CNN en Espanol: Venezuela carece de mucho más que las papas fritas de McDonald’s

“El país está implosionando”, dice Russell Dallen, socio administrativo de Caracas Capital Markets, una compañía con sede en Miami que se especializa en valores latinoamericanos. “Venezuela no podría pagar sus deudas con el costo del petróleo a 100 dólares el barril y, definitivamente, será mucho más difícil que las pague con el precio actual de 40 dólares el barril”.

Venezuela no vende lo suficiente de su petróleo para cubrir su deuda, dice Dallen. Aunque Venezuela produce alrededor de 2,3 millones de barriles de petróleo al día, los venezolanos consumen la tercera parte de esa cantidad y casi no pagan nada por ella. Aunque el país también envía una gran cantidad de petróleo a China, el ingreso, casi en su totalidad, sirve para pagar las deudas anteriores, según indicó Dallen.


CNN: Venezuela lacks a lot more than McDonald’s French fries

“The country is imploding,” says Russell Dallen, managing partner of Caracas Capital Markets, a Miami-based firm that specializes in Latin American securities. “Venezuela couldn’t pay its bills at $100 a barrel of oil and it’s darn sure going to have a hard time paying them at $40 a barrel of oil.”

Venezuela does not sell enough of its oil to cover its debt, Dallen says. Although Venezuela produces about 2.3 million barrels of oil a day, Venezuelans consume a third of that and pay almost nothing for it. While the country also sends a lot of oil to China, it’s almost entirely to pay off previous debts, according to Dallen.

The South American nation has $11 billion in debt payments this year. The critical moment will come in October, experts say, when about $5 billion is due. Maduro has not asked the International Monetary Fund or World Bank for financial help.

Financial Times: Is Venezuela finally ready to sell Citgo?

citgo-lemontRuss Dallen of Caracas Capital Markets told beyondbrics by email:

They would like to sell it, but they are trying to talk up their book. It is worth about $5-7bn, not the $10-15bn they were are trying to assert they have offers. But, they need the money. They have huge dollar shortages at home. They have 2 bonds for $4.5 bn maturing in October to pay off, in addition to high interest, and they are also concerned about the large arbitration judgments that loom in their future.

Financial Times: Argentina’s holdout saga: pacta sunt servanda

The most casual followers of the Argentine debt saga will be familiar with the Latin term pari passu, or “equal footing” – or, in this case, equal payment to all holders of Argentine bonds, whether or not those holders took part in the country’s two restructuring programmes in 2005 and 2010 following its 2001 default.

Now Russ Dallen of Caracas Capital Markets, a veteran commentator on and broker in Latin America’s most exotic bond markets, has introduced another smattering of Latin to the story: pacta sunt servanda, or “contracts are for keeping”.

That’s what Dallen wrote to investors on Thursday as the basket of defaulted Argentina bonds, bought by Dallen for clients last year when they were trading for 30 something cents on the dollar, rose through the mid 80s to reach a bid price of 90 cents on the dollar.

This from his note:

While Argentina rails and nashes their teeth at the injustice of it all, the US courts in the end are simply enforcing contract law; and like it or not, Argentina wrote bad contracts (or good contracts, depending on which side of the litigation fence you are on).

There are about $3bn worth of untendered Argentine debt – bonds that did not take part in the restructuring – including about $1.3bn held by investors who have sued Argentina in the US (because the bonds were written under US law), led by Paul Singer’s NML Capital.

Source: Russ Dallen, Caracas Capital Markets

The defaulted bonds have shot up in value since the US Supreme Court refused on June 16 to overturn previous rulings that ordered Buenos Aires to pay the holdouts according to the contracts on their bonds. They are now, says Dallen, approaching face value.

But what if the contracts really are for keeping?

There are many different instruments in the bundles traded generically as defaulted Argentine debt. In a normal bond market, bonds are traded with interest: a bond that pays interest every six months will rise in price over the course of each six month period in accordance with the amount of due interest accrued. Argentine defaulted bonds are traded without interest, on the assumption that no interest will be paid.

However, if the contracts are enforced as written, that could change dramatically in bond holders’ favour: they would get not only 100 cents on the dollar but also the amount of interest unpaid since the default nearly 13 years ago, which could typically double or triple the bonds’ face value.

Might that happen? It just might. The prospect would certainly tend to push the price of the bonds up rather than down. And it would add to what Dallen says is an extreme mismatch between people now clamouring to buy the bonds and those willing to sell.

“It may well be that Argentina is buying the bonds back,” he says. “It would make sense and it would certainly be the cheapest solution for them, especially if they will have to pay a multiple.”

Argentina’s best course of action now would appear to be to negotiate in good faithwith the holdouts. It may well be able to settle for less than the full amount in the bonds’ contracts. Says Dallen, who got his law degrees from Christchurch College Oxford and Nottingham University in the UK and Columbia Law School in the US: “The first thing they teach you on both sides of the Atlantic is pacta sunt servanda. Then they teach you how to get out of it.”

Washington Post: Maligned Dollar Flourishes in Venezuela

“Essentially, they’ve hit a plateau, and Venezuela’s oil production hasn’t gone up,” said Russell Dallen, head trader at Caracas Capital Markets and a longtime student of Venezuela’s economy. “What that really means is that Venezuela doesn’t have enough dollars to pay for all the things that they need to pay with dollars.”

Il piano di Maduro per rilanciare il Venezuela

PDVSA bldgIl terzo è lo spettro di un default. Il Venezuela vende ogni giorno 640mila barili al giorno alla Cina, a prezzo privilegiato per poter ripagare almeno gli interessi dei 40miliardi di dollari che Pechino ha investito in Venezuela dal 2008 a oggi.Per questo, secondo Russell Dallen, analista americano di “Caracas Capital Markets”, nei prossimi cinque anni vi è il 65% di probabilità che Venezuela non sappia fronteggiare i propri debiti.

CNN en Espanol: Por qué los “chavistas” votarían por Obama

“Estados Unidos sigue siendo el único cliente real que paga en efectivo y el precio completo”, dijo Russ Dallen, jefe operador de Caracas Capital Markets, en Caracas. “Puede que Romney quiera utilizar esa influencia para dejar de subvencionar una espina que tiene clavada Estados Unidos”.

Dallen añade que Venezuela, o por lo menos el gobierno de Chávez, necesita que los precios del petróleo se mantengan altos, y Obama podría ser una apuesta más segura para ese escenario. “Obama está más dispuesto a tolerar los altos precios de la gasolina porque la gasolina, a 4 dólares el galón, provoca que las personas estén más dispuestas a invertir en tecnologías alternativas y que esas tecnologías sean más rentables”.

Reuters: Venezuela unlikely to sell U.S. refiner Citgo soon

State-Owned Oil Co. PDVSA Facilities As $1 Billion In Bribes AllegedThere is a lot of interest from foreign investors in the
bonds issued by Venezuela's government and its state oil firm,
which offer high returns but are consistently rated by risk
indicators as having the world's greatest chance of default.
 This month, PDVSA launched another $3 billion bond in its
latest bid to juggle its many obligations to service providers,
nationalized companies and social spending. [ID:nN25262594]
 Speculation about any sale of Citgo has also jacked up
interest in the $300 million of notes that were issued by the
U.S. refiner and mature in 2017, secured by its refineries, its
inventories and a portion of its accounts receivable.
 "If Citgo is sold, these bonds with an 11.5 percent coupon
will fly," said Russ Dallen, head trader at Caracas-based BBO
Financial Services.