Venezuela's state run oil company, PDVSA, is urgently searching for replacement financing after losing a line of credit of more than $5 billion from the Royal Bank of Scotland, CNBC has learned.
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PDVSA had an agreement in principle with RBS until the UK government stepped in last week and bailed out the troubled bank. RBS [RBS 1.18 0.02 (+1.72%)] then rescinded the financing, citing market conditions.
Now, a source within the US administration says Hugo Chavez's government is giving off indications that it's strapped for cash.
Hugo Chavez Howard Yanes / AP Getting the Squeeze? Hugo Chavez's state-run oil company has been cut off by former creditor Royal Bank of Scotland. As an oil-producing country, Venezuela should be swimming in cash. A member of it OPEC, it's believed to pump roughly 2.6 million barrels of oil per day, though the exact number is disputed.
Also in question is how much oil Venezuela actually sells. Chavez distributes 800,000 barrels per day internally for his citizens’ use, and then another 300,000 barrels per day to friendly Latin American neighbors, such as Cuba and Bolivia, at highly subsidized prices.
Chavez also has been spending money extensively, both internally and overseas, as he builds what he calls his “Bolivarian Socialist Revolution.” Just how much the president spends is unclear, because Venezuelan government finances are opaque.
In a speech Thursday, Chavez put Venezuela's savings at $100 billion. But in terms of actual reserves that can be measured by the international banking system, that figure is closer to $39 billion dollars.
Six months ago, Venezuela's bonds were yielding between 7-9 percent depending on maturity. Currently yields have dropped to a range of 15 percent to 16 percent, indicating investors are increasingly nervous about getting paid back on the bonds.
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