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April 02, 2016

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Hi Noel: As always I'm looking forward to the continuation of your posts. Now, just to add early a potential question for later -- one of the concerns now is that the government will issue a lot of PDVSA bonds as an attempt to avoid default & avoid cutting back on imports. The issuance would be done similar to the old permuta system -- just give a dollar bond to a public bank and the public bank sells it in the market. Would that be more feasible than a loan against Citgo?

Short answer: yes! My understanding is that Venezuela is already doing to finance pharmaceutical imports and that the bonds are trading at heavy discounts; the Venezuelan press claims as high as two-thirds off face. I haven't talked to Francisco about that, but I think he puts those issuances under "net bonds sales." He doesn't think that they can raise much from them unless oil prices rise.

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