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'Venezuela is not a trustworthy lender,' so says Toro Hardy, ex-president of PDVSA
La Nacion
August 25, 2008

by Mart n Kanenguiser

August 24, 2008

Economist Jos Toro Hardy warned that Argentina should not trust the regime of Hugo Ch vez as a lender of last resort, because the Venezuelan economy is heading for a crisis over the decrease in private investment and the drop in recent days in the price of oil.

A Venezuelan, and economist at the Catholic University Andr s Bello, ex director of the Andean Foment Corporation and the oil company Petr leos de Venezuela (PDVSA), Toro Hardy said to LA NACION in a phone interview from Caracas that "everyone understands that the bond purchase is a favor from Ch vez to Cristina [Fern ndez de Kirchner]".

Venezuela acquired almost 9.2 billion dollars in Argentine bonds since 2005 the year that he made his first purchase and it's the only foreign lender the country has had due to the lack of an arrangement for the bondholders that didn't accept the debt swap held by the government in 2005.

Those holdouts still hold in their hands bonds in value of close to 30 billion dollars, pending payment.

-Has the last Argentine bond purchase generated controversy in Venezuela?

-In Venezuela the banks know that they can buy dollars with bonds that in another way they cannot buy due to the exchange controls in place.

But it generated a problem because the friendly banks to the Chavez government, which have benefitted from this strategy, now can't have more than 30% of their bonds in dollars in their portfolios and are obliged to change them into bolivars.

-How do the banks that are not favored by the government of Ch vez operating?

-Venezuelans can only buy dollars through the Commission of the Administration of Currencies, created in 2003, so it's not understood why these operations are done with Argentina while the rest of the financial entities can't acquire currencies freely in the market.

In any case, the explanation is understood as a very particular favor from the Chavez government to Cristina Kirchner.

-Do you believe that the Chavez government will continue buying bonds from the Argentine government?

-I don't know, because Venezuela will have problems with dollars since we're all the more dependent on currencies from from foreigners. And the government is affecting foreign investment with the nationalization of businesses.

In the particular case of oil we will have to be producing five million barrels a day, but we are only at 2.3 million. To that one has to add that the price of crude fell from 147 to 113 dollars in the past few months.

-What effect could this slowdown in production and the fall in prices have?

-It could bring a severe economic crisis, from which I don't know if it could continue to making bond purchase operations.

-Do you predict a recession in Venezuela?

-Without a doubt. In the midst of the biggest oil revenues in history, the country is importing huge amounts of food and meat because nobody dares to invest due to the permanent threats from the government ot the private sector.

In this way, the only source of revenues that remains firm is oil, that, as I said before, is falling.