Dear Wall Street investment banker,
I apologize for interrupting your busy schedule, but in the off chance you are going to listen to Venezuelan economic czar Rafael Ramírez in the coming days, allow us to suggest a few questions for him.
As you may know, the Venezuelan government is desperate for cash. To quench that thirst, Ramírez is traveling to New York to beg for money – your money, given how the loans from China don’t really solve our liquidity problem.
So, before you hand over your clients’ funds to the business partners of Hugo Carvajal, may I suggest a few “due diligence”-esque things you might want to bring up?
- How can we be sure that the funds we give Venezuela will not be used to pay for the PSUV’s political campaign, like they have in the past?
- What is the implicit price per barrel of oil in the loans-for-oil deal with China? What is the discount rate that is being used?
- Can we see the agreement where these conditions are stipulated? What happens to the deal if prices go down? If they go up?
- How much money is in the Fondo Chino? How much of that has been paid for? Have these numbers been audited?
- When estimating Venezuela’s debt burden, are you including the billions of dollars PDVSA owes suppliers? Are you including the billions of dollars the government owes Venezuelan importers, including foreign airlines? Are you going to honor those commitments?
- Was the failure to pay the Sidetur bonds a default? What guarantees can you provide that this will not happen again?
- Why has Venezuela continuously failed to increase oil production, as it has promised to do in the past?
- Why is the average cost per barrel of oil six times higher than what it was in 1998? How are you planning on reversing this trend?
- Why is the productivity per employee, measured in terms of barrels of oil, one quarter of what it was in 1998? How do you plan on reversing this?
- When do you plan on “unifying” the exchange rate? At what rate is this “unification” going to take place?
- When do you plan on raising the price of gasoline? Can Venezuela be fiscally viable without raising the price of gas?
- How are you going to ask the people to pay more for gas while maintaining the onerous fuel subsidies to Cuba? Politically, can you even pull this off?
These are just some of the highlights, off the top of my head. Since you are the wolves of Wall Street, I trust you can come up with many more.
Oh, and a video of the meeting would be much appreciated.
All the best,
Your friendly bloggers.
UPDATE: Strange, strange. The meeting between Ramírez and the bankers has been suspended. And today, lots of rumors going around that Citgo is for sale. I guess when everything else fails, you just give away all you’ve got and pretend there is no problem. Champagne! Champagne for everyone! Somos una potencia!
18 thoughts on “Questions for Rafa (UPDATED)”
Very good. I was thinking about the same but I didn’t have as many questions as you.
Is it possible we could find who Ramírez will actually meet? It would be nice if we could distribute this post to all possible journalists or NY money people who might even indirectly have the chance to send the questions to the right people.
Meeting canceled, Carvajal may have proved to create some panic…
How about: do you want us to figure out a way to repackage your debt and sell it to our other clients as an excellent low risk investment opportunity?
Venta de Citgo
I’m reading CITGO represents 27% of the total refinery capacity of PDVSA, what are these assholes doing? selling it and then leasing it to the new owners. Sounds like a great idea.
Tap water, tap water for everyone?
Sidetur bonds default, darling? What default? Call our banker on the Monte Carlo number…..do you have a pen? Take note darling, the number is 01-23-45-6789…ciao darling I have my 6 o’clock Pilates sessions coming up…….Burbujas de Barinas
My readers are never going to forgive me for this! (Jota was the one who introduced me to that last link btw … blame him)
Maybe he won’t have to give any answers to those questions because he is going there to make a sale:
What could have been done with all of those billions… the scale of the stupidity and ineptitude is breathtaking.
you forgot too mention corruption
And it appears they are also suddenly working on selling off other U.S. assets. PDVSA’s 50% stake in the Louisiana Chalmette Refinery is also for sale “as soon as possible”. Fire Sale, anyone?
Quote from article above:
“Venezuelan officials told Argus yesterday that PdV is weighing offers in the range of $10bn-$15bn to buy its downstream subsidiary Citgo. The planned sale of Citgo is aimed at raising cash for upstream projects at home, redirecting more crude supply to China in exchange for oil-backed loans, and reducing the government´s potential exposure to international litigation.”
The reports of Pdvsa’s efforts to sell Citgo have the ring of truth , they cannot continue supplying the oil Citgos needs for its operations and there is always the risk that its assets may be seized by succesful claimants against losses suffered as a result of non compensated govt expropiations or the govt defaulting on its many debt obligations . The need for extra money to pay the bondholders at the end of the year and later is dire and urgent . Problem of course is that Citgo’s value goes down if it cannot make optimum use of its heavy crude processing units absent a regular supply of venezuelan heavy crude .
Thinking with paranoia if I were the US and wanted to sabotage Ramirez efforts at improving Venezuelas financial image (now that he was planning a NY trip to meet with finance leaders) the perfect time for seeking the capture and repatraition of Carbajal would be now , bringing to the fore of international media attention Venezuelas govt unsavory connections and adamant defense of indicted criminals within the regime !! This is a gangster state and dont you forget it .!!
It has been well confirmed in the press that at least three offers have been received by PDVSA for Citgo. To me, that means that they must have made quiet inquiries at least two or three months back. Due diligence for a multi-billion dollar sale takes time.
I think you are spot on about their concern that Citgo’s assets could be seized to pay court ordered judgements on debts. In fact, it would not surprise me if their were several motions filed on Monday to block the sale of Citgo based on this.
Juan, good points, plus, “What is the audited level of international reserves? How much is gold, where is it, and at what price is it carried? How much is in Argentine/et. al. junk bonds carried at par? And, how much is in SDR’s?
PDVSA has been tasked with a series of non-core activities like Mercal, F1 race sponsorship (Maldonado), and many more. One question I would add to your list is how those activities affect both management performance (i.e., how many minutes of directors meeting are devoted to these?) and the bottom line.
I came to the conclusion that most people dont care about the unsustainable and ilogical gifts and helps we give to cuba and other countries, either they agree, they dont know, dont believe, or just don’t care about it, it’s almost a non-issue, so they could definitely get away with raising gas prices and all from that part. I’m even beginning to believe that they dont care about the blatant corruption neither, It may only upset the public if the price surges really, totally kill their pockets, not sooner.
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