The Ministry of Finance has announced that the bond which will enable corporations and individuals to buy US dollars by means different from foreign exchange boards Cadivi and Sitme will be sold at 100 percent of its value.
Businesses will pay the bonds with bolivars and will subsequently resell them abroad to get foreign currency.
Financial experts estimate that the bond will be traded abroad at 87 percent of its value. This means that each dollar bought through the notes will be around VEB 5.
"Bearing in mind market volatility," dollar prices through the bonds will "fluctuate between 4.8 and 5.2 bolivars," Alfredo Puerta, an analyst with Estrategia Financiera, estimated.
Alejandro Grisanti, an analyst with Barclays Capital for Latin America, said in his latest report that "the implicit exchange rate will be about VEB 4.9 per USD, which favorably compares to the last exchange rate in the parallel market at VEB 8.2 per USD."
Fitch Ratings gave the foreign currency denominated bond a long-term rating of B-Plus, and said with certainty that relatively relaxed economic policies have made an impact on growth, but underscored the little clout of the domestic debt and its proven intention to pay, even in critical times, Reuters reported.
Nevertheless, scholars have warned against a fast growing debt. Last month, Venezuela borrowed from China a large amount of USD 20 billion.
Question of law
Issuance of bonds for USD 3 billion will calm down the longing for foreign currency in an economy where businessmen have warned against shortage. Previously, the government had closed the parallel market that allowed completing Cadivi allocations at the official exchange rate.
However, Finance Minister Jorge Giordani claimed that the bonds were issued just to comply with the Indebtedness Law and refused to comment on any linkage between the new bonds, expiring in 2022, and the foreign exchange market.
