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Venezuela purchases US$ 2.9 billion in South American debt
Source: El Universal

Caracas, July 7, 2006.- Hugo Chávez Government's investment in South American debt bonds are to jump US$ 2.925 billion once it purchases debt certificates issued by a Paraguayan hydroelectric power firm.

On many occasions, Venezuelan Finance minister Nelson has said his country is assessing regional financial markets. For example, in November 2005, the official said Venezuela was considering investments in "the Brazilian, Paraguayan or any other market."

The Venezuelan Government started making investments in debt bonds last May, when it began purchasing Argentine debt certificates.

The Venezuelan move came as a response to the situation Argentina was going through, as in the second half of 2005, Argentina faced maturity of debt bonds amounting to US$ 3.87 billion.

But beyond this specific situation, Venezuela has continued to buy and sell Argentine debt certificates, for a total purchase of US$ 2.8 billion in 14 months.

The Finance Ministry has sold some US$ 2.4 billion in Argentine debt bonds to Venezuelan financial institutions, with profits exceeding US$ 200 million.

Besides transactions with Argentine bonds, Venezuela has bought debt certificates from Ecuador too.

In the second half of 2005, Ecuadorian officials asked Venezuela to purchase US$ 300 million out of a US$ 750 million debt bond issuance. In this way, Ecuador returned to the international financial markets following a debt default.

But Venezuela ultimately bought US$ 25 million in Ecuadorian debt, and then Quito argued that Venezuela did not make a greater purchase because it was not necessary.

This week, President Hugo Chávez Frías announced a new regional debt purchase. This time, Venezuela is to buy debt bonds from Itaipu, a Paraguayan hydroelectric energy corporation. According to the Venezuelan ruler, the transaction is to amount to US$ 100 million. He stressed that state-run bank Banco Nacional de Desarrollo (Bandes) is meeting with Paraguayan officials to refine this transaction.

Paraguay had urged Chávez to invest in Itaipu, just like he has purchased Argentine bonds. Nicanor Duarte intended to complete a US$ 3 billion transaction, but Chávez bought a lower amount.

Itaipu debt with Brazilian Government amounts to US$ 19 billion, and both Paraguay and Brazil are considering renegotiating the terms of the Itaipu Agreement, AP reported.

In stand-by

Over the next few months, Venezuelan investments in South American debt bonds are expected to soar, as Venezuela and Argentina have plans to issue a bi-national debt certificate estimated at US$ 1-2 billion.

These instruments will be endorsed by Chávez' Government, and a part of the issuance would be placed in the Venezuelan domestic market. Therefore, they could be US dollar-denominated bonds payable in Venezuelan bolivars. This operation is expected to be completed in 60-90 days.

Besides, the Costa Rican Government has asked Venezuela to buy debt bonds and Bolivia wants Caracas to buy US$ 300 million in debt certificates.


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