(Bloomberg) -- Venezuela’s opposition is reaching out to Wall Street banks to dissuade them from helping the country monetize its $7.7 billion in gold reserves.
Venezuela is going to try to stave off default by seeking to swap its gold reserves into cash, and any investment bank that helps will be effectively “supporting a government recognized by the international community as dictatorial,” according to a letter the opposition-led congress sent Monday to top banks. Lawmakers also approved a measure today that they say would nullify any government debt issuance, as well as any debt swaps and pledges of gold as collateral, not explicitly approved by congress.
“The national government, through the central bank, is going to try to swap gold held as reserves for dollars to stay in power unconstitutionally,” according to the letter signed by National Assembly President Julio Borges. “I have the obligation to warn you that by supporting such a gold swap you would be taking actions favoring a government that’s been recognized as dictatorial by the international community.”
Venezuelan President Nicolas Maduro has been battling lawmakers for control over the nation’s finances since the opposition won control of the National Assembly in December 2015 elections, riding a wave of anger over triple-digit inflation and chronic shortages of basic staples. Investors are left trying to gauge the likelihood that the country will continue servicing its debt amid a dollar shortage worsened by the collapse in oil prices.
Lawmaker Angel Alvarado, a member of the National Assembly’s Finance Committee, said the letter has gone to banks including Citigroup Inc., Goldman Sachs Group Inc. and Bank of America Corp.
Venezuela’s central bank said it held $7.7 billion of gold in reserves as of February. The country’s total foreign reserves stood at $10.26 billion on Monday, near a 15-year low.