Apocalyptic South American fuck-up nudges up fund manager's alpha

SA_ICONThis Bloomberg lede tiptoes right up to the point of self-parody. (The article itself is good, though – sorry, don’t have a link to the whole thing…)

July 24 (Bloomberg) – The first signs that Hugo Chavez’s hand-picked successor is scaling back $8 billion in annual oil subsidies to the Caribbean is bolstering Gramercy Funds Management LLC’s bullish view on slumping Venezuelan bonds.

Guatemala this month became the first of 18 members of the Petrocaribe oil alliance to consider leaving the program, saying that Venezuela had doubled interest rates on loans used to pay for oil. Venezuela also slashed new commercial foreign credit by 72 percent in the first quarter from a year earlier, according to central bank figures. Under Chavez, Venezuela attempted to export its brand of “21st century socialism” through cheap oil shipments across the region, even as the nation’s budget deficit reached record highs and shortages of consumer goods worsened.

While the election of Nicolas Maduro as president on April 14 has caused Venezuela’s dollar-denominated debt to fall almost twice the emerging-market average, the move to cut oil subsidies would lift the value of the bonds, according to Gramercy.

“These positive policy changes coming from the new administration make it an attractive opportunity,” Jeff Grills, a money manager overseeing $3.6 billion at Gramercy, said in a telephone interview from Greenwich, Connecticut.