Some Wall Street competitors who asked not to be identified criticized CSFB for what they described as a conflict of interest. But CSFB bankers denied a conflict, noting they disclosed the holding in the prospectus.
Michael Schoen, CSFB's managing director of Latin American debt capital, said Thursday, "The reality is Venezuela has borrowed 7-year money at 53/8% with cash flow savings of $1.4 billion over four years. It doesn't get much better than that." Venezuela's total foreign and domestic debt is about $30 billion.
Frank Lopez, CSFB's managing director of Latin American investment banking, said, "Venezuela has faced a difficult debt-payment schedule since 1998-1999. We've been working closely with the administration whoever's been the minister of finance to come up with creative solutions to their external debt."
Lopez said the time for such a deal was right due to a recent improvement in Venezuela's cash-flow resulting from increased domestic oil production and prices, and relative political calm.
But the deal was attractive to Chavez's opponents because the bonds were priced in U.S. dollars at the official exchange rate of 1,600 Venezuelan bolivars at a time when the country's black-market rate is closer to 3,000 bolivars.
Even if Venezuela's currency were to be devalued, the bondholders would be protected.
That doesn't provide Chavez's predominantly poor supporters with much succor. But it does give Chavez time to consolidate his political position before the referendum and continue his populist reforms.
Fred Jaspersen, director of the Institute of International Finance's Latin American Department in Washington, says, "The fact the deal was done strengthens his position.***
"'We are no longer terrorists, we are now guerrillas,' they told us. 'We are not going to kill you like before,"' Salazar said. Two days later he was mourning his brother Uldarico, blown up by the notorious Maoist rebels a few miles away.
The Shining Path, or Sendero Luminoso in Spanish, is slowly regrouping after lying dormant for much of the past decade since the capture of its leader. The government relaxed its guard after its success against the group and became preoccupied with other problems, giving rebels an opening.
As the rebels regather, Peru's poor farmers are trying to make a comeback with their own call to arms.***