Everything you’re hearing about Goldman Sachs is true. Yes, they are amoral. Yes, they don’t hesitate to profit from suffering. And yes, they’ll keep doing so as long as there are desperate governments willing to bend the knee for cash. Venezuelans are right to be outraged, but the anger is somewhat misplaced.

Is Goldman at fault? Of course it is. They found in Maduro a cash-starved victim willing to cut them an obscene deal —$2.8 billion in PDVSA 2022 bonds for just 31 cents on the dollar— and they jumped on it. They deserve to be shamed for buying “Hunger Bonds” and giving Venezuela’s government fresh cash. Folks that claim this transaction was “on the secondary market” are misleading you with irrelevant technicalities. For all intents and purposes, this was a plain vanilla primary-market issue of new debt, at 47% interest in dollars mind you.

But if Goldman hadn’t closed the deal, some other Wall Street firm would have. It was too good for any vulture to pass up. What’s really at issue with this deal is that Venezuela’s Dictatorship once again put Wall Street above Venezuelans to raise money for a few months of debt service, imports, kickbacks or financing for the Asamblea Nacional Constituyente.

Venezuelans are right to be outraged, but the anger is somewhat misplaced.

MUD should focus on reaching out grassroots chavistas and hammering home a message they can vibe with: That the Revolution sold its soul to Wall Street. That the folks who call themselves the “sons and daughters” of Chávez are filling Wall Street’s pockets by impoverishing ordinary Venezuelans. That Maduro sold of Venezuelan asset to big time capitalists, and that he did so cheaply.

La Revolución se vendió a Wall Street”.

That’s a mantra right there. Put it in haiku, write songs about it, make memes about it, but direct the blame where it most belongs: the government. Aporrea, of all places, already took steps in that direction.

As part of this story, the MUD should continue to ask for probes and investigations in Venezuela and the US. Even as the National Assembly is powerless, it can still take symbolic action. Under the current legal framework, the National Assembly can’t remove the Central Bank president or Directors. Maduro reserved that power for just himself through an Enabling Law. But, at this point, who cares?

The assembly was already willing to “impeach” Maduro for “office abandonment”. If they’re willing to do that, why not call for the removal of the Central Bank president and Directors. Would that be symbolic? Sure. But the message is what matters most. What you don’t communicate… doesn’t exist.

Chavismo’s obvious and outrageous contradictions must be exploited, and this one is easy pickings. I mean, how can you possibly justify raising $864 million at a total cost of $3.65 billion? “We took money from our most notorious antagonist, but we have to pay over 4 times that amount by 2022”? Good luck! Even Aporrea agrees that Maduro should be called nothing less than a traitor.

La Revolución se vendió a Wall Street”.

And this Goldman deal is not the first horrendous disposal of assets, although it’s perhaps the worst one yet. Remember when PDVSA swapped bonds last year by pledging half of CITGO’s shares? Or when the regime pledged the other half of CITGO to Russia? Or the Fintech repo operation, which valued Venezuelan bonds at just 23 cents? It should be easy to slam the government for this. All it takes is some questions:

  1. After all these big time Wall Street deals, have the food and medicine shortages abated? No.
  2. Did the government massively cut imports at the expense of the people to honor the debt service? Yeah, to the tune 70% in the last three years.
  3. Has PDVSA’s financial black-hole been filled yet? No.
  4. Has the Government or PDVSA enhanced their credit rating, or managed to borrow at anything like a low rate? No.
  5. Is Venezuela’s or PDVSA’s amortization schedule getting smoothed out to make space for imports? No.

Goldman Sachs just gave a discursive mango bajito to MUD. Raising the reputational cost for banks that get in bed with Maduro makes sense. But let’s not lose sight of the biggest sinners: M.A.D.U.R.O & Co.

31 COMMENTS

  1. Goldman Sachs are vultures. But if there is a carcass for them to pick on, is because Maduro killed it.

  2. Yes! But!

    I have for soon two decades been discussing the need for a Sovereign Debt Restructuring Mechanism., SDRM

    For it to work in favor of citizens it has to begin by classifying public debt in default as being bona-fide, dubious or outright odious credits. That in order to avoid that now a Goldman Sachs sell its position, at huge loss to a vulture fund, which could then proceed to use all legal means available to collect 100% of its face value plus interests.

