UPDATE 1-Venezuela mulls gold swap to boost dollar supplies -source

Thomson Reuters






CARACAS, Nov 27 (Reuters) - Venezuela is evaluating a swap
agreement involving gold reserves as a way to fortify dollar
supplies in the OPEC nation, a senior government source told
Reuters on Wednesday, amid chronic product shortages and
inflation close to 55 percent.


Opposition leader Henrique Capriles said last week that the
government was negotiating a swap operation with Goldman Sachs
involving 1.45 million ounces of gold worth around $1.86
billion.


"The most logical thing would be a swap," said a senior
government source with direct knowledge of the issue, who asked
not to be identified. "We haven't finished anything yet. But if
there's an opportunity to do something, it could be done."


Asked if Venezuela would be willing to carry out such a
transaction, the source said: "That would depend on the cost and
financial conditions."


Such an operation would effectively allow the country to
borrow against the value of part of its gold reserves, using
them as collateral and paying interest to the bank.


Capriles also said last week that the government was
planning an operation in which Bank of America would
help pay off debts to foreign suppliers who now have billions of
dollars in pending invoices due to payment delays caused by the
nation's decade-old currency controls.


The government source did not comment on that operation.


Bloomberg reported on Wednesday that Goldman proposed a swap
that would provide $1.68 billion in cash and be backed by $1.85
billion of the central bank's gold, generating some $818 million
in financing costs over seven years.


Bank of America would pay Venezuelan companies less than the
official exchange rate for bolivars, Bloomberg said, letting the
central bank avoid directly dealing at an exchange rate weaker
than the official one.


Goldman and Bank of America declined Reuters requests for
comment. Venezuela's currency controls, which fix bolivars at
6.3 per dollar even though they fetch 10 times that on the black
market, has built up large debts with businesses that are
struggling to meet import needs for lack of hard currency.


In recent months, the country has suffered from shortages of
goods ranging from corn flour to toilet paper amid a tumble of
18 percent in its international reserves over the last year.