Gold Reserve, the Canadian gold-mining company that took the Bolivarian Republic to the cleaners at international arbitration after the expropriation of its mine at Las Brisas, is now stuck with a familiar conundrum: how do you collect payment from a government that may want to pay you but has no money?!

The answer, it turns out, is simple enough: just get them to pledge some of ’em Hunger Bonds. In a press statement posted on its website today, Gold Reserve announced it just collected about $40 million from the res publica. But the remainder, very nearly a billion dollars, it will get

…in installments (the “Installments”) over approximately the next two years. The amended Settlement Agreement contemplates that Venezuela’s obligations thereunder will be partially collateralized with Venezuelan sovereign debt.

In other words, Venezuela promises to pay in the next two years, but since those promises aren’t worth much, the republic also promises to hand over some juicy bonds if they can’t pay.

The Bolivarian Republic’s desperation to pay is clear: fail to do so, and this arbitral ruling could set off the cross-default clauses in other bonds. That can’t be allowed to happen. So their back is against the wall. Desperate, they’re pledging what they can pledge…bonds.

But which bonds? More of those VENZ36s? How many of them? Whose balance sheet will they come off of? What’s the implicit value of each bond in the deal? And what, if any, is the daño patrimonial Venezuela stands to suffer if Gold Reserve has to execute on this collateral? We’re not told.

But witnessing the level of care for the public purse Venezuela has put into in its last few bond deals, we shudder to think what’s in the small-print.

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