How can we all keep quiet?

Last week Venezuela issued 20-year bonds for a total of U.S.$500 million at an interest rate of close to 14 percent per annum. This implies service outlays of U.S.$70 million. The United States would pay only 6 percent for a similar issue. This means Venezuela must annually pay U.S.$40 million more than the United States. In spite of this, government officials qualify the issue as successful. Who are we kidding?

Although I am sure these Venezuelan officials were formally authorized to contract this debt, I am certain that they were not authorized morally.

I say this based on the certainty that capable, responsible and patriotic administrators would not have rested in their efforts to develop a healthier alternative for the country. An alternative different than simply paying more, so much more, in fact, that people queued up to purchase these instruments.

I also maintain that there should be limits to the cost at which the country is allowed to subscribe new debt. There should be a limit to the cost at which we, as a failed generation, have the right to saddle future generations with. I consider we have reached that limit. What’s is our government’s limit? Is it 25 percent, 100 percent, or is there no limit at all?

What other alternatives do we have? If there were a real political will to fight for the future of our country, the alternatives are infinite. Cut costs, use reserves, achieve the consensus necessary in order to use the vast real guarantees the country possesses in order to contract debt at lower interest rates, or simply contract debt at shorter maturities. Any which way, anything other than what was actually done.

For example, if the interest rate for Venezuela’s debt drops within one year to the levels Mexico’s debt is currently traded at (9.8 percent), then, considering that there would be 19 years left to maturity and that the paper carries a fixed 14 percent interest rate, the country would have to pay U.S.$675 million to retire this particular debt issue. In other words, in one year the country would have incurred losses of U.S.175 million.

Someone could object and say that the situation could become worse and the 14 percent could actually become a bargain. I don’t believe however, that any government has the right to impose its pessimism for future decades. Should the country now actually implement some of the alternatives being discussed today, such as the partial sale of PDVSA in order to cancel existing debt, the rates the country could command would fall to the same levels as those of the United States.

In this case, the losses incurred with our most recent issue would be stratospheric (hypothetically, if this were to occur within one year from now, the losses would reach U.S.$450 million).

Some may argue that the political conditions that would allow the development of an alternative that was not of least resistance do not exist. I can’t accept this since it is the responsibility of leadership to create these political conditions or, if it fails, to resign. The governability of a country must mean more than simply being able to avoid a coup d’état. The damage caused is not limited to the fact that we must now pay higher interest rates for the U.S.$500 million.

The fact that we forced the issue upon a market with low receptivity by simply raising the interest rate, means that this will be used to measure future opportunities in Venezuela.

It is enough to note that this increase in interest rates will be reflected immediately in an increase in financing costs for the private sector and in a reduction in the income we could receive from future privatizations.

The interest rates fixed for Venezuela are approximately 3 percent higher than those applicable to Mexico and Argentina today. This means a difference of U.S.$15 million per annum.

Our official spokesman explained that the international markets unfortunately perceive a higher credit risk in Venezuela since the latter is an oil producing country. I am truly amazed by the sharpness and realism of this analysis.

As if they were rubbing salt into the wound, the announcement of the bond issue was published simultaneously with an ample, and probably costly, campaign launched by Fogade in which they exhort failed Banco La Guaira’s debtors to “comply with the payment of their obligations.”

This exhortation comes a full four years after the day this institution was intervened by the government. The tranquility with which the government went about the collection of these debts doesn’t seem compatible with the urgency reflected by the high interest rate accepted in the latest bond issue.

I have three beautiful, intelligent and talented daughters. Thank God they have had opportunity to visit various parts of the world and enjoy them immensely. Their good knowledge of languages and computers, as well as their open-minded thinking about the new realities make them ideally suited for a globalized world. My eldest daughter recently told me that, in spite of all this experience, the place she likes the most and in which she wants to live is Venezuela. How can I keep quiet?