from Zero Hedge:
Just under a year ago in the aftermath of the “OPEC Thanksgiving Massacre” of 2014 which sent oil crashing when Saudi Arabia effectively ended the oil cartel, we predicted that Venezuela (with its CDS trading at 2300 bps back then) would become the first casualty of the “crude carnage.” Since then not only has Venezuela, which relies on crude oil for 95% of its export revenue, suffered a dramatic episode of hyperinflation (which is only accelerating) coupled with total economic collapse, but its CDS has, as expected, blown out to reflect a default of probability at 96% over the next five years as shown below.
Yet while everyone promptly jumped on the “Venezuela will default bandwagon” it has so far avoided bankruptcy.
How can this country with a massive debt load and a paralyzed economy have avoided default so far?
For one thing, it has been drawing down on its FX reserves at an unprecedented pace. Venezuela’s international reserves are hovering near a 12-year low of $15.2 billion.
According to Barclays economist Alejandro Arreaza, the latest figures support estimates that Venezuela had about $42 billion of total assets, including off-budget funds, at the end of the third quarter, of which $15 billion was liquid. He said liquid assets will fall to about $8 billion by year end. The country and its state oil company have $12 billion in bond payments coming due next year.
But before we get to next year, there are still two more months left in 2015, as well as two immediate bond payments due this week and next, amounting to $3.5 billion.
Where did Venezuela obtain the funds needed to make these debt payments?
The answer: it has been dumping its gold, which its former ruler Chavez worked hard in 2011 to repatriate from London, and which its current president Maduro, just four short years later, is busy sending back to its creditors.
According to Bloomberg, “in a sign of how Venezuela is growing increasingly desperate to acquire hard currency, a report released this week showed the country has been stepping up its sales of gold.”
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