Goldman Sachs Buys Venezuelan Oil Company Bonds
Wall Street investment bank Goldman Sachs made many Venezuelans angry by buying $2.8 billion worth of Venezuelan government bonds.
It’s either misery-capitalism at work or a sign that Goldman thinks things are about to change for the better.
The story was first reported by the Wall Street Journal. It was confirmed by Goldman Sachs on Tuesday, May 30, 2017.
Venezuelan Opposition Leaders are Upset
Venezuelans are upset that the investment props up a government that has mismanaged the Venezuelan economy to the point of near collapse.
The president of the National Assembly and top opposition leader Julio Borges wrote an open letter to Goldman Sachs CEO Lloyd Blankfein in which he claimed Goldman failed its own code of conduct and wrote, “…Goldman Sachs decided to make a quick buck off the suffering of the Venezuelan people.”
Goldman knows how to Profit from Misery
Goldman bought the bonds at a steep discount. It paid $865 million for $2.8 billion worth of bonds issued by state oil company PDVSA in 2014. That’s about 32 cents on the dollar. The bonds mature in 2022.
Goldman Sachs defended the investment saying it bought the bonds from a broker and not the Venezuelan government. Goldman also said, “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.”
Like many in the asset management industry, we believe the situation in the country must improve over time.
~ Goldman Sachs
“Buy low, sell high” the old saying goes. Goldman made a killing in Europe at the bottom of the Great Financial Crisis of 2008. When no one wanted to touch Europe, Goldman was in there buying up real estate assets. They are unwinding those deals now for huge profits.
Venezuela has the world’s largest known oil reserves, but Goldman’s investment carries a lot of risk. The current Venezuelan government is struggling to feed its people and is losing its grip on power. Opposition leader Borges says he will recommend that any newly elected Venezuelan government not honor the bonds. If the country falls into civil war, there may not be a Venezuelan government.
Yet Goldman plays the game better than just about anyone. Could Goldman’s investment be a hint that the Venezuelan crisis is hitting bottom and things will soon turn around?