Archive for July 24th, 2006

Oscar García Mendoza, Argentinean Bonds

July 24, 2006

I was talking about Argentinean bonds before it was fashionable, this is part of the evident levels of obscene corruption taking place in the revolutionary or robolutionary Government. Of course, those that support the Government are always quiet about these posts. In doing so, they become accomplices.

Here is an article from today’s El Universal by Oscar Garcia Mendoza who I have translated before. I think the daily volume is slightly smaller than he says, but except for that detail, the rest is a clear explanation of the levels of absurd and obscene corruption and enrichment taking place in this Government. Those that became Chavistas because they opposed the corruption of the Fourth are surprisingly quiet and silent on these topics. Why? It hurts to much? The truth is that the level of corruption has increased by orders of magnitude as the Chavistas cheer on.

Oscar García Mendoza, Argentinean Bonds

Since January 2006 when the Financial Times denounced that two Venezuelan banks (with full names) had negotiated with the Ministry of Finance and with important gains, Argentinean bonds, the so called Boden 12, a lot of questions were raised, but few answers were given. At last the Minister gives us some clues. Evidently there was no transparency, but we could not expect it otherwise.

Now we have something. In the operations the Government made US$ 201 million, says the Minister, through negotiations in which dollars were sold at a weighted average of Bs. 2,380 per dollar. Without pretending to be mathematicians, but being a banker, it is evident that all that was done was a simple foreign exchange operation. Without the price of the bond changing at all or very little, there was a “benefit”, by manipulating the exchange rate.

Explanation: in the regular foreign exchange transactions, in Venezuela, as well as in the rest of the world, the difference between the purchase and the sale price is very small (before exchange controls, in the 80’s you would buy dollars at Bs. 4,2925 and would sell them at Bs 4,30, with a gain to the foreign exchange operator of 0.175% who was happy because he was making a good profit. (With the current exchange controls, the difference is between 2.144,60 and you sell at 2.150, a gain of 0,25%). Now the Minister acting as an “investment banker” tells us that he made a “profit” selling at a weighted average of Bs. 2,380. Here, my esteemed and ached readers, the gain for the Nation, was based on the manipulation of the price of the dollar which is fixed at Bs. 2.150. It would have been a true gain if the price of the sale of the Boden 12 had gone up from 77% to 90.40% and they had been sold in the international markets.

But there is something worse. That price of Bs. 2,380 at which the favored banks buy, gets transformed to roughly Bs. 2.650, because the banks sell the dollars that result from the transaction in the parallel market, euphemistically called in the slides of the Minister “TR: the reference exchange rate (taken from the Reuters screen or the CANTV ADR’s)”, generating for them an enormous gain. Once again, without being a mathematician, if we extrapolate the data of the Minister, the gain for the banks in the period must have been between 190 and 240 million dollars or between 503 and 636 billion bolivars. Which is pretty good for companies accustomed to make percentages of 0.25% as we mentioned above. In this case the percentage is around 11.34%. That is, 45 times the gain, which exchange controls allow. Not bad, the beneficiaries must think.

To give a clear idea: It is said that each week US$ 90 million of BODEN 12’s are sold. If the gain is 270 Bolivars for each dollar (2.650 minus 2380) the weekly gain for the favored banks is Bs. 24.3 billion. Note, every week, week after week, month after month. In six months the exchange gains for the banks must have been in this semester (including those that did not participate) was Bs. 1,316 billion. That is, in all of these operations they made more than half their earnings. Question: Why doesn’t the nation make this gain for itself?

The permanent deception in these operations, the harm to the public is of unheard of level of seriousness. But nothing will happen. The Government’s operations are totally covered and sealed. A few gain, the majority is harmed.

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