Eulogio vs. Poleo

Why Eulogio del Pino wants to sue Rafael Poleo’s newspaper, El Nuevo País, to smithereens.


Have you heard? PDVSA’s latest debt swap deal isnt going great. After sweetening the terms of the deal, PDVSA’s  been forced to extend the deadline…twice. By now they’re resorting to outright threats to browbeat bondholders into swapping.

It’s no surprise, then, that Venezuela’s combination oil-company-chief/oil-company-regulator (what could possibly go wrong with that?!) Eulogio Del Pino is now searching for someone to blame, and it looks like he’s found it in local newspaper “El Nuevo Pais”.

Last Friday, Del Pino introduced a libel suit against this paper in a Caracas court. In his words, this paper “…is trying to harm, in whatever way they can, an operation that we have offered transparently”. The previous week, he had announced this legal action on Twitter, under orders of Nicolas Maduro, who accused the paper of “…publishing false information to destroy PDVSA.”

At the center of the controversy is an article published by El Nuevo Pais on October 7th that hints that the State oil company is out to privatize CITGO. The piece is based on a report by Bloomberg from the day before, saying that PDVSA would use its U.S. subsidiary as collateral (which — not that this makes any difference — happens to be true.)

El Nuevo Pais responded to PDVSA’s lawsuit with a written statement accusing the government of using this legal action as an excuse to shut the paper down altogether. El Nuevo Pais has an uncompromising editorial line against the government and has pledged to keep it that way in a TV interview. As the paper put it,

“This lawsuit is not for reporting the collapse of PDVSA. This lawsuit is for being an unyielding paper, which doesn’t buckle under pressure from any advertiser’s interests. It’s designed to depend on the pregón, the street hawker. This suit has come because in this paper the opposition has found a megaphone to burst through the government’s communicational hegemony. And not just the opposition, but dissident Chavismo as well. That’s what Nicolas Maduro is afraid of…

We can be chased, but we have our combat gear put on. We will defend the message carried in our motto: ‘This country of all must be built for all.’ We won’t be the first newspaper closed by a dictatorship.”


El Nuevo Pais’s founder and director, Rafael Poleo, responded to the lawsuit by putting a series of questions on his Twitter account to Nicolas Maduro about the current state of PDVSA, such as: “If PDVSA is such good condition, why doesn’t he call the financial press and answer the reports that suggest otherwise?” The President of the National Assembly, Henry Ramos Allup who writes a weekly opinion article for the paper, showed his solidarity and support in his last column.

Sadly, this kind of legal action against the press is not unprecedented in Venezuela: Last year, Diosdado Cabello sued local newspapers Tal Cual and El Nacional (along with news website La Patilla) for reproducing an article from the Wall Street Journal linking him with drug trafficking.

Cabello also took the WSJ to court in New York City for libel. Currently, his case is still active this month, as WSJ’s lawyers asked the judge to throw out the entire suit.

So far, there’s no indication that PDVSA will proceed legally against Bloomberg. In the meantime, an earlier piece indicated that the lack of interest from investors is the reason why the latest bond offer is falling flat in the markets, according to analysts quoted by the financial news outlet.

“Repetitive delays now logically suggest that the deal is struggling,” Siobhan Morden, the head of Latin America fixed income strategy at Nomura Holdings Inc., said in an e-mailed note. “The stakes are high on whether a successful transaction allows for the muddling through strategy to continue or whether an unsuccessful transaction reaffirms repayment stress through next year.”

The lack of interest from investors is somewhat justified. The conditions offered by PDVSA are not attractive enough, not only because bondholders would have preferred a higher swap ratio -the amount of new bonds PDVSA gives in exchange for PDVSA 2017 bonds-, but also because many market analysts think that CITGO Holding Inc. assets guaranteeing the new bonds are simple….worthless.

In fact, PDVSA had to extend the early tender deadline to participate in the deal twice, arguing that participation was “substantially less” than PDVSA hoped for (at least 50%). Is this El Nuevo País’s fault? Of course not. Bondholders definitely pay attention to local media when making investment decisions; especially if we’re talking about risky countries like our own. But to blame a local newspaper for the potential failure of a bonds swap deal that many investors already said is not attractive enough, is completely far-fetched.

Other factors that could be influencing the PDVSA bond proposal include a recent lawsuit from ConocoPhillips (which considers this debt swap deal as “fraudulent”) and the unilateral approval of 2017 national budget via decree by the Executive (under supervision of the TSJ’s Constitutional Chamber), illegally bypassing the constitutional role of the National Assembly regarding the budget.

Regardless of what happens with this particular case, the State is becoming more and more hypersensitive with non-hegemony media outlets, even falling into the bizarre: Last week, two journalists were detained for over two hours just for taking a picture of Maiquetia Airport’s floor.

