[Marxism] Repercussions

[S. Artesian]

I agree that this is indeed troubling.  Expected, perhaps, due to the 
decline in revenues, but making a currency play like this amounts to nothing 
more than transferring wealth up the ladder at the expense of the rest of 
the economy.

There has been a recent recovery in emerging market debt,  part of the 
flight back from the flight to safety which saw demand for US Treasury 
instruments soar and interest rates on those instruments decline, and 
Venezuela debt has been a particular favorite-- given the country's 
relatively modest debt load.  I don't know why currency speculators haven't 
yet taken a big run at the Venezuelan bolivar fuerte, unless supplies and/or 
convertibility have been severly restricted.

Why does PDVSA want to do this?  According to the article, PDVSA has a 
backlog of about $10 billion, at the official exchange rate of  2.15 
bf/dollar,  in unpaid invoices it owes to suppliers and contractors.  If the 
bond issue is well received and PDVSA nets $2 billion in dollars, it can 
then use those dollars to settle accounts with its suppliers at the 
unofficial rate of  7 bf/dollar.  This is the reverse complement of the 
tactic where a company buys back its own debt at distressed levels after bad 
economic news has driven the face value of the instruments down to about 30 
cents on the dollar.  In this case PDVSA is using its relative strength to 
liquidate its obligations at a discount due to the weakness of the rest of 
the economy.  Helluva way to get to 21st century socialism.


----- Original Message ----- 
From: "nada" <dwaltersMIA at gmail.com>
To: <sartesian at earthlink.net>
Sent: Sunday, May 10, 2009 7:12 PM
Subject: [Marxism] Repercussions