oil in Euros. His comments come after Iran had announced that it too is contemplating switching to the European currency.

“That was an interesting proposal made by the president of Iran,” Chavez told Channel 4 News in London. “We are also free to choose between the dollar and the euro. I think that the European Union has made a great contribution with the Euro.”

“In a way, what the President of Iran is saying… is recognizing the power of Europe, that they have succeed in the integration and have a single currency that competes with the dollar, and Venezuela can consider that, too, we are free to do that,” Chavez added.


According to the BBC, Iran announced earlier this month that they supported the creation of an “oil exchange that traded solely in Euros”. Experts have warned that such a conversion to the European currency could trigger central banks to convert their dollar reserves to euros, thus potentially worsening the already declining US currency.

Although the International Herald Tribune reported yesterday that the US dollar has rebounded this week from its recent lows against the Euro, it still stands at about $1.28 per Euro. The value of the Euro has grown substantially against the dollar since the two currencies were equal, just before the beginning of the US invasion of Iraq.

Already last year, Venezuela made a number of financial moves towards the European currency. In October, 2005, the Financial Times reported that Venezuela had “transferred a large portion of its $30.4 billion of foreign reserves out of US Treasuries and into banks and other financial instruments in Europe, seemingly for political reasons.”
Last December, The Central Bank of Venezuela approved the use of Euros in some financial transactions in what it called, an attempt to “promote the diversification of the economic relations and international finance of the nation.”

The conversion to Euros has been a controversial international issue because of the possible effect it could have on the US currency and international markets. In November of 2000, Iraq switched its oil exchange to Euros, even before most Europeans where using the new currency. Many critics of US foreign policy have pointed to this conversion as a possible impetuous for the US invasion of Iraq a few short years later.
Possibly making the connection, President Chavez, at a speech in London on Sunday, declared that the price of oil would soar to over $100 a barrel if the United States were to declare war on Iran. Even before Iran’s recent announcements on possible Euro conversion, the Bush Administration had been exerting increasing pressure on the oil-rich nation over the development of its nuclear program. The Venezuelan government has publicly declared itself in support of Iran’s peaceful nuclear energy program and opposed to any military action against the middle-eastern country.

What happened to Hugo's revolutionary spirit? Here's a chance for him to lead the way head first. Screw that Tehran rhetoric. Hugo is for real. All aboard the Hugo Euro Express fueled by 20% inflation. Wooo! Wooo!



Oh Ive been smiling lately, dreaming about the world as one
And I believe it could be, some day its going to come

Cause out on the edge of darkness, there rides a Euro train
Oh Euro train take this country,

Everyone jump upon the Euro train
Come on now Euro train

Get your bags together, go bring your good friends too
Cause its getting nearer, it soon will be with you!

notice the lack of responses to this thread????? what happened to all the wide eyed chavez groupies??? ROFLMAO

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The bonds with mature periods ranging from 10 to 30 years will go on sale from Monday till Thursday, Ramirez said.
Part of the money raised from the bonds will be used to back a plan aimed at boosting PDVSA's oil production capacity from the current 3.3 million barrels per day to 5.8 million bpd, the chief said.
Another part of the money will go to the National Development Fund for domestic and international aid and development projects.
As the country's largest state-owned energy company, PDVSA has stakes in exploration, production, refining and exporting oil and natural gas. It dominates the oil industry of Venezuela, the world's fifth largest oil exporter.

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Oh boy, a portion of the capital raised is going for domestic projects. :o That translates to Hugo cronies overcharging the government. That's how they stay ahead of 20% inflation. What are the odds the government will default on the loans? They have oil so businesses will still come knocking. The poor would probably show a raised fist and give a shout like, " You go Tio Hugo!" The bigger question is will Hugo have legally extended his stay in office when the first wave of bonds mature?

Why would the gov default on the loans? :o

Here is some more good news for all Che Guevara friends.