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  1. Not sure that Del Pino on his own would have proceeded to sue Poleos paper , his got enough worries of his own to distract his mind with something so ultimately irrelevant , dont believe Wall Street bond holders have Poleos paper on their reading list ……the same identical information can be found in many other much better read publications !! Its Maduro who wants to either show off how grandiously powerful and brutal he can be in attacking a local publication that’s simply repeating something everyone already knows when reminded of the regimes extreme financial vulnerability or is letting of steam at the frustration of being increasingly cornered by distressful situations he cannot control !!

    In times of great oppressive distress and frustration, people will sometimes engage in wild gestures of rage to distract themselves from the vise like despair they feel , they blow off steam by kicking chairs , bellowing insults , threatening violence to those close to them …… Suspect that Maduro is either playstaging a brutal anger to give the impression that he is impressively strong and menacing ( at this time of utmost vulnerability) or that he is letting off steam in response to the very difficult situation he is living thru….!!

    This lawsuit is more a sign of weakness than of strenght !!

  2. What is fascinating here is the non-participation of the one country on which the Bolivarian Revolution (read Hugo Chavez) placed ALL of its oil chips, …China. No more loans, no more investment support. The Chavista’s are now left twisting in the wind by their new friends/comrades across the oceans. Hugo Chavez spent years courting the Chinese. Now, …nothing. Silence. Chinese bureaucrats staring off into space. If the Chinese aren’t helping here, what does that say?

  3. Just in , Pdvsa has just posted a new communique where it extends for a THIRD time the deadline for accepting swap offers on its 2017 bonds (its now October 21) given that it has not yet collected the minimum number of offers needed for the swap to proceed (50%) .

    The communique ends with the following highly suggestive phrase : “Si las ofertas de canje no son exitosas, podría ser más difícil para la compañía hacer pagos programados de su deuda existente, incluyendo los bonos existentes, lo que resultaría en que la compañía evalúe todas las opciones alternativas”

    “If the swap offers are unsuccessful , it might be difficult for the company to make the programmed payments on its existing debt , including existing bonds which would result in the company evaluating all alterntive options ”

    Translation : if the swap offer fails we are going broke , and anything goes !! The plot thickens !!

  4. “If the swap offers are unsuccessful , it might be difficult for the company to make the programmed payments on its existing debt , including existing bonds which would result in the company evaluating all alterntive options ”

    Like defaulting.

    It’s amazing to me that the pending default is getting so little ink. It’s a sure thing if the swap tanks – as it apparently will. Word I got is that nowhere near 50% of bondholders willing to defer payment from a country whose financial portfolio and bankrupt fiscal policies can only get worse as Maduro drives his bus and the country off the cliffside. This latest quote above seems to be saying, “Swap…or get nothing,” which assumes that the nothing Maduro has now will magically be something in 2020 – sans policy changes.

    But the Chavista’s ability to connive and swindle and sandbag is impressive, though printing money will no likely make a difference on this one. Something HAS to give, eventually. The idea, perpetuated by a national paralysis to act or make change, suggests that the country can keep muddling on indefinitely. But with not that kind of nut to service. The bell tolls, and it ain’t going to quite down now.


  5. Juan : as per the grapevine, offers have so far been received for about 36% of the bonds being offered , Even if offers are ultimately received for the full 50% that is the target minimum , Pdvsa still has to come up with about 1 billion US$ to pay the remaining bonds , no one is quite sure whether the funds are there to make this last payment ……!! the situation is getting really dire …….but no one seems to be giving it too much attention ……do they know something we don’t know or are they just ´distracted´ ….??

  6. Guillermocito,

    Where’d you hear 36%? I heard it had leveled off at around 30%, from a relative who works cooking the books (or watching them burn). But reliable facts and figures are hard to come by with this outfit. My sense of it is if they are forced into forking over a cool billion, which if they have it at all is certainly targeted for stuff like keeping the lights on in Caracas and keeping the brass fed and in goods, a crisis of some sort cannot be diverted. And if the vig stands at 2 B, THAT will get the bondholders attention no matter how distracted the Chavistas are. As I said earlier, Chavistas have basically ignored everyone for going on 20 years but this time they simply can’t. My understanding is that Ven’s foreign holdings (whatever they are actually worth) cannot be garnished outright owing to the convoluted conditions attendant to the bonds, but you can’t fudge on two billion and now feel the screws turning, hard and fast. Something has to give on this one. As used to be said of South American regimes, once the money dries up to pay the military, the standing government is done for. But we’ll see.

    In a sense, from sitting here in the US (I haven’t been able to return to my home in Valencia for nearly 3 years for fear of reprisals, being a Gringo and all), the Chavistas have always accorded their own warped definitions of “meaning” according to whatever needs redefining. The constitution says this, but the Chavistas say what it really means per the RR, or whatever is the issue, is this (some insane interpretation). It’s gotten so bad and insane that all sense of meaning has virtually evaporated per lay and institutions – the bones of any society. But when you own western powers, it ALWAYS MEANS you have to pay up. Gonna be interesting how this one plays out since the Chavistas cannot reinterpret what owing money actually means. But you know they will try and play it sideways.


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