Should it be required for a sovereign to be placed on a “The Bad” list, for its financiers to be morally concerned?

Sir, Jonathan Wheatley and Eric Platt write: “Just how much room for manoeuvre does cash-strapped Petróleos de Venezuela have? It is the question that has dogged investors, economists and the South American country’s own people as the government of Nicolás Maduro struggles to manage a crippling debt burden and cling to power” “Debt swap respite for Venezuela state oil group” October 25.

No! I can assure you Sir that most Venezuelan’s, are much more concerned with where they will get food or medicines for today, and about whether they should dare to walk out on the street, than with PDVSA’s debt.

And that should also concern PDVSA’s creditors, because it is truly a shame if they are totally uninterested in what human right violations they might be financing.

For instance, petrol (gas) is still being sold at about US$ 1 cent per liter, only so that government partners can make a killing smuggling it over the borders.

Really, it surprises me that these type of issues seem so irrelevant to FT. 

@PerKurowski ©

Odious debt is often mentioned, but its origin is most often those odious credits and odious borrowings that abound

Sir, Benedict Mander, with respect to Argentina issuing debt writes: “These yields don’t exist anywhere else in the world in countries with such low levels of debt,” said [enthusiastically] Facundo Gómez Minujín, managing director at JPMorgan’s Argentina unit. “Argentina targets $30bn debt issuance” May 2.

Is that not a sign that Argentina, if it took on debt, should demand to pay less or just leave it like that?

And by the way, what has the fact that Argentina has low level of debts to do with anything? Is not debt to be contracted only if you have something really worthy to do with it, something that will allow you to repay the debt and leave some decent returns?

I do not know much about Argentina, and I do not intend any similitude, but I do know that I profoundly dislike all those who knowing how bad it was run, and how little with its huge oil revenues it should need credit, still financed the disastrous XXI Century Socialism Venezuela, only because risk premiums seemed good. Had they not done so, Venezuela could perhaps already have been able to rid itself of The Tragedy. Had they not done so, Venezuela would not, on top of all its other current mindboggling difficulties, need to add the service of totally unproductive contracted debt.

For me good governments are those who stay out of debt even if conditions seem fair, only on account that debt basically represents advance fiscal revenues, to be paid later by the next generation.

We do need a Sovereign Debt Restructuring Mechanism (SDRM) but, if it is going to produce reasonable results for the citizens, then it has to begin by defining very clearly what is odious credit and what are odious borrowings. I have sometimes argued that any public borrowing that offers to pay more than a specified number of basis points over what the best debtor is paying, could be considered as odious.

I know it is way too extreme, and has absolutely nothing to do with Argentina or Venezuela, but the question needs to be asked, so that the point I am making becomes utterly clear: Would bonds issued for the construction of the crematoria ovens in Auschwitz be included in any debt restructuring… or should these just be thrown out… or should the financiers also be judged?

@PerKurowski ©

“Government, I will lend you fresh money if you favor me with huge risk premiums” Does that not sound a bit corrupt?

Sir, Max Seddon and Laura Noonan write about the plans of Russia to issue its first sovereign bond since the US and Europe imposed sanctions on Moscow, and of some reactions of Washington to that. “Russian bond poses dilemma for bankers” February 26.

And in this respect: “The Treasury told the banks that while there was technically no ban against helping the Russian government raise money, the banks would have to be mindful of the fact that the money could be diverted into activities that were not consistent with US foreign policy.”

But what about the case of money that could be diverted into activities that was not consistent with Russian citizens’ interests? Is that irrelevant?

I ask because I am Venezuelan, and the government of my country has taken on loads of debt, something that clearly is not justifiable in the midst of an incredible oil boom. And all this odious credit/debt is now supposed to be repaid by all citizens who had absolutely nothing to do with how the loan proceeds were used, in much because of a big lack of transparent information.

And the financier’s of Venezuela have been quite aware that things in Venezuela were not fine and dandy. Among publicly notorious issues was that the government was selling oil to some countries a highly subsidized prices for its own political benefit; giving away gas to its own citizens for a value that exceeded all social spending put together; the existence of rampant corruption; and that its human right’s behavior was being questioned over an over again.

But the financiers loved the risk premiums, and so I ask:

In the case of a loan to an individual government official in return for a favor, there would be no doubt that it could be classified as an act of corruption, and the financier could be held liable in the US under the Foreign Corrupt Practices Act.

But, what about a loan that provides money to a whole government, in return of the favor of extravagant risk premiums, could that not also be classified as an act of corruption?

The world no doubt needs a Sovereign Debt Restructuring Mechanism (SDRM) but, if that is going to help the citizens of the world, which it primarily should do, that must begin by making clear the difference between bona-fide normal credits and odious credits.

@PerKurowski ©