Monthly Archives: June 2010

Shameless plug: Give me your money

Every day, this website attracts readers from an impressive chunk of the world’s biggest oil, engineering and consumer products companies, along with various government agencies and universities. This post is addressed to those of you who work in these multi-billion-dollar institutions and are wondering how you can harness the power of Setty.

You’ll be pleased to know that I can apply my wonky records skills, my contacts and my dogged on-the-ground reporting ability to your due diligence investigations and risk analysis efforts.

Write me for more information. And don’t worry. I have a real name and CV and am happy to share them.

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Salad days

Lettuce field near Watsonville, California

Lettuce harvest during the Great American E. coli Scare, Oct. 10, 2006, Salinas Valley, California.

Lettuce sure has gotten spendy.

You may have heard that Venezuela moved this year from having two exchange rates to at least four. That is, it used to have the official exchange rate pegged to the U.S. dollar and a weaker free-market rate. The official rate has for the past couple years been reserved for people importing items deemed crucial by an agency called Cadivi. (These whiz kids have routinely allowed the cheap import of designer clothes and putrid food while delaying currency trades for companies buying necessary parts for the oil industry.)

The free-market rate was set, in theory, through trading of Venezuelan international bonds in bolivars. People bought in bolivars, and sold in dollars, so if it took 4 Bs in Caracas to buy a bond that sold in New York for $1, it gave an “implicit” rate of 4 Bs to the $. While it’s illegal to publish any exchange rate other than the official one, the swap rate was frequently published by traders via postings to Twitter and anonymous blogs. Those reports, in turn, not only gave some transparency to legal buyers and sellers of bonds, but also gave a benchmark price for people in the illegal black market. That is, tourists with $500 cash who needed some bolivars for their Gran Sabana vacation could refer to the blogs to ensure the bolivar-selling huckster at the airport was treating them fairly.

Hotel Gran Meli√° pool, Caracas

Everybody out of the pool! Hotel Meli√°, Caracas, charges 300 bolivars for a day pass at the pool, gym and sauna -- $69.76 at the official exchange rate, $33.70 at the lettuce rate, and about a week's income for a minimum-wage Venezuelan. Mostly just a pretty picture to break up a wonky-ass post.

The government banned the swap system a few weeks ago. The well known blogs closed and were replaced by newcomers of unknown reputation and methodology. The scammers got the upper hand. With no official channels for most currency trades, all that’s left is the black market. But now there’s no benchmark for the deals. An acquaintance who organizes black market transactions says nobody is trading via money transfers under fear of arrest. On the street, near the Central Bank, a stranger offered another friend cash U.S. dollars for 12 bolivars apiece. At the airport this week a stranger offered to buy my dollars for 7 bolivars apiece.
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Correction on bonds note

I’m busy so don’t expect much posting for a while. Here’s a correction, since I have a passion for accuracy: Walter Molano isn’t paid by Roubini, but BCP Securities LLP.

Meanwhile, how about those bonds he was slamming in his note dated June 8. According to Avila Capital Markets (maybe not the world’s best source of bond pricing, but it’s the only one on the intertubes):

venz bond yield chart

Venezuela bond yields. Do I hear an owl?

No really, it was a compliment

puerto-ordaz-dam

Inside the Jose Antonio de Sucre hydro dam in Puerto Ordaz. Open the bay door, HAL.

Dear nice people in the Venezuelan government and PDVSA who read this website (and you know who you are): When I said it was good news that electricity rationing would be maintained, I meant it’s good news for the pueblo, and by implication, it was good news for the stability of your government. Just cause I speak English doesn’t mean I meant that it’s good news for the bourgeois apatrida sifrina pitiyanqui imperio ricachon desestabilizadores etc etc. Well, anyway, nice work — I’m sure Guri will recover just fine without rationing. No really, it’ll be cool. (And yes, I know I said a while back that it doesn’t matter if they end rationing, as it wasn’t doing much. But ending rationing for the people is different from ending rationing for the big factories in Guayana, where there were tremendous energy savings. Oh wellsies.)

Thanks to the eagle-eyed scholars at the smart, speedy and snarky Structurally Maladjusted for the note alerting me to the news.

Bond analysis for dummies

Guacharaca

A guacharaca (known to our neighbors in Central America as the chacalaca), a type of wild turkey that talks a lot and says nothing. Anything to do with this post? You be the judge.

Roubini Global’s Walter Molino Molano* seems to have forgotten a basic tenet of bond analysis. In his several paragraphs detailing the general crumminess of Venezuela’s economy and the non-recoverability of bond collateral, Molano never explains why exactly people should avoid Venezuelan bonds.
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PDVSA: cost of capital

With something like $80 billion in capital projects planned for the six years, this has to hurt.

Orinoco joint venture with Chevron
Orinoco joint venture with Repsol
Orinoco joint venture with Petrovietnam
Orinoco joint venture with Russian National Oil Consortium
Orinoco joint venture with China National Oil Corp.
Orinoco projects for shared use (roads, cities, water treatment, etc)

Offshore natural gas development with Chevron
Liquefied natural gas train with Chevron
Offshore natural gas development without partners
Liquefied natural gas train solo (Mariscal Sucre)
Offshore natural gas development with Gazprom
Offshore natural gas development with Repsol-Eni

New refinery on Orinoco River
New joint venture refineries in China
Joint venture refinery in Brazil
Shipping line with China
New ships from Brazil
New ships from Spain
New shipyard on Paria Peninsula

Yes, I’m sure I’m missing a few, this is just from memory.