Archive for November 9th, 2006

Bono del Sur: An early Xmas gift for the rich oligarchs

November 9, 2006


This week,
the Venezuelan Government announced that it would issue the “Bono Del Sur” a
combined issue of a Venezuelan bond with an equal part composed of two
Argentinean bonds.

After
enriching some of the Government’s buddies with the sale of Argentinean bonds
for months, the Government decided to give the rich a nice Xmas gift, bonus and
subsidy right before the election.

And the
poor you may ask? Well, you know…we all want to change the world, as the
Beatles song used to say.

You see,
this bond is simply an outrageous gift for those that can afford buying it and
converting the Argentinean part into US$ at the incredibly bargain rate of Bs.
2330 per US$, compared to the parallel market rate which ahs been hovering
around Bs. 3,000 per US$ for the last few weeks.

It is also
a gift for the banks and other financial institutions, which will buy the
Venezuelan part of the bond, a dollar denominated bond, which pays interest
only in Bolivars at whatever the official rate maybe and which will pay capital
also in Bolivars when it matures in 2017. You see, people and corporations will
buy the whole Bono del Sur only to get at the US$ from the Argentinean part,
but they will quickly sell the Venezuelan part to the financial institutions
who are interested in getting them, because they will be protected from future
devaluations. (Banks are limited in how many dollars they can hold as a
percentage of their equity)

The third
beneficiary is the “poor” country of Argentina,
which has a higher GDP per capita than Venezuela
and whose citizens also have a much higher educational level than Venezuela.

Meanwhile
while banks are given some protection the poor of this country have absolutely
no protection from all of the financial shenanigans of this Government, which are
slowly creating conditions which are simply untenable and may only be corrected
in the future by a devaluation.

Of course,
the autocrat today was
bragging
that the issuing of this bond was an “economic luxury” showing how
ignorant he is about what is being done under his so called leadership. This is
not a luxury, this is an irresponsible waste of money, which subsidizes the least
needy and imposes a new debt burden on everyone in a country which has enjoyed
in 2006, the biggest windfall in any twelve month period of its history. About
the only benefit it has is the fact that it will sterilize US$ 1 billion of the
monetary liquidity, which in any case only exists because of the irresponsible
spending policies of this cynical Government.

Things are not going to be all right like in the
song…

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