Desperate for cash to purchase imports, oil-rich Venezuela pawned part of its gold reserves as collateral for a $1 billion loan from Citibank.
The gold bars, worth $1.7 billion, will be kept in the vaults of the Bank of England, but will still count as part of the South American country’s reserves.
“Citi clearly got the far better of the deal, for it has a huge cushion on the downside,” says Dennis Gartman, editor and publisher of The Gartman Letter, a daily newsletter on global capital markets. “This is the first, we fear, of several more such deals.”
Venezuela will pay a fee to Citi for structuring the swap. The country’s late socialist leader, Hugo Chávez, had made a show of repatriating its gold reserves.
Meanwhile, neighboring Trinidad and Tobago has offered to swap manufactured goods, including toilet tissue, for Venezuelan crude.