    This specific and notorious case, a true example of odious credits, provides a great opportunity to get some action on blocking financiers through crony statism, exploiting citizens

    http://unsustainabledebtsustainability.blogspot.ca/2014/09/an-odious-method-of-contracting.html

  3. Goldman Sachs did the Venezuelans a big favor by screwing Maduro, depriving him of 30% (some say) of what he might have obtained otherwise. This heroic and selfless action on the part of Goldman Sachs, taking on obviously bad debt at the considerable cost of irreparable financial harm to themselves, further depletes Maduro’s saleable assets, thus forcing him ever-closer to eventual bankruptcy. This is a courageous move to free the people of Venezuela and help them back to the path of democracy! The Venezuelan congress should give Goldman Sachs a medal for moral action in the face of imminent financial danger!

      • Some say Goldman provided money to Maduro, while almost in the same breath stating the contradictory, that Goldman short-changed Maduro: “a vulture taking advantage of the weak, an example of predatory capitalism at its worst”. You can’t have it both ways.

        Either … A) Goldman gave Maduro a bailout and a ton of money (unlikely from what I’ve read since all they did was buy bonds from Dinosaur, bonds which had already been sold, and the cash already delivered by Dinosaur, with nothing prearranged between Dinosaur and Goldman, or Goldman and Venezuela, but presumably any money to Maduro is bad, per that hypo that Goldman provided needed cash to Maduro).

        Or … B) Goldman screwed Maduro (through Dinosaur, and paid only half of what the bonds had been trading at the day before, which is also bad, because per that hypothesis, that Goldman is just a predator on the weak and helpless, they gave Venezuela only half of what it should have received).

        I’m neither sarcastic nor gringo loco. But I suspect some other people are. I just exaggerated a bit. I kind of hate to mimic Hillary, but this whole Goldman bond-buying thing “is one big nothing-burger”.

        • The major price-from-market difference probably stayed with Ven enchufados/Dinosaur/Dinosaur probable Ven clients/cronies, and GS probably made a somewhat discounted-from-market-price bet, at a terrible PR cost to the firm, as it turned out. But,(crybaby) Hillary was right–the Russians stole the election for Trump!

          • There are always protesters wanting to shut down something successful. What is interesting about Venezuela is that this time, the protesters want to BUILD something.

  4. There is an advantage to GS holding this debt compared to Russia or China.
    The US government has final authority over claims against other entities. This authority has been exercised in the past. Basically the government has negotiated settlements of claims with other countries and the claimant has been forced to accept this settlement.
    If a future Venezuelan government can show that any of these funds found there way into the pockets of the sanctioned officials, collecting the debt may be the least of GS’s concerns.
    GS may appear to have got a real bargain, but the bonds are basically non-negotiable. The chances of these bonds ever being redeemed at face value is nil.
    This makes the bonds impossible to value.
    Default is imminent.

    Another thought,
    Goldman Sachs has many connections within the US government. Is it possible that we are missing something or that there is more to this story?
    These guys have access to information that the average investor would never have.
    There are opportunities available to them from all over the world to make money.
    Why Venezuela? Why now? Why do a deal that would bring so much negative attention to them?
    Something else had to be in play.
    Perhaps buying the bonds was a way to keep China or Russia from having more motivation to keep Maduro in power.
    I am only thinking aloud. My gut tells me that eventually we will know the truth.

    • “The chances of these bonds ever being redeemed at face value is nil.
      This makes the bonds impossible to value……Goldman Sachs has many connections within the US government. Is it possible that we are missing something or that there is more to this story?”

      Goldman Sachs simply saw a way to make lots of money, and that’s all mattered. Morality doesn’t come into at all. They were looking at their bottomline, they could care less about dictatorships or suffering or economic damage.

      In case of default, there will be some sort of haircut or debt-restructuring. Since they bought this at roughly 30 cents a dollar, if the restructuring takes the form of 60 cents a dollar, they still profit immensely. That’s why they did it.

  5. Si Goldman realmente “is bad” espero que más adelante aquí publiquen un artículo diciendo lo buena que es en caso de que una hipotética futura reestructuración de la deuda les hiciese perder parte del dinero que ahora han puesto de su bolsillo. Si ganan se habrán lucrado gracias al hambre de los venezolanos pero si luego pierden, siguiendo el mismo razonamiento, la única conclusión posible será que fue porque se lo dieron al bravo pueblo venezolano, buenos que son ellos, ¿no?.