Chavez Policies Turn Venezuela Oil Tap
Tuesday March 27, 12:36 pm ET
By Natalie Obiko Pearson, AP Business Writer

Chavez's Largesse Puts Strain on Venezuela's State Oil Company As Exports to U.S. Decline

CARACAS, Venezuela (AP) -- President Hugo Chavez has won friends at home and abroad with his generous spending on social programs ranging from support for Venezuela's single mothers to shipments of cheap heating oil to poor Americans from Massachusetts to Alaska.
But Chavez's cash cow, Venezuela's state oil company, can't keep paying the price forever. The long-term capacity of the U.S.'s No. 4 oil supplier to keep pumping crude is under threat because it is spending more on Chavez's ideological agenda than on badly needed investments, industry analysts say.
Petroleos de Venezuela SA, or PDVSA, "is overstretched to capacity with any number of needs," said Patrick Esteruelas, an analyst at the New York-based Eurasia Group. "It simply can't cope at this stage."
The company is borrowing billions from international lenders, while independent estimates show its output falling. U.S. government data shows imports from Venezuela last year hit a 12-year low after dropping 8.2 percent from 2005.
Chavez says exports to the U.S. are dropping because Venezuela is diversifying its oil buyers. His energy minister also notes that Venezuela, home to the largest reserves outside the Mideast, is making production cuts ordered by the Organization of Petroleum Exporting Countries.
But the decline may also partly reflect the strain put on PDVSA by Chavez's spending.
The health of PDVSA's finances is a subject of debate, mainly because audited financial results have not been publicly released for the past two years.
A recent report by the Caracas-based economic institute CIECA estimated PDVSA had a net loss of $3.7 billion in 2006 -- a year when most major oil companies posted record profits.
The CIECA analysis shows PDVSA handed over about 70 percent of its gross revenue to the state, including $28.7 billion in taxes, royalties and dividends, and $9.9 billion for other social spending.
"Spending on social programs is not a problem in itself. But it is a problem when it's done at the expense of industry growth," says Enrique Sira, the Caracas-based analyst for Cambridge Energy Research Associates.
PDVSA is not the only state oil company in Latin America to face such problems. Mexico's Petroleos Mexicanos, or Pemex, now faces rapidly shrinking reserves and outdated technology. Company executives agree they must reinvest much more, but are hamstrung by Mexico's constitution. Nearly 60 percent of Pemex's revenues go to the federal budget each year, while debt and pension obligations total upward of $100 billion.
In contrast, Brazil's Petroleo Brasileiro SA -- considered one of the world's best-run state energy companies -- is planning $87.7 billion in investments in the next four years, and there are few doubts about its ability to contribute to the Brazilian government. According to the most recent figures, Petrobras handed about 35 percent of its gross revenues to the government in 2005. Over $30 billion went mostly to dividend payments, royalties and taxes, but also to funding social programs.
PDVSA, meanwhile, is now spending about 40 percent more on Chavez-backed social initiatives than on total investments in its oil and natural gas operations: $9.9 billion last year compared to $5.9 billion. Though comparable figures are not available for the pre-Chavez era, oil industry experts say less went toward social programs in the 1980s and '90s.
And PDVSA has other financial commitments as well as social programs, new farming projects and discounted oil exports. The company is footing the bill for nationalizing power companies and buying majority stakes in oil projects in the Orinoco River region from BP PLC, Exxon Mobil Corp., Chevron Corp., ConocoPhillips Co., France's Total SA and Norway's Statoil ASA.
Aging oil fields that make up the bulk of Venezuelan production require heavy investment. PVDSA must inject natural gas to raise the pressure of deposits underground, and spend on improving wells and facilities to keep the oil flowing. Largely untapped deposits in the Orinoco River region are among the world's most promising, but also require enormous investment to convert the heavy tar-like crude into usable oils.
With foreign investment falling sharply as Chavez increases state control over the oil industry -- Chavez himself says foreign investment in the oil sector fell 55 percent last year -- PDVSA is making new overtures to international lenders.
PDVSA plans to launch a $5 billion bond issue Thursday, and recently secured $1 billion in credit from French bank BNP Paribas and $3.5 billion from Japan's Marubeni Corp. and Mitsui & Co. Ltd. in advance payment for future oil shipments.
Venezuelan officials, meanwhile, insist their oil industry could not be healthier. Oil Minister Rafael Ramirez, who is also president of PDVSA, denies any cash flow problems and says the funds raised from the bond issue will go toward an ambitious $56 billion expansion of production to 5.8 million barrels a day by 2012.
Given PDVSA's current condition, that goal could prove elusive.
There have long been disputes about how much crude Venezuela now pumps from the ground. Venezuela claims it produces 3.3 million barrels a day, while the International Energy Agency and OPEC said production is down to around 2.4 million barrels a day from as much as 2.7 million in 2005.
"It is clear that cash is tight," the IEA, an agency of 26 member countries including the United States, said in its March oil market report. It said PDVSA faces "impediments to raising supply" as it is increasingly "saddled with a host of 'extracurricular' social spending obligations."
PDVSA's troubles aren't good news for the U.S., which relies on Venezuela for about 12 percent of its oil imports, but analysts don't expect significant supply disruptions or sudden gas price hikes for American motorists. Given time, the U.S. can make up for the shortfall elsewhere.
The impact on Venezuela would be worse, since PDVSA accounts for roughly 45 percent of government revenues and 78 percent of exports. Associated Press writers Tales Azzoni in Sao Paulo, Brazil, and Lisa J. Adams in Mexico City contributed to this report.


