“That’s what fiction is for. It’s for getting at the truth when the truth isn’t sufficient for the truth.” – Tim O’Brien

An email from [email protected] snakes into Jose Guerra’s inbox, the subject line reads “LEAKED DOCUMENTS”. From his drab La Florida office, Jose Guerra opens it:

I spent two years compiling this dossier on how funds raised through PDVSA and Venezuela bond issuances made their way to helicopters and polo teams. I could leak this dossier to anyone in the opposition, but I’m leaking it to you.

You, more than anyone, understand that the debts that fuelled the most obscene corruption binge in our history must not be allowed to weigh on the backs of Venezuelans; that we have an obligation to uphold the constitution and repudiate illegal debts. Get the opposition to push for article 312 and I’ll keep leaking files like I’m Edward Snowden. This is just 4% of the dossier…

The leaks are legit. Page 6 of 105 has scanned UBS statements from Rafael Ramirez’s cousin. The balance: CHF 223 million. The source of funds: sale of earthquake insurance to Venezuelan national parks. There’s an email transcript where he authorizes a $2.14 million credit card swipe. To buy a pony.

Jose Guerra loosens his tie and reaches for his whisky. He knows the constitution’s Article 312 by heart, it rings in his head like a bell:

[…] The State will not recognize debts other than those debts contracted by legitimate State bodies, in accordance with the law.

In accordance with the law. In accordance with the law. Guerra’s done his research. He knows the chavista-controlled National Assembly didn’t bother with formalities, that half the bonds weren’t properly authorized.

All that’s been missing is a case for public opinion, evidencia contundente that most of the money was stolen. Pair the legal argument with a public-outrage campaign and it’s not just a political winner, it’s also a moral imperative: paying the debt would be sacrilege.

He gets on the phone with PJ’s leadership, PJ’s leadership gets on the phone with the G4 and the proverbial ball begins to roll.

* * *

Eulogio del Pino cranks his AC down to 17C. Maduro’s done nothing but sabotage his job as PDVSA’s CEO and the thought of the bastard keeps him up at night. Maduro named Cilia’s inept nephew as CFO and slashed PDVSA’s investment and maintenance budgets to feed CADIVI. Then he created Campineg, an oil company for the military, and now he’s threatening to fire him because of two tweets.

Del Pino is sick of it, and he’s been getting even for weeks. He grabs his phone and refreshes LaPatilla. Chuo Torrealba is front page news: “SIN ARTÍCULO 312 NO HAY JUSTICIA.” He laughs and prepares the 5th batch of documents to scan for Guerra. “I like what I’m seeing. Keep it coming and I’ll do the same” he writes.  

Months and hundreds of emails later, del Pino offers to trade heinous info on Padrino Lopez’s Campineg exploits if the MUD holds a press conference to commit to Article 312 in two days, right after Maduro speaks. “We need to go public with this. Panamá papers se va a quedar pendejo,” he teases.


Two days later, it’s a quiet morning on Wall Street. Maduro’s on TV ranting about how PDVSA is barely earning any $$ thanks to the global oil conspiracy and that PDVSA’s partners are in cahoots with el imperio to cripple oil production. He rambles that PDVSA’s debt swap failed because of the international financial blockade from Miami and Bogota.

He gets to the point: Maduro admits that there’s not enough money to protect el pueblo from Economic War and pay bond debt in November. He looks into the distance and asks ¿Qué haría Chávez? ¿Qué haría nuestro comandante?

It’s kind of poetic. “Chávez protegería al pueblo… ¡Chávez siempre protegería al pueblo carajo!” Bonds nosedive from as high as 70 cents on the dollar to 27. Read between the lines: Maduro announced default. Wall street panics, it came out of nowhere.

Meanwhile, the MUD kicks off its press conference. Chuo Torrealba reveals that they have 169 GB of leaked financial data exposing government corruption. He reviews cases in pornographic detail. Chuo reads and signs a pledge where the MUD unanimously commits to push for Article 312 and repudiate much of Venezuela and PDVSA’s debt.

Bonds tank to 22 cents. Wall street can’t believe it, it’s an avalanche of bad news. Alarms go off at investment firms: Sell everything. Stop losses.

Goldman has twelve sellers on the line, Barclays eleven sellers, Bank of America fifteen sellers. There are no buyers. 19 cents. Capriles signs. 17 cents. Ramos Allup signs. 15 cents. Freddy Guevara signs. 13 cents. A bond trader pops a Xanax, 11 cents, another sobs, 10 cents, another wets his pants, 9 cents.

