Goldman Sachs criticized for Venezuela bond deal

By the A.M. Costa Rica wire services

The head of Venezuela’s opposition-led congress on Monday blasted U.S.-based bank Goldman Sachs for a financial transaction that he said would prop up his country’s unpopular socialist government while exacerbating difficulties for ordinary Venezuelans.

National Assembly President Julio Borges denounced the bank for trying to make a quick buck off the suffering of the Venezuelan people, he said in an open letter to the bank’s leader, criticizing last week’s deeply discounted purchase of $2.8 billion in Venezuelan bonds.

Borges said in the letter that he would recommend to any future democratic government of Venezuela not to recognize or pay on these bonds.

As The Wall Street Journal first reported Sunday, Goldman Sachs Group Inc. last Thursday closed a deal in which it agreed to pay Venezuela’s Central Bank $865 million for the bonds issued by state-owned oil company Petroleos de Venezuela SA in 2014. That’s a rate of 31 cents on the dollar. A London-based intermediary, Dinosaur Group, handled the transaction, The Journal noted in a follow-up story.

In seeking money to satisfy creditors such as Russia and China, the Venezuelan government was considering all options, The Journal quoted the country’s oil minister as saying last week.

Borges said the assembly would begin a probe into the deal. Venezuela’s opposition leaders repeatedly have asked foreign governments and investors not to do business with the Maduro administration, which it has accused of human rights abuses.

Venezuela has been wracked by nearly two months of street demonstrations, sparked by the jailing of Maduro’s political rivals, delayed elections and widespread shortages of food, medicine and other basics. At least 60 people have died in the protests.

Goldman Sachs defended its actions in a statement:

“We bought these bonds, which were issued in 2014, on the secondary market from a broker and did not interact with the Venezuelan government. … Many investors make similar investments daily through mutual funds, index funds and ETFs which also hold Pdvsa bonds. 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.”

Borges warned that any future Venezuelan government would not forget where Goldman Sachs stood when it had to choose between supporting the Maduro dictatorship and democracy for our country.

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