By Kejal Vyas

Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--Venezuela's latest move to introduce $3.15 billion in bonds to the market only scratches the surface as the country is likely to continue looking toward debt sales to finance heavy social spending projects and tackle dollar shortages.

Late Monday, state-run oil company Petroleos de Venezuela, or PDVSA, said it will sell $3.15 billion more of its existing bonds that mature in 2017, which carry an 8.5% coupon. Reports from local press indicated that about $2 billion of the sale would go directly to the Central Bank of Venezuela to pay outstanding debt while the rest is likely to be put into PDVSA pension and savings funds.

Still, analysts say the securities will eventually make their way into the hands of investors. That is being seen as only the first of many forays the country will make into the capital markets this year. Projections for exactly how much the government will look to raise in 2011 vary but most agree that it will need to raise quite a bit as it looks to boost its economy, the only one in South America still mired in a recession.

"We expect the authorities to continue to issue at least $15 billion in external debt to finance the dollar deficit this year," Morgan Stanley analysts said in a note to clients Tuesday.

Strategists at ING estimate that the Venezuelan government and PDVSA combined need more than $6 billion to make interest payments and settle maturing debt in 2011. Increasingly, however, many expect PDVSA's role as financier to the government to grow further this year, with many projecting the company to carry through the bulk of bond sales rather than the sovereign.

Last week, the government authorized the sale of a series of local bond offers that, Barclays Capital analysts say, suggests that the sovereign may look toward more domestic financing and leave external issuance to PDVSA. The plan, analysts say, was made by Planning and Finance Minister Jorge Giordani, who is often seen as more hesitant to rely on international capital markets.

But even if the government is raising funds domestically, PDVSA looks as if it will still be in charge of bringing in the U.S. currency the country needs.

Rigid state control over the foreign-exchange system has severely limited dollar availability in the country. Meanwhile, greenbacks are also being drained by the increasingly import-driven economy. The resulting dollar shortage is best seen in a drastic difference between the state-set official exchange rate of 4.3 bolivars to the dollar and the black market where the dollar easily fetches more than VEF8.

For investors, expectations for more PDVSA bonds suggest that prices on the securities will continue to remain suppressed.

Currently, yields on existing PDVSA bonds maturing in 2017 offer as much as two percentage points over comparable sovereign bonds.

The discrepancy exists "even though there's a perception that you're buying the same risk," said Gorky Urquieta, head of the emerging markets debt group at ING Investment Management.

The supply risk with PDVSA "never ends," he added.