Happy Easter
Chavez Policies Turn Venezuela Oil Tap: Financial News - Yahoo! Finance


:bunny3: Happy Easter:bunny3:

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Originally Posted by stroller

Why would the gov default on the loans? :o

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Just having a little fun khun stroller. Besides it's not so far fetched. Hugo has appropriated people's property. He has forced businesses to sell their product at a loss. He's destroying the capital and resources of those who might mount an opposition to him. Defaulting on the bonds would continue this trend and it would play well with the mob, Hugo thumbing his nose once again at conventionalism and the man.

Castro said something along the line that the Revolution must re-create itself daily in order to prevent a counter-revolution. This translates to a continuance of instability so that the people will not realize that the leaders of the revolution are now in fact the establishment and are now the source of their problems.

This is the case with Hugo. He is the man now and once people realize he is the source of their woes Hugo may well end up like Mussolini and the story will have run it's course like it always does.


(International investors will be able to purchase the PDVSA bonds so I don't see a default happening.)

Your bias in your speculations is very evident. :)

The American term is "brilliant insight". :)

Imo, the greatest risk to Venezuela's 'Socialist Revolution' will be falling oil prices. It is very hard to get a true picture of what is happening in Venezuela from our so called free press, as it is uniformly hostile.
It is certainly true that he has improved the wretched lot of the common people and possesses a strong electoral mandate from the citizenry. Perhaps the most objective accolade I can give him is that his reforms are being widely studied, and copied in Central and South America. He has done a reasonably good job so far Imo, but he does persist in sounding like a Loonie at times.

If I were Chavez' financial advisor, I too would have advised him to issue Bonds in USD. This has several desirable effects-
1- It removes some of the excesss liquidity in the Venezuelan currency, which will help reduce the inflation rate. This needs to happen.
2- It makes the Bonds more saleable- both domestic and foreign investors are more comfortable with USD than the Venezuelan currency.
3- Venezuela is free to sell it's oil in USD or Euro. The Bush administration fiscal and monetary policies, specifically the government debt load and balance of trade figures, are likely to mean the USD will remain weak against the Euro, GBP, Yuan & Yen for some time yet. To have your borrowings in a weaker currency but some of the accompanying revenues in a stronger currencies is a profitable arbitrage, if they are fixed interest rate borrowings anyway.