Goldman Sachs criticised for buying Venezuelan government bonds at record low

Goldman Sachs criticised for buying Venezuelan government bonds at record low

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US investment bank Goldman Sachs has come under attack by the Venezuelan opposition party for buying government bonds and, in doing so, “giving a lifeline to an incompetent government”.

Goldman Sachs paid $865 Million USD for government bonds that were originally worth $2.8 Billion USD. The bank paid 31 cents on the dollar, far lower that what was considered to be a fair value.

The bank defended its action saying that it brought the bonds in 2014 for a state-run oil company Patroleos de Venezuela SA with the hope that conditions in Venezuela would improve and the value of the bonds would increase.

Goldman Sachs claim that they bought the bonds from another broker and did not interact with the Venezuelan government. Despite buying the bonds indirectly, Nicolas Maduro’s government have already benefited and seen a surge in reserves.

Venezuela only has $10.8 Billion USD in reserves left and its reserves rose by $400 Million USD after Goldman Sachs purchase according to central bank data.

Citizens in Venezuela have been protesting for two months over food, medicine, electricity and clean water shortages. It  grows very little of its own food after the government nationalised much of the farmland then abandoned the agricultural plan, focusing on exporting oil as its only source of revenue.

Maduro has been lambasted by the opposition who hold that he chose to pay Venezuela’s global bondholders, over feeding the country’s people. The move by Goldman Sachs to buy the bonds has caused further moral outrage and has been described as “morally indefensible” by critics.

Venezuela’s opposition leader Julio Borges sent a letter to Goldman Sachs CEO Llyod Blakefein saying he was outraged that the bank decided to buy the bonds calling for the case to be heard before the US congress.

Latin American leaders and international organisations have also criticised Maduro for abandoning the country’s democratic values denouncing him as a hypocrite given the government’s anti-Wall Street rhetoric.  

Goldman Sachs’s compliance staff is now reviewing the Venezuelan trade agreement after the furious response that the bank was helping to support President Nicolas Maduro, as he is faced with accusations of human rights violations.

 

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