Suddenly, a vulture fund blasts every Bloomberg terminal on Wall Street: “BUYING ALL PDVSA VZLA BONDS 8 CENTS”


Del Pino’s secretary calls him over the intercom, “…agarre el teléfono por favor, es el señor Jeymi…”

“So how’d it go?” the man on the phone asks. Del Pino bursts into laughter. It’s Jamie Dimon, J.P. Morgan’s CEO. They are talking about the most macabre debt buyback in history. “Well Jamie, we vaporized 44 billion dollars in debt with your $4 billion loan.”

“Best loan I ever made” says Dimon.

“Saved me from default, gracias” says del Pino as he hangs up.

Del Pino tricked Wall Street into selling Venezuela and PDVSA and Venezuela bonds at rock bottom and bought $44 billion in government debt for $4 billion. Now the government owes itself that money, meaning it doesn’t owe it at all.

Del Pino obliterated $25 billion in PDVSA bonds and $19 billion in Venezuela bonds with J.P. Morgan’s fresh $4 billion loan.


Jose Guerra gets one last email from [email protected]: “THANKS FOR PLAYING ALONG, MORON.” From his drab La Florida office, Guerra loosens his tie and drafts an answer:

Au contraire my friend, I’m the one who played you. If you think this whole thing didn’t reek of a massive, Ecuador-style debt buyback, you’re the moron. Your boss got some cash relief to buy last minute popularity, we got…

But he doesn’t send it, why bother? The debt reduction won’t save Maduro from the recall referendum, but it will make his job as finance minister 100x easier. Guerra sips on his whisky and smiles. It’s a small gain for the government and a huge gain for the country and the opposition.

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  1. The missing piece here is Eulogio’s testaferros shorting the shit out of Venny’s right before each new leak. #ObvioNo?

    • Well Mr. Toro, if only it weren’t by the fact that there is no really efficient way to “short” Venny. In pre-crisis times and the heydays of exotic derivatives, you could find synthetic options on Venezuelan and PDVSA bonds to do that (but then again we all know what happened to the counterparties and issuers of these options). All you can find now for the purpose of “shorting” are CDS…Which well, I wouldn’t necessarily call efficient given almost no one really knows how they are priced (despite whatever excuse/reasonable explanation they can give you) and some times have not had clear trigger mechanisms (i.e. Greece). From history, I wouldn’t think that something that was implying a “96% probability of default in March” and which now is probably showing around 60% is efficient and actually a reliable indicator of anything. But then again, this is what “the market” says and what anal-ists like to quote in their very well written news articles. Ha..The market…sigh…

      In other matters, how are your default projections for this year going? Isn’t it time to roll these over to 2017 or? El cuento del gallo pelon…

      • Broker/dealers short PDVSA/Venny all the time… You sell bonds (enter a sale agreement), repo the bonds so your sale settles, and close the repo at some other point, however many weeks later. I know of many broker dealers that have taken big hits on shorts gone bad.

        • Frank, as I mentioned, I haven’t come across an “efficient” way of doing it. Not in the past 10 years+..However, I haven’t been overly keen to do so anyways as I’ve always preferred to be long. And this is meaning a normal investor doing it (not a broker/dealer desk on its own and not on behalf of clients)

          Which broker/dealer do you know does this? Do you know the rates offered on those repos? Would be good to know.

          My experience is that not many institutions like to hold these securities (Venz/PDVSA) on their books and rarely offer attractive financing. They wouldn’t take the securities as collateral (in most of the cases I’ve encountered) and, if they do, they take a big haircut and the rate is for any leverage tends to be quite high (>7%)

          • Every single dealer does this. When they end the day long X PDVSA bonds, they short Y PDVSA bonds–typically in the same part of the curve–to have zero net exposure and protect the capital of the trading desk from market risk. Nomura, JPM, Goldman, everybody.

            Intraday, a lot of these guys also speculate and short the curve in the morning if they think its gonna be a bad news day, and close the shorts in the afternoon. Eulogio del pino isn’t restricted by what a retail investor can do. This guy owns one or many broker dealers.

  2. Well yeah, except for the fact that this probably already happened around Jan-Feb’16 minus the leak! Booooyaaah!

  3. Just wondering how many patriots bought shares of Gold Reserve prior to the announcement of the government paying $770M…

    No one said you have to steal money in front of everyone to see, you need to be sophisticated. (Rafael Ramirez)

  4. I think in today’s market..the government has heavily manipulated mkt pricing to their profit and potential buy backs. What better business than saying abunch of bad news, assign some wacko as vp of economics, who says inflation doesn t exist for a few months, and hit bond prices 10pts+? … I agree with venny trader… Feb 2016 was the trade, not only for investors but for those who caused the drop….venz 2016 quoting 86 a few weeks prior to maturity??


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