Venezuela Issues Dollar Bonds to Feed its FX System

The Venezuelan government is taking strong action to feed the FX system SITME with U.S. dollar-denominated bonds, in an attempt to provide a greater supply of currency to its third official exchange rate market. This new supply comes from an unannounced US$1.04 billion issue from the state oil company Petroleos de Venezuela SA (PdvSA) on August 5, which, according to Bloomberg, was sold directly to the central bank (BCV) and financial system. Meanwhile, in the first week of August the Venezuelan government also announced the issuance of US$3 billion of U.S. dollar denominated bonds to be sold in the domestic market, which could be purchased in Venezuela’s local currency (bolivar, VEF) and resold at international markets. According to some analysts, part of this issuance could go directly to the financial system to further feed the SITME. Finally, Venezuela paid US$1.5 billion of international debt (Global 10 bonds) on August 7, without the use of BCV’s reserves.

Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients, LatAm Focus: Brazil’s Growth Decelerates While Colombia and Venezuela Mend Ties

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