[1zq]

But you can be the Venezuelan central bank and buy $2.8 billion in PDVSA-issued bonds and later sell those bonds at a 70 percent discount (i.e. around 840$ million) to Goldman Sachs.

Until the moment of the sale to GS the money had only been transferred between two entities associated with the government.

[jevgeni]

Yeah, but how does that generate free money for the Venezuelan state?

[1zq]

It doesn't generate free money. On the contrary, it generates very expensive money.

For this operation, the central bank received about $840 million in cash from GS, and PDVSA must now pay back $2.8 billion plus interest to GS.

Whereas before this operation, PDVSA (owned by the Venezuelan state) had to pay back $2.8 billion plus interest to the central bank (also owned by the Venezuelan state).

[jevgeni]

But where did the central bank get the 2.8 billion USD? Venezuelan central bank can't print USD. So, net the country owes 2.8 billion USD + interest either way. It's just that the ultimate creditors have changed.

[josefx]

The 2.8 billion are PDVSA-issued bonds not USD, they only exist on paper and aren't worth a cent unless Venezuela can pay. Afaik Venezuela can print as many of those as it wants.

> So, net the country owes 2.8 billion USD + interest either way.

Venezuelas right hand owes money to Venezuelas left hand, both are Venezuela so Venezuela owes nobody. Now we have Goldman buying that dept from Venezuelas left hand and some more ( it can print as much as it wants of that ) for $5, Venezuela now owes 2.8 billion to someone else it has to pay back in the future in exchange for having $5 now. Those $5 benefit the current government and will affect any future government negatively.

[whatok]

Venezuela cannot print USD and needs USD to pay coupons/principal.

[josefx]

I may be missing something. They make USD by selling bonds, as long as they make more USD then the scheme has running cost they can increase the amount of USD they have right now by selling more bonds below value, leaving any future government in dept.

[_r_o_y_]

The first one would be just like a transfer between accounts while what op suggest is that now they're receiving the money from Goldman.

[jevgeni]

Yeah, but they are not. If I sell you a car for $5000, I get the $5000 and you get the car. When you then resell the car to someone else, I am not involved in the deal in any way.