[NYTr] Venezuela to Reduce Foreign Debt in Bond Buy-Back
 
Date: Thu, 19 Jul 2007 19:49:24 -0500 (CDT)


Via NY Transfer News Collective  *  All the News that Doesn't Fit
 
El Universal - July 17, 2007
http://english.eluniversal.com/2007/07/17/en_eco_art_venezuela-pondering_17A900509.shtml

Venezuela pondering debt buyback

Venezuelan Minister of Finance Rodrigo Cabezas is devising a strategy
to manage foreign debt.

The official told Bloomberg Venezuela is likely to buy back debt bonds
in the fourth quarter, just like it did in 2006.

"We intend to move on with a number of operations within the framework
of debt management polices, thus allowing us to reduce our balance."

Last year, the Venezuelan government bought back USD 3.9 billion in
foreign debt, thus cutting foreign debt from USD 31 billion to USD 26
billion.

Cabezas stressed that "the government will continue to repay foreign
debt until it is down to one tenth of Gross Domestic Product, which we
expect to achieve in 2010."

In two years

While in the last few years Cabezas claimed that Venezuela did not
intend to devaluate the Venezuelan bolivar in the next five years, on
Monday he said the official exchange rate would be reviewed in 2009.

He stressed that in 2007 and 2008 there are no plans to change the
official rate, which the government has kept unchanged at USD 2,150
since 2005. He added, however, that a review would be implemented if
deemed necessary.

It is noteworthy that in its 2006 Economic Report, the Central Bank of
Venezuela (BCV) said the Venezuelan currency is overvalued.

BCV uses the effective exchange rate index to measure the currency real
value. The gauge is directly proportional to domestic competitiveness.

Last year, the indicator "dropped 9.4 percent." This means that in
average imported goods are some 9.4 percent cheaper than domestic
items. The major reason is the fact that the official exchange rate to
the US dollar has remained unchanged while inflation in Venezuela is
higher than in the country's major trade partners.

Not yet

Venezuelan President Hugo ChC!vez ending last April said his country was
withdrawing from the International Monetary Fund (IMF) and the World
Bank. However, Cabezas declared that withdrawal from these institutions
would not come any time soon.

He explained that Venezuela is not leaving the two multilateral bodies
in the short term. Withdrawal from IMF and WB requires adjustment of
the terms governing debt issues.

                              ***

Dow Jones Newswires - July 17, 2007
http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20070717%5cACQDJON200707171412DOWJONESDJONLINE000580.htm&

Venezuela To Conduct Debt Buyback This Year: Finance Min

By Raul Gallegos and Stephan Kueffner

CARACAS -- Venezuela plans to carry out a debt repurchase program this
year that could leave the country with a smaller ratio of debt to gross
domestic product, Finance Minister Rodrigo Cabezas said at a news
conference Tuesday.

"We will be observing market conditions" to decide when to go ahead
with any debt buybacks, Cabezas said.

He said that the government is pursuing a strategy of gradual foreign
debt reduction beginning this year. The country aims to have its
"foreign debt end at 2006 levels or lower" relative to GDP, he said.

As of that date, its outstanding debt ran at $27.25 billion, while it
stood at $26.53 billion at the end of the first quarter.

Cabezas said Venezuela still plans to end the year with a 12% inflation
rate, though recent data indicate it will likely overshoot the target.

The government hopes to bring inflation to single-digit levels by 2010,
in part through currency reform planned to begin Jan. 1, he added.

Heavy spending by the left-wing government has fueled economic growth
and accelerated consumer price growth. The government has said it will
pursue a more restrictive fiscal policy to tame inflation, but Cabezas
reiterated that Venezuela won't consider fiscal austerity.

Concerning the exchange rate, Cabezas ruled out a devaluation within
the next couple of years, saying the next currency adjustment would
come in 2009 or 2010 at the earliest, and only if GDP growth and crude
oil prices fail to meet estimates.

"Economists aren't magicians ... we're simply projecting there will be
growth" and that oil prices will sustain spending levels, leaving the
government with space to keep the foreign exchange regime under present
terms, said Cabezas.

The current plans for the 2008 budget don't contemplate any change in
the exchange rate, he added.

Venezuela has had a fixed exchange rate since early 2003, when the
government introduced capital controls to stave off outflows.

Cabezas also said Venezuela could lower the value-added tax rate next
year from its current level of 9%. It has incrementally cut VAT as a
measure to stimy inflation.
       
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