Exactly a week ago, I suggested the media might be mischaracterizing Nicolas Maduro’s decision to put his Vice President Tareck El Aissami in charge of renegotiating Venezuela’s debt.
On the surface, El Aissami seemed like a less than ideal choice, primarily because he’s an OFAC-designated narco trafficker. That made bondholders understandably nervous about flying to Caracas to meet with him. Besides the fact that meeting with people who stand accused of overseeing the shipment of, according to the U.S. Treasury, “over 1,000 kilograms” of cocaine is an inherently dangerous proposition under any circumstances, the OFAC designation put corporate officers who deal with El Aissami at risk of millions in fines and up to 30 years in prison (again, according to the Treasury department).
That said, here’s where the media coverage was, to my mind, a little unfair. Reuters wrote that El Aissami “has no known experience in debt negotiations.” Really, Reuters? Is it realistic to say that someone who moves thousands of kilos has “no known experience in debt negotiations?” As I put it earlier this month in the post linked here at the outset, “it’s probably not a stretch to say that when it comes to debt “negotiations”, El Aissami has more experience than all of Wall Street combined.”
But what are you gonna do, right? The #fakenews media will do what the #fakenews media does; which in this case is “lie” about the negotiating skills of drug lord.
Well over the express reservations of pretty much everyone, Venezuela went ahead with plans to hold a creditor meeting in Caracas this week and as Bloomberg recounts, it was “an odd spectacle.” To wit:
Venezuela rolled out a literal red carpet for investors coming to debt restructuring talks in the capital Monday, welcoming them to a sprawling government office building downtown that was flanked by national guards carrying assault rifles and riot shields.
The meeting began just after 2 p.m. at the Palacio Blanco, a neo-classical building across the street from the presidential palace in a neighborhood that’s known to be particularly dangerous at night. Attendees were being served, juice, arepas and cachapas -- corn pancakes -- and at least one person who planned to take part in the meetings walked out after seeing name tags for El Aissami and Zerpa, according to people familiar with the matter.
So, in something right of a Chappelle Show sketch about Prince, Venezuela brought bondholders to the capital, put out an actual red carpet at a palace, led them to a meeting room the entrance to which was adorned with a giant picture of Hugo Chavez and then served everyone actual pancakes.
Guests were also given what Reuters described as “colorful gift-bags made out of recycled materials and containing Venezuelan chocolates and coffee.”
And although the power of corn pancakes and juice is legendary when it comes to pacifying people who are owed billions of dollars and who have traveled in some cases thousands of miles to hear about how they might go about collecting, the meeting did not go well.
For one thing, only about 100 people reportedly showed up. That’s “just” 300 less than Venezuelan officials claimed had RSVP’d. So that’s 300 people who missed the pancakes and free chocolate and who also missed maybe getting robbed of that same chocolate later by the starving citizens who probably reside in what Bloomberg described as “the particularly dangerous neighborhood” across the street from the palace.
Beyond that, some attendees apparently left as soon as they realized that El Aissami was indeed going to be there. “At least one [creditor] hightailed it out after realizing that two government officials sanctioned by the U.S. were in attendance, fearful of violating rules governing interactions with them,” Bloomberg details, in a separate piece documenting the “festivities.”
El Aissami was joined by a colorful cast of characters including Finance Minister Simon Zerpa (a political scientist who is also under U.S. sanctions), Oil Minister Eulogio del Pino, PDVSA President Nelson Martinez and planning vice president Ricardo Menendez (a geography professor).
No one but El Aissami spoke and based on the accounts I’ve read, no one but El Aissami was even allowed to speak, including (and probably especially) the creditors. El Aissami stayed for all of 30 minutes (one assumes he had more pressing “business” matters to attend to) and apparently spent the entire time lambasting everyone from Citi, to Deutsche Bank, to Euroclear, to U.S. financial authorities, with the latter’s actions being - according to the accused drug lord - “worse than the Holy Inquisition.”
“There was no offer, no terms, no strategy, nothing,” one bondholder told Reuters, while another called the farce “a missed opportunity.”
Meanwhile, S&P has now declared PDVSA in selective default after the state oil company failed to make coupon payments on its 2027 and 2037 notes within the 30 calendar day grace period. That just a day after the ratings agency cut Venezuela to SD. Earlier today, PDVSA would claim it made interest payments for the 2027s.
It’s worth noting that Venezuela does not generally share the media’s assessment of how Monday’s pancake brunch went. “[It was] a resounding success,” the Information Ministry said in a statement.
See there? It all depends on how you look at things.
On the bright side, Wednesday did bring some “good” news for Caracas. Russia has now agreed to restructure some $3.15 billion in Venezuelan debt. Turns out Vladimir Putin is a more sympathetic ear when it comes to restructuring requests from “good” folks like El Aissami.