VZCZCXRO7612
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
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DE RUEHCV #1362 2952100
ZNR UUUUU ZZH
P 222100Z OCT 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 3871
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 001362 
 
SENSITIVE 
SIPDIS 
 
ENERGY FOR CDAY AND ALOCKWOOD 
HQ SOUTHCOM ALSO FOR POLAD 
TREASURY FOR MKACZMAREK 
NSC FOR DRESTREPO AND LROSSELLO 
USDOC FOR 4332 MAC/ITA/WH/JLAO 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EPET VE
SUBJECT: GBRV AND PDVSA CHANGE TERMS OF PDVSA BOND ISSUANCE 
 
REF: A. CARACAS 1340 
     ¶B. CARACAS 852 
 
¶1.  (U) PDVSA announced on its website October 22 three 
changes related to its USD 3 billion bond issuance originally 
announced October 16 (ref A).  First, the Ministry of Economy 
and Finance (MEF) will exempt from taxation interest paid on 
the bonds.  Second, the Central Bank (BCV) will not require 
financial institutions to count the bonds toward their 
position in foreign currency.  (Note:  The BCV limits a 
bank's net position in foreign currency to 30 percent of its 
capital.  End note.)  Third, PDVSA extended the cut-off date 
for receiving offers from the afternoon of October 22 to the 
afternoon of October 23.  At some point previous to the 
announcements noted above, PDVSA put on its website a press 
release claiming a "positive response from investors" for the 
bonds and "ratifying" the terms and conditions previously 
established. 
 
¶2.  (SBU) Press reports indicate brokerage houses saw limited 
interest in the bonds as of October 22.  Analysts have 
estimated the implicit exchange rate of the bonds (which are 
dollar-denominated but will be purchased in bolivars) to be 
higher than the current parallel exchange rate of 5.1 
bolivars/USD, thus making it more attractive to purchase 
dollars in the parallel market than to buy the bond.  An 
executive at one of Venezuela's largest brokerages told 
Econoff October 21 that the issuance was "tanking" and that 
no "when and if" market had been established.  (Note:  A 
"when and if" market refers to a deal between a potential 
Venezuelan buyer and an international investor, whereby the 
potential Venezuelan buyer agrees to sell the international 
investor the bond on a given date at a given price assuming 
the bond is actually issued.  Entering into a "when and if" 
agreement is a way for a Venezuelan buyer seeking to acquire 
dollars to lock in a dollar value, thus eliminating price 
risk.  End note.) 
 
¶3.  (SBU) Comment:  PDVSA and Venezuelan government (GBRV) 
officials are clearly concerned that the bonds are not 
attracting sufficient interest.  The exemptions and 
exceptions offered by the MEF and BCV will make the bonds 
somewhat more attractive to local investors and particularly 
to banks, though it is unclear if they will be attractive 
enough to make the issuance a success.  This marks the second 
time in a row PDVSA has had to change the terms of an 
issuance (see ref B for the prior issuance).  End comment. 
DUDDY