Goldman Sachs paid about $865 million for $2.8 billion worth
of bonds in May, 2017. This represents 31 cents on the dollar and translates
into an annual yield of more than 40 percent.[1]
The high yield is due to the high risk that is involved, for the bonds had been
held by Venezuela’s central bank in what “the government’s opposition decried
as a lifeline” to the regime then in power.[2]
Indeed, the central bank’s foreign-currency reserves increased by $442 million
to $10.8 billion the day the bond deal was completed, and the government needed
to raise money it owed to key allies like Russia and China.[3]
In indirectly aiding that government, Goldman Sachs risked the ire of the
opposition. Writing to Goldman Sachs, Julio Borges, head of Venezuela’s
opposition-controlled legislature, indicated that he would “recommend to any
future democratic government of Venezuela not to recognize or pay on these
bonds.”[4]
Hence, the high risk, high return. Though I submit that the risk might have been
considerably less than meets the eye on account of the influence of the bank on
the U.S. Government.
The fully essay is at "Goldman Sachs' Venezuelan Bonds."
1. Kejal
Vyas, Anatoly Kurmanaev, and Julie Wernau, “Goldman Sachs Under Fire For
Venezuela Bond Deal,” The Wall Street
Journal, May 30, 2017.
2. Ibid.
3. Ibid.
4. Ibid.
