Pdvsa borrows money at high rates to curb dollar's rally

The interest rate paid by the state-run oil company Petróleos de Venezuela (Pdvsa) is soaring. Two years ago, the country's largest company sold bonds at a rate of 5.12 percent; in 2010 the dollar-denominated paper had a coupon of 8.5 percent and the USD 3 billion bonds to be sold on Friday will carry a coupon of 12.75 percent, the highest interest rate in Pdvsa bonds history.

To get an idea of the interest rate to be paid by Pdvsa, it is worthwhile mentioning that Petrobras, the Brazilian oil company placed, on January 20, 10-year bonds at an interest rate of 5.4 percent.

Pdvsa is paying this coupon to narrow the gap between the US dollar in the unofficial market and the official exchange rate. Venezuelan businesses and investors use those bonds to purchase foreign currency.

Companies buy bonds with Venezuelan bolivars and then sell the securities abroad to get US dollars.

In a report issued by Barclays Capital, the British global financial services noted that the interest rate paid by Pdvsa shows that the Venezuelan authorities are willing "to issue bonds at any cost to maintain a strong implicit exchange rate for local" investors. It also warned about long-term impact on Pdvsa's cash flow.
El Universal