Venezuela Opens Gold Vaults to Improptu Inspection

[Judi Lynn]

Venezuela Opens Gold Vaults to Improptu Inspection
By Isabella Cota Sep 23, 2014 7:00 PM CT

Francisco Rodriguez, an economist with Bank of America Corp., was at a routine meeting with Venezuelan central bank officials last week when he sprung an unusual question on them: Can you show me your gold?

He’d been itching to take a peek for years and now was the time to ask. With the government’s bonds sinking toward prices that indicate investors are bracing for the possibility of default, the country’s $15 billion of gold bars are crucial to ensuring debt payments are met. His first impression once inside the vaults? Those bars don’t take up a lot of room.

“You picture that amount of money requiring a lot of space when, in reality, it all fits in five small cells that were not even full to the top,” Rodriguez, a Venezuela native who covers Andean economies for Bank of America Corp. in New York, said in a telephone interview yesterday. He said he started counting frantically in his head, summing up figures scrawled out on signs near each pile of the metal. By his quick math, the gold was all there.

Rodriguez said that while he’s remained optimistic about Venezuela’s ability to keep servicing its debts, he’s been getting nervous phone calls from investors amid the rout that sent the country’s benchmark bonds to as low as 67 cents on the dollar last week. One client was even worried that the gold might have vanished from the vaults, a concern that Rodriguez said helped push him to ask to see the stockpile last week.

More:
http://www.bloomberg.com/news/2014-09-24/bofa-peeks-inside-venezuela-s-gold-valut-for-closer-look.html

[center]

Smooth move, Sherlock Rodriguez. [/center]

[hack89]

1. Their over reliance on gold is hurting VZ

The BCV report of August 7 on the account balances for the first half of 2014 shows that the value of the gold reserves amounts to USD 15.24 billion. This represents a 24% decline, compared to USD 19.98 billion in 2012.

Venezuela is the Latin American country with the highest exposure to gold prices, as gold bars represent 71% of the country's reserves.

The high share of gold in the Venezuelan reserves is not the result of an increase in the amount of gold bars; they remain at 11.8 million troy ounces, just like in the first half of 2007, but they gained relevance because cash reserves in US dollars plummeted to minimal levels.

This drop in Venezuelan international reserves has called the attention of Dagong Global Credit, the main risk rating firm in China. On July 1, the firm downgraded Venezuela's debt rating. "In 2013, international reserves dropped to 5.7% of GDP, and only afford 95.6% of the short-term foreign debt, and 19.4% of the total foreign debt," a report issued by Dagong remarked.

http://www.eluniversal.com/economia/140815/venezuelas-gold-reserves-fall-24-in-18-months