Venezuela bonds crash as political standoff escalates

Bonds issued by the Venezuelan government crashed on Friday as political tensions escalated following the annulment of the country's legislature by its high court earlier this week, a move that ignited protests and international condemnation.

The price on Venezuela's benchmark $4 billion bond maturing in September 2027 with a 9.25 percent coupon fell by more than 3.5 cents to around 46.4 cents on the dollar, Thomson Reuters data showed.

Its yield, which moves in the opposite direction of price, shot up by 1.55 percentage points to nearly 23 percent, the highest since last August. It was the largest one-day rise in yield since October.

The country's high court late Wednesday stated it was assuming Congress' role in a ruling authorizing President Nicolas Maduroto create oil joint ventures without the previously mandated congressional approval.

The move was met with international condemnation and street protests, and on Friday the fallout intensified when Venezuela's attorney general broke ranks with Maduro and rebuked the judiciary for its move.

Some longer-dated bonds were even lower in price. The less widely traded March 2038s, with a 7 percent coupon, were bid at 40 cents on the dollar, down from 42.6 cents on Thursday. Their yield rose to 18.22 percent from 17.17 percent.

Carlos Becerra | Bloomberg | Getty Images. National guard officers raise batons as anti-government student demonstrators stand in front of them during a protest against the Supreme Court's decision to seize the powers of the opposition-led Congress in Caracas, Venezuela, on Friday, March 31, 2017.

Venezuela’s President Chastised by His Top Prosecutor

IQUITOS, Peru — Venezuela’s attorney general on Friday condemned the decision by the country’s Supreme Court to seize power from the National Assembly as “a rupture in the constitutional order” — a rare rebuke of President Nicolás Maduro from a top figure in his own government.

At a regularly scheduled news conference in Caracas, the attorney general, Luisa Ortega, said that the ruling, which transferred all powers of the country’s National Assembly to the court, violated the inclusive spirit of the country’s laws. “We were able to achieve a social contract,” she said. “We all participated in this Constitution.”

“It is a rupture in the constitutional order,” she said. Her audience gave her a loud ovation.

Although she is one of the country’s top law enforcement officials, it is unclear what ability Ms. Ortega has to stop the court’s decision, given the growing authority of the president. But her criticism of the ruling exposed a rare fissure within the leftist movement led by Mr. Maduro, which has mainly presented a united front as he has accumulated more and more power over the last year.

On Friday evening Mr. Maduro went on state television to deliver an address, his first remarks since the court seized power, to argue that Venezuela was still democratic.

“In Venezuela, the Constitution is in force, for social, economic and civil rights and for the power of the people,” he said. Venezuela, he added, has a strong “participatory democracy.”

He said that the only “rupture to the constitutional order” had taken place in 2002 when members of the opposition staged an unsuccessful coup against his predecessor, Hugo Chávez.

The president said he would soon meet with top advisers to discuss the situation.

The court’s decision, issued late Wednesday night, has generated condemnation both within and outside of Venezuela that the country has become a dictatorship in all but name.

After more than a year of conflicts with the National Assembly, controlled by Mr. Maduro’s opponents, the court ruled that the assembly was in contempt and transferred parliamentary powers to the judges.

The court, packed with judges loyal to Mr. Maduro, is seen as a rubber stamp for the president.

On Friday, members of Mr. Maduro’s political opposition applauded Ms. Ortega’s remarks.

The opposition of the attorney general “is the opposition that causes dictatorships to crumble,” said Freddy Guevara, an opposition legislator, in a recorded message.

On Thursday, President Juan Manuel Santos of Colombia joined the criticism, writing on Twitter: “I raise our voice of protest, in solidarity with democracy.”

On Venezuela’s streets, however, public expressions of dissent remained relatively subdued, with only a few scattered protests.

Amid protests, Venezuela's Maduro seeks to defuse court row

Venezuela's President Nicolas Maduro promised on Friday to resolve within hours a controversy over the judiciary's annulment of congress which has sparked opposition protests and condemnation from around the world.

