Bolívar anchored to the Petro is less credible in PDVSA’s partner companies and financial community

By Moris Beracha.

- PDVSA’s partner companies involved in joint ventures, as well as financial analysts and investment bank economists, including consulting firms agree on questioning President Maduro’s announcement revealing that the Bolivar Soberano’s stability, which will start circulating on August 20, will be anchored to the oil-backed Petro (PTR) digital currency.

“There is a very clear executive order issued by the US Government banning transactions involving Venezuela’s Petro and it is applicable to any transaction with the Venezuelan Government or PDVSA related to the use of that cryptocurrency,” said a source from one of the partner companies of Petróleos de Venezuela. “Neither Chevron, nor any of the European companies, including Rosneft, CNPC or Indian companies such as ONGC or Reliance will accept any transaction in Petros,” it said.

According to the source, in several meetings, the PDVSA authorities have considered the possibility of using the Petro to pay that part of the debts with suppliers including the liabilities related to dividends or profits of the joint ventures, but it says in those meetings it has been “bluntly and directly” stated this alternative is totally dismissed.

The Chief Economist of the firm Torino Capital, Francisco Rodríguez, has also said it is unclear the role that Petro would have to achieve macroeconomic stability and curb the currency and monetary distortions faced by Venezuela, which estimate a hyperinflation of 1,000,000% and a 30-time gap in the bolivar-dollar peg when the official market is compared with the parallel market.

“It is hard to understand the meaning of Petro’s anchoring because there is no market price or a secondary market for this digital currency, nor is it used for any type of publicly known transactions,” said Rodríguez in the report of that consulting firm. “The authorities must be strongly committed to avoid printing more local currencies, but it is impossible due to the lack of credibility and because the Venezuelan government holds the ability to print Petros,” he added.

Financial analyst Moris Beracha, expert in cryptocurrencies, also notes the lack of clarity and even inaccuracy in the way the Venezuelan president has referred to the Petro and how it would be used to promote stability of the currency, while pointing out transactions lack transparency.

“It is the first time a government on the planet decrees this type of measure, even tentatively suggesting that the official currency circulating in Venezuela has no value, since the Petro is not traded in international markets or it’s a currency,” says Beracha. “The so-called Petro created by Nicolás Maduro and called cryptocurrency is not a currency that is traded internationally. Hence, it must be clear it is impossible to anchor the value of the sovereign bolivar based on a non-existent, invisible currency and it is impossible to know where it is or its value,” the expert points out.

He explains the currencies are anchored compared to other currencies in order to fix their stability and for this reason many countries take the dollar or the euro to obtain a value and fluctuate with respect to them.

The Ayacucho block 1 and the BCV

One aspect that is also being assessed by the legal consultancies of PDVSA’s partner companies is the announcement revealing that the Central Bank of Venezuela (BCV) will be transferred part of the oil reserves after President Maduro informed the issuing agency will be granted the Ayacucho block 1 in the Orinoco Oil Belt. However, they are waiting for the national Executive or the BCV itself to report the scope of this transfer on a field on which the recoverable volumes of crude oil are unclear.

“The Maduro government has insisted that Petro will be backed by oil reserves. However, the reality and the legal framework show that oil cannot be used as a collateral to back a cryptocurrency, and this is stated in the current Hydrocarbons Law that establishes they are inalienable and imprescriptible,” Beracha said. “It’s surprising the proposal that the Central Bank transfers through PDVSA a complete block of oil reserves certified at 29.298 billion dollars, located in the Orinoco Belt because it is unclear if it is part of the assets of the issuing agency or if they intend to use it as a backup to request an international loan and reduce the financial cost,” he adds.

According to the chief economist of Torino Capital, two interpretations refer to the transfer of oil reserves to the BCV, but both breach the Constitution: the first, listing those volumes of crude as part of international reserves, but it would have no effect since they cannot be exchanged; the second has to do with the possible intention of the Government to transform that property into a negotiable financial asset.

Read the original post here.