Venezuela subisidizes Argentina’s finances

October 29, 2005

I tried to write about this the other day, a friend sends this to make sure I don’t miss the idea:


According to this report
,

Venezuela
purchased $300 MM of the $572 MM in bonds placed by the Argentine Govt.
last week. As you report, the debt was placed at an extremely low
interest rate for Argentina, 8.75%, which was arguably 1 full point
lower than comparable Argentina debt which you can purchase in the
marketplace. In other words, Venezuela not only has lent money to
Argentina once again (it has effectively done so in the past by
purchasing outstanding debt) but this time does it under conditions
highly unfavorable for Venezuela, and very favorable for the Argentine
Govt. The conditions were so preposterous that only Banco Nacion and
other local banks were the buyers. It is incredible to me how the
Venezuelan people don’t make a big deal out of this. Who is getting
rich behind the scenes? I don’t know. But if Venezuela wants to invest
in other countries’ debt (they are also rumored to be the buyers of
$300 MM of Ecuador debt to be issued soon, a country that is on the
verge of economic co! llapse), they should at least do so at market
rates, and not with heavy subsidies, don’t you think?

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