The Supreme Court's ruling this week that it was assuming functions of the opposition-led National Assembly was lambasted as a "coup" by critics. They viewed it as a lurch into dictatorship by the Socialist Party that has ruled for the last 18 years.

"I think today we can find a coherent, clear and constitutional solution that clears up doubts and disarms internal and external aggressions," Maduro said at a meeting of the state security council.

Seeking to project himself as above a fray between independent powers and presaging a rumored U-turn by the Supreme Court, Maduro said he had known nothing in advance of its ruling but would address the matter quickly.

Opposition leaders scoffed at that as a hypocritical response to international outrage against his government.

In a rare show of dissent from a senior official, Venezuela's powerful attorney general Luisa Ortega, long an ally of Maduro, rebuked the court earlier on Friday.

"It constitutes a rupture of the constitutional order," the 59-year-old said in a speech on state television. "It's my obligation to express my great concern to the country."

Throughout Friday, pockets of protesters blocked roads, unfurled banners and chanted slogans against Maduro's unpopular government, including "Freedom!" and "No To Dictatorship!"

In volatile western Tachira state, several dozen demonstrators tore up copies of court sentences in front of judicial buildings.

Having already shot down most of the National Assembly's measures since the opposition won control in 2015, the pro-Maduro Supreme Court on Wednesday said it was taking over the legislature's role because it was in "contempt" of the law.

The court went into session on Friday afternoon, further fueling rumors of a row-back to diffuse the controversy.

"The shameless criminals are going to overturn sentences 155 and 156 in the next few hours," said one opposition leader Henry Ramos, referring to this week's two key rulings on the assembly.

"They will have to do the same with the other 52," he added, referring to a raft of previous rulings shooting down congressional measures.


Venezuelan government bond prices fell sharply on the uncertainty.

Maduro, 54, a former bus driver and self-declared "son" of late leftist predecessor Hugo Chavez, was narrowly elected in 2013 amid widespread support for the ruling Socialist Party's oil-fueled welfare programs.

But his ratings have plummeted as Venezuelans struggle with a fourth year of recession, scarcities of food and medicines and the highest inflation in the world.

Critics blame a failing socialist system, whereas the government says its enemies are waging an "economic war". The fall in oil prices since mid-2014 has exacerbated the crisis.

The court's power grab brought condemnations and concern from the United States, Organization of American States (OAS), European Union, United Nations and major Latin American nations.

Ally Russia bucked the trend, urging the world to leave Venezuela alone. "External forces should not add fuel to the fire," it said in a statement.

Maduro accuses Washington of leading a push to topple him as part of a wider offensive against leftists in Latin America.

However, new U.S. President Donald Trump seems to have other priorities or has not yet fully formed a policy on Venezuela.

OAS head Luis Almagro, whom the Venezuelan government views as a pawn of Washington, has been pushing for its suspension from the 34-nation regional bloc, which has announced an extraordinary meeting for Monday to debate Venezuela.

Suspension appears unlikely, diplomats say, given Venezuela's support from other leftist governments and small nations who have benefited from its oil largesse.

"It's all a plan to intervene in Venezuela, provoke national chaos and impose a coup d'etat," Maduro said in a speech. "Venezuela has a powerful democracy ... the constitution is fully intact," he added.


The disparate opposition Democratic Unity coalition, made up of about two dozen parties and groups, declared itself in "permanent session" and promised rolling street protests to demand a new presidential election.

But the coalition is hobbled by disunity: leaders held four overlapping news conferences on Friday.

Opposition supporters are also acutely aware that street tactics have failed on numerous occasions.

Vast rallies in 2002 helped briefly topple Chavez, but he was back about 36 hours later after his supporters poured onto the street and military factions came to his aid.

In 2014, hardline opposition activists led months of protests, but they turned violent and led to 43 deaths, their leader Leopoldo Lopez was jailed, and Maduro consolidated power.

The opposition is hoping the military - whose top ranks still pledge absolute loyalty to Maduro though there is believed to be dissent lower down - may nudge him into bringing forward a presidential election slated for the end of 2018.

But there is no public sign of that happening.

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