Citigroup to sell Venezuelan gold in setback to Maduro: report

March 21, 2019 09:03
Citigroup is said to be planning to sell Venezuelan gold held as collateral against a loan granted to the troubled South American nation. Photo: Reuters

Citigroup plans to sell several tons of gold placed as collateral by Venezuela’s central bank on a US$1.6 billion loan after the deadline for repurchasing them expired this month, Reuters reports, citing sources.

The move would mark a setback for President Nicolas Maduro’s efforts to hold onto the country’s fast-shrinking reserves, the report noted.

Maduro’s government has since 2014 used financial operations known as gold swaps to use its international reserves to gain access to cash after a slump in oil revenues left it struggling to obtain hard currency.

In the past two years, however, it has struggled to recover its collateral.

Under the terms of the 2015 deal with Citibank, Venezuela was due to repay US$1.1 billion of the loan on March 11, according to Reuters sources. The remainder of the loan comes due next year.

Citibank plans to sell the gold held as a guarantee - which has a market value of roughly US$1.36 billion - to recover the first tranche of the loan and will deposit the excess of roughly US$258 million in a bank account in New York, according to the report.

The ability of Maduro’s government to repay the loans have been complicated by the South American country’s dire economic situation as well as financial sanctions imposed by the US and some European nations.

Most Western nations say that Maduro’s re-election to a six-year term last year was marred by fraud and have recognized opposition leader Juan Guaido as Venezuela’s legitimate president.

Guaido invoked Venezuela’s constitution to announce an interim presidency in January. However, Maduro retains control over state institutions in Venezuela and has the support of the powerful military. He has branded Guaido a US puppet.

With Washington’s support, Guaido’s team has taken control of state oil company PDVSA’s US refining subsidiary but its attempt to negotiate a 120-day extension of the repurchase deadline for the collateral was unsuccessful, the sources said.

“Citibank was told that there was a force majeure event in Venezuela, so the grace period was necessary, but they did not grant it,” said a Reuters source who belongs to Guaido’s team.

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