An UN-eventful visit

/ September 23, 2014
The great hall, when the non great speaker was speaking

The great hall, while the non great speaker was speaking

When Hugo Chávez went to the UN, it used to be an event. The outlandish comandante garnered the world’s attention thanks to the deep pockets he had, and let’s face it, to his God-given talent for hogging the limelight and seizing the media’s attention.

Nicolás Maduro? Not so much.

Aside from a sparsely-attended speech in which the most noteworthy thing he said was that capitalism “has ignored the laws of thermodynamics and entropy” (bringing this little post by Quico to memory), Maduro’s visit has been a bust. No bluster. No brimstone. Even a meeting with chavistas in the South Bronx is barely worth writing about. And let’s not even discuss the fact that the one of the world’s dirtiest gas stations is lecturing people about climate change.

Maduro’s lackluster performance on the world stage mirrors the country’s horrendously downbeat mood. The good times are over. Nobody cares about Venezuela any more, so much so that we’ll make our way to the Security Council and nobody will bother contesting this. We don’t have the deep pockets we used to have. In fact, we may even have to borrow some cash for the cab fare home.

The world is looking at us with a mix of embarassment and contempt, like one does with alcoholic waking up with an 11 am hangover, wondering “did I really have a good time with this person last night?” Frankly, the world simply wishes we would just go away, that the socialist experiment dies its inevitable death already so they can all move on.

When Chávez spoke at the UN, he made history. When Maduro speaks, it’s just one more selfie for Cilia.

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23 thoughts on “An UN-eventful visit”

  1. http://www.bloomberg.com/news/2014-09-23/gold-reserve-wins-740-million-from-venezuela-for-mine-takeover.html

    “A World Bank arbitration court ruled that Venezuela must pay $740 million to Gold Reserve Inc. (GDRZF) for taking its Brisas gold and copper project in 2008.

    The South American country must honor ICSID rulings to avoid default of sovereign bonds, according to Joe Kogan, an analyst at the Bank of Nova Scotia.”

    Can anyone explain to me why the first of 20+ cases (of over $30 billion) before the ICSID would result in a sovereign bond default if not paid?

    Is there language in the bond contracts that declares this a sovereign debt default?
    If so, has every analyst that says default will (may) not happen completely wrong? There is no way in hell Venezuela will pay them (followed by Exxon, Conoco,etc.). But is this default when they do not get paid?

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    • Yes, there is language in VZ’s bond contracts (cross-default provisions) that stipulate that failure to honor a final, unappealable, judgment from a competent court in excess of $100 million is considered a default. Bondholders would then be entitled to accelerate the bonds. The GDRZF ruling is effective immediately, and I suspect not paying will be considerably more costly for VZ.

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    • Articles 53 to 55 of the convention cover awards and basically state that 1.) ICSID cases, once a binding decision is rendered, cannot be appealed. 2.) That the involved signatories will treat the decision as if it had been rendered by its own courts, and 3). the most relevant part to your question, which comes from article 54: “(3) Execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought.”

      Under American law, once you have “perfected” your claim (established a public record that the debt is owed and often that payment may be made on demand), you go the front of the line as far as creditors are concerned and if you demand payment, and it is not met, you have a legal means of seizing assets and filing injunctions against the use of those assets by the debtor party.

      I think this was a key motivator behind the fire sale of Citgo, but apparently it wasn’t quick enough. Likewise, this explains the odd rumor about a possible $10 billion bond float the government I was hearing about earlier this year, to basically allow them to retire the October issue coming due.

      In the first case, Citgo is subject to seizure, or at least freezing of its cash flows until the debt is paid. As far as bonds go, and I’m a bit fuzzy on the application here, but the dollar denominated bonds have a third-party agent (investment bank) based in New York, and therefore subject to U.S. laws, that holds the funds for disbursement in coupon payments. Despite the funds being effectively escrowed, they still belong to the government until payment is made, which may (or may not – again, fuzzy here and I can’t find relevant case law) make them subject to seizure or an injunction may be rendered to halt payment until the debt to GRZ.V has been satisfied. Either of the latter would result in a default.

      Also, if the assets are seized or frozen, by the time a thaw occurs, other decisions regarding other ICSID cases may be rendered resulting in a cascade effect that certainly wouldn’t do wonders for Venezuela’s external assets.

      This is not quite the same situation as Argentina’s default and its pari passu clauses employed by the hedge funds. It more resembles the seizure of the Argentine warship in Ghana, but, in Venezuela’s case, the assets are tied up within the U.S. and not subject to a supranational law.

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      • Thank you both.

        I do not see any analyst discussing these cases when discussing bond default. They appear to me to be making judgments based on cash flow.
        At the same time the pending debt from these cases totals more than the total of Citgo and Venezuela’s foreign reserves (including gold holdings) combined.
        I expect that within the next 6 months most of these 28 cases most of these cases will be decided and most will have large judgments awarded to companies that have had their contracts with Venezuela expropriated.

        I just cannot see where the analysts are taking these judgments into account and where Venezuela has the money to pay for these cases.

        Basically,I am wondering if these judgments are a “surprise” or factured in.

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  7. I’ll be fair to Maduro here. It’s hard to grab media attention when Leonardo DiCaprio is speaking at the UNGA.

    That still doesn’t make him any less of an uncharismatic tool.

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  9. When Chavez spoke at the U.N., I don’t know that he made “history”, so much as entertainment. Diplomats are predictable and boring. It is just that kind of business. Chavez was a break from what would be an otherwise dull day. Maduro, with or without his tweeting birds, just doesn’t entertain like Chavez did.

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  10. Nice observation.
    He didn’t say “We’re living times when developing countries are finally seizing the present and struggle to advance” or anything of the sort.
    He said “The devil was here,” which is kind of the thing you’d say at a bodega, walking in with a beer in your hand. Chávez was a great speaker… if you don’t read very much.

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  13. Last time HCF was in NYC, it was the U.S. Secret Service and not D.S.S. that provided security. Why? Because they reserved the best for HCF. It was surreal to see the Secret Service working together with HCFs bodyguards. They worked in tandem in parallel. One SS, one Venezuelan/Cuban, two SS, two Venecubans. Chavez wore body armor under his suit and has covered by three umbrellas not to protect his from the weather but to protect him from snipers in midtown Manhattan. True Story. His ability to hacerce el ridiculo was ony superseeded by Colonel Kadaffi.

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