Credit Suisse bans trading of Venezuelan bonds
By Ken Sweet
NEW YORK — Credit Suisse has banned the trading and use of Venezuelan bonds, as the political and financial crisis in the South American country escalates.
The bank will no longer trade, nor accept as collateral, two specific types of Venezuelan securities as well as any bonds the country issued from June 1 going forward, according to a company spokeswoman who was not authorized to give her name. Further, any businesses who wish to do business with Venezuela and deal in any assets there will have to go through additional screening.
The ban comes as the U.S. considers a range of economic sanctions against the government of President Nicolas Maduro, who is facing mounting international criticism over a crackdown on opponents and moves to consolidate power. In the memo, the bank cited “recent developments and the political climate” in the country for the ban.
The Trump administration has sanctioned 30 government officials or loyalists since April, including Maduro himself.
Venezuela in the midst of a severe economic downturn caused by poor government policies and low oil prices. The country’s bonds are one of the few ways the current government is able to raise money to support its collapsing economy.
But as the country’s political crisis has worsened, the bonds issued by the government as well as the state-owned oil company PDVSA have become a point of contention and concern for investors who increasingly worry they are supporting an oppressive regime as well as a country that is a great risk of defaulting on its debts. Goldman Sachs came under political pressure earlier this year for buying a reported $2.8 billion in Venezuelan bonds on the open market at a significant discount.
National Assembly President Julio Borges, leader of the country’s opposition, has sent more than a dozen letters to leading global banks warning them of the risk to their reputations and bottom line if they throw a lifeline to Maduro. Borges also threatened not to recognize any bonds issued by Maduro’s government if the opposition were to come back into power.
The country has debt payments coming due this year of around $6 billion and is estimated only to have $10 billion in cash remaining, largely tied up in gold bars.
The Trump administration has not ruled out the possibility of banning oil Venezuelan oil imports, a step that would deprive the country of its main source of hard currency and could hasten a debt default. Other options on the table include a ban on exports of light U.S. crude that Venezuela depends on to process its oil. That could also raise the risk of default by significantly reducing Venezuela’s oil production.
AP reporter Joshua Goodman contributed to this report from Caracas.