(Bloomberg) -- Venezuela's opposition is turning up the heat on Wall Street banks by alleging that some of the proceeds from a recent bond sale will be used to purchase weapons and help keep President Nicolas Maduro in power.
In a letter dated June 1, Julio Borges, the president of the opposition-controlled National Assembly, said that at least $300 million in proceeds from the central bank's “fire sale” of bonds to Goldman Sachs Group Inc. and Nomura Holdings Inc. will be used to purchase weapons from Russia.
The sale “provides resources to the regime to purchase instruments of war that will be used to savagely repress the hundreds of thousands of peaceful protesters demanding free and fair elections and democracy in our country,” Borges said in the letter that was addressed to Nomura's chief executive officer, Koji Nagai.
The opposition-led Congress in an April letter had appealed to Wall Street bankers to refrain from helping Maduro's government stave off default, arguing that otherwise they would be effectively supporting a dictatorship. They didn't heed the plea, with the Wall Street Journal reporting that Goldman's asset management unit paid about $865 million, or 31 cents on the dollar, for bonds issued by state oil company Petroleos de Venezuela SA and held by the central bank, while Nomura's trading arm paid about $30 million.
Nomura declined to comment when asked about Borges' most recent letter, while Venezuela's Information Ministry didn't immediately respond to an emailed request for comment. Goldman previously said that it hadn't handed money directly to the government and that the country's situation “is complex and evolving.”
With a severely constrained supply of cash, Maduro has kept up bond payments while sharply curtailing imports of food, medicine and other basic goods. Government critics say he's prioritizing his political survival over his constituents' needs and have dubbed government debt under his rule “hunger bonds.”
As anti-government protests have left dozens killed over the past two months, Borges said that the National Assembly would conduct a “thorough investigation of this dubious transaction” and reiterated his threat to withhold payment if the opposition eventually manages to take power.
“The National Assembly will move expeditiously to make sure our country's future democratic government and economy is not saddled with this astronomical debt, at usurious rates, entered into by a highly unpopular and illegitimate regime,” he said.
To read a QuickTake Q&A on Venezuela's ‘Hunger Bonds,' click here.
--With assistance from Ben Bartenstein
To contact the reporters on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net, Noris Soto in Caracas at nsoto9@bloomberg.net.
To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Rita Nazareth at rnazareth@bloomberg.net, Nathan Crooks
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