U.S. Weighs Restricting Trades in Venezuelan Debt to Punish Maduro
August 22 2017 - 11:50PM
Dow Jones News
By Anatoly Kurmanaev and Ian Talley
WASHINGTON -- The U.S. government is considering restricting
trades in Venezuelan debt as it seeks to punish President Nicolás
Maduro for undermining the country's democracy, according to people
familiar with the matter.
The unprecedented move would temporarily ban U.S.-regulated
financial institutions from buying and selling dollar-denominated
bonds issued by the Republic of Venezuela and state oil company
Petróleos de Venezuela SA, according to a person who was briefed on
the proposal.
Another person familiar with the matter cautioned that the
measure was one of several steps under consideration regarding
Venezuela. The person said the final decision would rest with
President Donald Trump.
One option being considered is banning the trading in just some
papers issued by the state oil company to limit its access to
external funds, said a third person.
The ban would be the first step against the Venezuelan financial
system since President Trump promised "swift economic action"
against Mr. Maduro for installing a parallel parliament staffed
with loyalists earlier this month.
Up to now, the progressive waves of U.S. sanctions have targeted
dozens of Venezuelan officials, banning them from traveling to the
U.S. and freezing any assets in the country for alleged human
rights abuses and corruption.
On Wednesday, Vice President Michael Pence is scheduled to speak
to Venezuelan expatriates in Miami.
The ban is designed to damage Mr. Maduro's support among
military officers and government contractors who hold Venezuelan
bonds, without immediately hurting the wider population, said the
person briefed on the matter.
Mr. Maduro's government has continued making bond payments
despite undergoing the world's deepest recession, rewarding
risk-tolerant investors with the world's highest yields. Many major
U.S. fund managers rely on Venezuelan debt for growth at a time
when most rich countries offer negative interest rates on their
bonds.
The Venezuelan government has about $65 billion of outstanding
debt, which is among the most frequently traded in the emerging
markets.
Mr. Maduro has prioritized international debt payments at all
costs, even as the country sank deeper into an economic crisis and
his government cut back on imports of food and medicine.
Venezuelan bond trading attracted public scrutiny earlier this
year after the asset-management business of Goldman Sachs Group
Inc. bought $2.8 billion-worth of the country's debt at about 30
cents on the dollar.
Venezuelan opposition accused the investment bank of financing
the Mr. Maduro's repression of peaceful protesters. Goldman Sachs
had said the bonds were bought on the secondary markets and did not
add any fresh funds to the government.
Earlier this month, Goldman Sachs's rival Credit Suisse Group
said it prohibited its traders from buying and selling certain
Venezuelan bonds because of the risk the trades would finance human
rights abuses.
The policy forbids employees from trading or using as collateral
two specific bonds, one issued by the Venezuelan government due in
2036, and one by state oil PDVSA due in 2022, as well as bonds from
government entities issued after June 1.
Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com and Ian
Talley at ian.talley@wsj.com
(END) Dow Jones Newswires
August 22, 2017 23:35 ET (03:35 GMT)
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