A weird $1.3 billion payment

Argentina is planning a $1.3 billion payment to Venezuela’s state oil company, PDVSA, Bloomberg reports, citing the Official Daily in Argentina.

This struck me as odd because in my years reporting on PDVSA, I had never heard of a $1.3 billion debt from Argentina to PDVSA.

So I looked at the Argenine statement, and I see that all the payments are oriented to paying off a refinancing deal from May 2009. Sadly I don’t have time to track it down, if it was ever published. Nor to track down what that was refinancing, exactly.

However, in PDVSA’s annual reports, I see that the company started a bilateral agreement with Argentina in 2004. According to the 2009 PDVSA report, that agreement works like this: PDVSA sells oil to Argentina. The money from sales goes into a fund. That money has to be used to buy things from Argentina. (This would explain why Argentine companies are always eager to go on trade missions to Caracas — captive customers are very attractive.)

That alone would be weird. But what takes it off into Venezuela-Argentina levels of weirdness is that in the PDVSA annual report (p. 477), you see that Argenina’s Cammesa put $439 million in this fund in 2008-09, and PDVSA sold Argentina 23,800 barrels a day in 2008 and 8,000 barrels a day in 2009. OK, oil and products sold, money coming in, fine. But look at page 126 of the report and see how much oil PDVSA exported to Argentina in 2008 and 2009. Practically nothing.

Now, it’s normal for an oil company the size of PDVSA to buy and sell oil all over the world in all sorts of little swaps. Some people are scandalized by the idea that PDVSA’s oil sales to China are actually ending up in the USA, or that the sales to Belarus may really come from Azerbaijan. This is just business.

But the financial side of this deal is “unorthodox.” PDVSA is selling oil to Argentina which it has to buy from some other country, maybe Brazil, almost certainly in dollars. In return it gets “restricted cash” which has to be spent in Argentina.

The question now is, this $1.3 billion — where is it going? If it is going to this restricted cash fund that is part of the bilateral agreement, PDVSA doesn’t actually get access to the money — it has to be spent in Argentina. If the money is going to PDVSA, it will help the balance sheet. The company only listed $605 million of long-term accounts receivable from energy agreements on its balance sheet in 2009, net of doubtful accounts. So if that is the relevant line (who knows), it will be a nice boost to the company’s coffers. We shall see, however.

3 thoughts on “A weird $1.3 billion payment

  1. otto

    The first thing that comes to mind is the 2010 financial year. Maybe PDV has provided and there’s $1.3Bn in upaid bills.

    The second thing is that maybe the Bloomie note’s first line is slightly misleading and the $1,3Bn is to be paid into the fund, not as a direct repayment to PDV.

    The third thing is that it all might just be a cunning ruse to piss off Argy Paris Club creditors.

    good post.

  2. sapitosetty Post author

    Wait, is it already 2011? What happened? No, the Diario Oficial says this is all payments for a refinancing that happened in 2009. So any 2010 payments are separate. But thanks for the hangover-check.

    Your “second thing” is almost certainly correct.

    I would hestitate to speculate on the motivations behind these cunning ruses, other than to quote my high-school U.S. history teacher, who said that for any question where you don’t know the answer, you have a good chance of getting it right by writing “money.”

    1. otto

      Smart dude that teacher or yours. Reminds me of the five things you need to know in the language of any country you visit on business (according to a globetrotter pal of mine): Yes, No, Please, Thank you, My friend will pay.

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