The Central Bank of Venezuela and Petroleos de Venezuela (PDVSA), the state-owned oil company, have reportedly reached an agreement that will allow the latter to roll over its ballooning debt.
According to reports, PDVSA owes the Central Bank of Venezuela about $42 billion – more than half of which was accrued during the second half of 2013.
Initally absorbed by the Venezuelan Treasury, the oil company's debt was later financed by the central bank through so-called "investment operations" – effectively printing money, according to one local news organisation.
Under the new arrangement, the Venezuelan Mining Corporation, a subset of PDVSA, will allegedly set up a vehicle that issues securities directly to the central bank in exchange for PDVSA's original bonds.
The debt burden is thus shifted from the books of the oil company onto the mining corporation, making the latter liable for future repayments.
A remaining portion of PDVSA's debt with the central bank is to be repaid through the transfer to the central bank of "gold exploitation rights", according to local news reports.
In December, the two organisations teamed up in a bid to "regularise" the production, sales and purchases of gold in the country, according to Venezuela's vice-president and economy minister, Rafael Ramírez – ostensibly to curb rampant smuggling.
According to a statement at the time, PDVSA was awarded a majority stake in the $40 billion venture, as well as "protection rights" on more than 92 billion ounces of golden ore through the Venezuelan Mining Corporation.
The central bank, meanwhile, would be responsible for buying the country's entire gold production. No comment has been on whether this arrangement forms part of the debt-settling plan reported today.
At 365 tonnes, gold accounted for 70% of Venezuela's reserves in 2012, according to the World Gold Council, a higher proportion than in any other emerging market and 50 times more than the levels held in neighbours Brazil and Colombia. The estimated value of those reserves, however, fell by more than $5 billion in 2013.
In the December statement, the PDVSA described the joint venture between the central bank as part of a broader "economic offensive to provide all Venezuelans an ideal environment for the satisfaction of their needs and development of their productive activities".