    El emperador Vespasiano le dijo a su hijo Tito Livio que el dinero “Non olet” (No huele) pero para medio mundo, R. Hausmann y ustedes en este artículo el dinero todavía huele mucho y lo hace mal. Para el otro medio lo hace demasiado bien. A pesar de todo, la realidad seguirá siendo siempre la misma: el dinero no huele.

  6. “MUD should focus on reaching out grassroots chavistas and hammering home a message they can vibe with: That the Revolution sold its soul to Wall Street. That the folks who call themselves the “sons and daughters” of Chávez are filling Wall Street’s pockets by impoverishing ordinary Venezuelans. That Mauro sold of Venezuelan asset to big time capitalists, and that he did so cheaply.

    “La Revolución se vendió a Wall Street”.

    My thoughts exactly! All the protests against GS are a waste of time and a wasted opportunity to shame the SOB of Maduro.

  7. I am forwarding your well grounded explanation and the inherent indictment of Goldman Suchs as an attachment to an email I am sending to all politicians who claim to represent my interests. Also,
    to President Trump, please don’t prejudge the President, he absolutely knows how to squeeze Wall Streets corporate gonads. I hope I’m not transgressing any of CC’s rules by forwarding your article sans first obtaining permission.

  8. I agree, most of the blame is going to the Pawn Shop, instead of Maduro’s Government missmanagement (and/or greed?) that made them to make the blunder. My concern, and I haven’t seen it discussed too much is about what are the scenarios (and how to counteract them). What are the possible plans of the government with that cash: Pay old creditors (abrir un hueco para cerrar otro)? Import food and medicines to quell the unrest (aka bozal de arepa) in this crucial moment that it seemed that there was a light at the end of the tunnel? More repression equipment? More corruption? Or ? The possibilities are mindblowing, and not in a good way.

  9. Cuba has defaulted in the past and continues to default on $billions in debt owed to other countries. Maduro is simply following the Castro model and has no intention of paying the 2022 debt to GS. Hell, Maduro cannot plan six years ahead– he will most likely be dead. The same stupid countries that lent to Cuba will lend to Venezuela.

  10. Speaking of money … I once again tried making my contribution through PayPal and got a link that doesn’t connect, leaves the page, and gives no further explanation. My PayPal account is fine, and I logged in with no problem, but I don’t know of any way to go from there to CC. And trying to go from CC to PayPal “bounces”. I was impressed by your delivery at the ASCOA meeting, Fransisco.

  11. The Vice President of Venezuela recently stated that criticism of “international credit entities” should not be permitted. You couldn’t get a greater perversion of Marxism than that.

    • HAHAHAHAHHAHAHAHAHAAHA!!!

      I saw Diosdado on his stupid show Wednesday night (seriously I cant believe I was watching 3 hours of propoganda) Con el Mazo Dando, saying that “he has cash now” and thanks Goldman Sach (with no explanation that this company is one of the most “imperialist” companies of the face of the planet).

      OMG!!

      Like my girlfriend constantly says, these scum are “sin verguenza” (without shame).

      Really, these guys have nothing!! Just amazing how they can keep power and continually lie. But remember most of the people clad in red are quite literally baboons who are impossible to reason with.

  12. “The first thing you need to know about Goldman Sachs is that it is everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Matt Tuibbi, Rolling Stone, July, 2009.

  13. Lorenzo, great quote. At COB today WSJ reporting that top executives were totally unaware of the Venezuelan transaction. Executives claim that a “minor” investment firm contacted one of the GS minions offering the sale for pennies on the dollar. Apparently anyone passing by a ringing phone at GS can do a deal into the billions of dollars and not need approval from on high. Just not a lot of accountability anyplace on Wall St. How do they sleep at night?

    • It may seem hard to believe but the same thing has happened where traders have lost billions of Dollars without any supervision.
      The London whale immediately comes to mind.

    • Thanks. In other words, the best that can be said for GS is that they are a huge corporation, out of control. They need to be broken up, and the pieces better regulated.

      Until that happens, the World is watching.

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