Pdvsa prepares issue of agricultural bonds for USD 697 million

Ready to rely on banks to back skyrocketing spending, the government of President Hugo Chávez has implemented an indebtedness plan through the issue of bonds. The securities are "special" because there are used to bolster plans in the sectors of agriculture and construction.

State-run oil giant Petróleos de Venezuela (Pdvsa) will be responsible for the next transaction. The holding will send financial institutions bonds for USD 697 million to raise funds. The sum will be subsequently transferred to the Zamora Fund. The Fund, in turn, will use the money in credits for farmers.

A snapshot of "special" operations points to substantial amounts. Altogether, the bonds that have been placed already; the amount of USD 697 million to be issued soon by Pdvsa, and plus USD 3.3 billion for construction total USD 10.3 billion.

Another look of the size of the sum accounts for 98% of the bank equity and 8.3% of general deposits.

Importantly, such issues of bonds enable the government to raise its profile in the economy as the clout of banks thins out.

Rather than engaging in risk assessment and choosing the borrower, financial institutions now buy bonds from the government. Later on, government agencies will grant the loans.

In the event of bad debts, the State will have to take up losses.

"They are not reproductive investments; the money goes to government agencies that lack return. Tomorrow, certainly, that debt will have to be liquefied by means of devaluation," reasoned Oscar García Mendoza, the CEO of Banco Venezolano de Crédito.

vsalmeron@eluniversal.com

Translated by Conchita Delgado