Pdvsa debt on loans and bond issues rises to USD 43.3 billion

State-run oil company Petróleos de Venezuela (Pdvsa) augmented its debt by 24% in the first five months of the year. Between January and May 2012, the Venezuelan oil company signed new financing agreements with China and Japan, and also launched a private bond issue.

At the end of 2011, Pdvsa's debt totaled USD 34.8 billion and with recent transactions the balance amounted to USD 43.3 billion.

Pdvsa started a cycle of requests for funding in February, when the government expanded cooperation agreements with China and signed 19 agreements. Two out of those arrangements included loans granted by China Development Bank (CDB) for USD 4.5 billion. These funds will be used to expand production of the Chinese-Venezuelan joint venture Sinovensa and to the purchase of machinery and equipment by the Venezuelan state-owned oil giant.

Although the loans have been agreed, the authorities have not disclosed when they will be disbursed.

Pdvsa's efforts to get more funds are not limited to these loans. In April, Pdvsa secured a USD 1 billion borrowing facility with Japan, in order to expand El Palito refinery in central Carabobo state and to the purchase of oil goods and services.

In addition to such funding, Pdvsa announced on Friday a new bond issue amounting to USD 3 billion which will be sold to the Central Bank of Venezuela and to state-run banks.

This new transaction made by the state-run oil company is intended to supply US dollars to the Transaction System for Foreign-Currency Denominated Securities (Sitme) exchange system, and to pay part of the obligations that the Venezuelan oil company has with the BCV.

The BCV has been providing financial assistance to Pdvsa since mid-2010. According to data on the monetary base, this aid amounts to USD 22 billion.

Asdrúbal Oliveros, an economist and director of economic research firm Ecoanalítica, commented that these bond issues are mainly made to maintain the exchange rate policy. "Pdvsa is borrowing money at expensive rates to grant the private sector access to foreign currency," he remarked.

Downward trend

The prices of Venezuelan bonds plunged on Monday between three and four points. The Bank of America (BOA) issued a report according to which President Hugo Chávez is ahead in the polls. Therefore, a shift toward market policies is hardly plausible.

In its report, BOA estimates that Chávez's victory in presidential election is the most likely scenario.

Translated by Gerardo Cárdenas