(Adds details on gold swaps)
By Eyanir Chinea and Corina Pons
CARACAS Feb 26 Venezuela is in advanced talks
for a $5 billion loan from international banks and investment
funds, the head of the central bank said on Friday, potentially
providing an influx of cash for the OPEC member country, which
faces heavy debt payments this year.
The operation would provide $3 billion in liquidity for the
government and $2 billion to finance a gold mining joint venture
with Canada's Gold Reserve Inc, Nelson Merentes, the
central bank president, said in an interview.
On Wednesday, Venezuela and Gold Reserve signed a memorandum
of understanding to jointly develop the Las Brisas and Las
Cristinas gold mines, ending an arbitration dispute.
"We hope within a month to constitute the company, and in
parallel we are seeking the loan," Merentes said. "I can't say
for sure if it will be in a month, in two months. But it will
definitely be this year. We are moving quickly."
Gold Reserve was not immediately available for comment.
Merentes said the loan would be repaid with gold produced
from the mines, which would serve as the guarantee for the loan.
A spokeswoman for Gold Reserve declined to comment, saying that
the company planned to issue a statement in the "near future."
Merentes said banks from Germany, Canada and China had come
to Caracas to participate in a government-sponsored mining
sector event. It was not immediately clear whether these banks
would be involved in providing the loan.
Investors have grown more concerned that Venezuela or state
oil company PDVSA could default this year, pushing the country's
bond yields to the highest level of any emerging market nation.
Venezuela's international reserves fell to a 17-year low of
$13.5 billion on Friday after the government paid in full its
$1.5 billion Global 2016 bond, according to central bank data.
Merentes vowed Venezuela would meet all debt commitments,
adding that authorities were willing to use instruments such as
oil or gold warrants in efforts to refinance.
"These are commodities that can be sold in the future or in
the present," he said. "We are going to continue doing modern
financial architecture to seek liquidity."
Obtaining the financing may be difficult given that Gold
Reserve is a tiny exploration company with no assets in
It had $2.2 million in cash on hand as of the end of
September. In its third-quarter results it warned of
"substantial doubt about the company's ability to continue as a
Banks have been leery of funding the advanced projects of
major players in the sector, and precious metal exploration
companies have largely fallen out of favor with investors, stung
by the extended slide in bullion prices.
Merentes confirmed that the central bank has been carrying
out gold swaps, financial operations in which central banks
receive cash from financial institutions in exchange for lending
gold during a specific period of time.
"It's normal, all central banks do this," he said, adding
that the operations have time frames of three to four years with
multiple banks, which he did not identify. "As part of our
strategy, the (central bank's) board of directors has decided to
carry out swaps."
As of November, more than 60 percent of Venezuela's reserves
were held in gold, which must be sold or swapped for it to be
used to pay for imports or pay down debt.
(Writing by Brian Ellsworth; Editing by David Gregorio and