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Goldman under fire for buying Venezuela "hunger bonds"

06 June 2017

Julio Borges, president of the opposition-led Congress, said Goldman Sachs is propping up a dictatorship and argued that the bond purchase violated the bank's own code of conduct.

Even at 31 cents on the dollar, Nomura is taking a risk buying the bonds.

Goldman stands to make a nice profit from the purchase. The value of the bonds would then rise too.

"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", it said. The purchase was made on the secondary market, with the bonds previously held by Venezuela's central bank. But the government seems to have already benefited from an increase in reserves and some Venezuelans are livid at Goldman's decision.

On Tuesday, the opposition of the country dismissed the statement of Goldman Sachs Group Inc, which says, it never dealt directly with the government of Venezuelan, when it bought bonds for pennies worth $2.8 billion on the dollar.

The broker said he did not expect the bonds to trade unless Goldman chose to sell them.

About 20 people gathered outside the Goldman Sachs headquarters in Manhattan on Tuesday to protest the bank's investment in PDVSA bonds. Unable to secure enough support for either of two draft resolutions, the foreign ministers said they'd reconvene in a few weeks.

Beke's mother, who died from cancer previous year, could not get the chemo therapy treatments she needed to fight her illness because of the severe medical shortages in Venezuela.

However, Prins believes Goldman is simply betting that things will change.

"That money will go to buy tear gas, bullets, weapons to repress" the people, she said.

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Anti-government protesters have taken to the streets nearly daily since early April, demanding elections, the release of political prisoners and access to humanitarian aid. We're facing hunger, there are no medicines. Venezuela's global reserves rose by $749 million on Thursday and Friday, reaching around $10.86 billion, according to the central bank.

Videgaray has been sharply criticized by Maduro's government but has nonetheless pledged to use all diplomatic channels to help reach a peaceful political solution to the bloody crisis in Venezuela. Food imports were down 50% previous year. The bonds were issued in 2014 and are set to mature in 2022. Instead, it focused on exporting oil, its only source of revenue.

President Trump summed up the crisis recently.

"We directly ask our sister nations to be our voice at this moment", he said, ". because what happens in Venezuela affects the region".

One - submitted by the United States, Mexico, Panama, Peru and Canada - asks the OAS to discourage the Maduro administration from convening the constituent assembly as now devised. It also put sanctions on Venezuela Vice President Tareck El Aissami.

Meanwhile, diplomats from Bolivia, Nicaragua, Ecuador and other nations rejected the meeting as an intervention in the internal affairs of the South American country.

Goldman made its investment against that backdrop.

Harvard professor and former Venezuelan leader Ricardo Hausmann urged JPMorgan last week to remove Venezuelan bonds from its emerging market index. Other indexes managed by Citi, Barclays, Morningstar and Bank of America have Venezuelan bonds in their indexes.

They also held signs saying "You give capitalism a bad name", and "Goldman Sachs profitUS$ off the killing of Venezuelans by Maduro'US$ regime". The move meant to eliminate a thorn in the side of embattled President Nicolas Maduro was reversed after three days - but its political fallout has now barreled into its third month roiling city streets across the country.

The Venezuela government information ministry didn't respond to a phone call seeking comment.

Goldman under fire for buying Venezuela