On Tuesday morning Goldman Sachs (GS) confirmed the purchase of Venezuelan government bonds, which critics argue gives a lifeline to a government facing mass protests and calls for resignations.
Goldman is alleged to have paid just 31 cents on the dollar, ~$865 million total, for bonds that were originally worth $2.8 billion. The company expects a hefty return in investment from the deal.
Goldman Sachs is said to have bought the debt on the secondary market from Dinosaur Financial Group, and did not deal directly with the Venezuelan government. Opponents of President Nicolas Madura say the deal has given the government a much needed financial lifeline as their cash reserves have continue to deplete. Venezuela’s opposition-controlled Congress has threatened that a future government will refuse to repay the debts to the bank, and plans to ask US officials to investigate the deal.
“Goldman Sachs’ financial lifeline to the regime will serve to strengthen the brutal repression unleash against the hundreds of thousands of Venezuelans peacefully protesting for political change in the country. Given the unconstitutional nature of Nicolas Maduro’s administration, its unwillingness to gold democratic elections and its systematic violation of human rights, I am dismayed that Goldman Sachs decided to enter this transaction,” Head of Venezuela’s National Assembly, and opposition leader, Julio Borges wrote in a letter to Goldman Sachs president Lloyd Blankfein.
The bonds were issued in 2014 by state run oil company Petróleos de Venezuela (PDVSA). Goldman Sachs defended their purchase saying they bought the bonds with the hope that life in Venezuela would improve, thus the value of the bonds would then rise.
“We are invested in PDVSA bonds because, like many in the asset management industry, we believe the situation in the country must improve over time. We recognize that the situation is complex and evolving and that Venezuela is in crisis. We agree that life there has to get better, and we made the investment in part because we believe it will,” GS said in a statement.
With a face value of $2.8 billion, Goldman Sachs now owns the vast majority of the series of bonds originally issued by PDVSA, which are said to have totaled ~$3 billion. If the debts are paid on time, the bonds are expected to be a very lucrative investment.
Protestors picketed outside Goldman Sachs headquarters in New York on Tuesday. Protests have also been planned in Miami, which is home to a large community of Venezuelans who have fled the country.
“By giving $900 million to a dictoraship, they are funding a systematic human rights violator, they are funding immortality and for Maduro to stay in power…” said Eduardo Lugo, a Venezuelan student attending University in New York.
Venezuelans have for more than two months now staged mass protests throughout the country, demanding Maduro hold early elections. Maduro has said the protests are a violent effort to overthrow his government, and claimed his country is a victim of an economic war supported by Washington. The death toll recently rose to more than 60 and thousands injured in the Venezuelan protests; with the majority of casualties being civilians.
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