Venezuela could have sold Dominican Rep's debt under Petrocaribe to Goldman Sachs at 41% of its value

DOMINICAN REPUBLIC - In Brief 06 Dec 2014 by Pavel Isa

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According to press reports, Venezuelan goverment and its PDVSA would have sold to Goldman Sachs the debt of the Dominican Republic contracted under the terms of Petrocaribe, an agreement through which Venezuela provides long term low interest credit for a portion of oil imported from Venezuela. Goldman Sachs would have bought USD 4.1 bn in Dominican debt for an impressive 41% of the total value. As of October 2014, total debt with Venezuela under Petrocaribe reached USD 4.13 bn for which GS would have paid or is about to pay USD 1.69 bn. There has been no official confirmation of the transaction and Dominican authorities have said that they have no information on such deal and that what they know is what press reports have informed. Although there wouldn’t be any immediate financial implications of the deal for the Dominican government, three elements should be bear in mind. First, if confirmed, this would signal the delicate situation of Venezuela’s finances and the fragility of Petrocaribe. Nonetheless, by design, as prices of oil drop or remain low, financial facilities of Petrocaribe decline, reducing pressures on PDVSA’s finances. Second, Petrocaribe includes a clause by which the debtors are allowed to pay in kind. Such deal would imply an elimination of that option. However, so far no significant payment has been made in this way and it is unlikely to see it in the future. Third, there have been suggestions that the Dominican government could or should be interested in buying the debt from GS. How reasonable such deal could be would certainly depends on the terms.