Venezuela c.bank in talks on gold swap

CARACAS: Venezuela's central bank has begun negotiations with Deutsche Bank AG to carry out gold swaps to improve the liquidity of its foreign reserves as it faces heavy debt payments this year, according to two sources familiar with the talks.

Low oil prices and a decaying state-led economic model have weakened the OPEC nation's currency reserves and spurred concerns that it could default on bonds as it struggles to pay $9.5 billion in debt service costs this year.

Around 64 percent of Venezuela's $15.4 billion in foreign reserves are held in gold bars, which limits President Nicolas Maduro's government's ability to quickly mobilize hard currency for imports or debt service.

In December, Deutsche and Venezuela's central bank agreed to finalize a gold swap this year, the sources said.

The sources did not confirm the volume of the operation in discussion. Neither Deutsche nor the central bank responded to requests for comment.  Gold swaps allow central banks to receive cash from financial institutions in exchange for lending gold during a specific period of time.

They do not tend to affect gold prices because the gold is still owned by Venezuela and does not enter the market.

Venezuela is suffering from a severe recession, triple-digit inflation and chronic product shortages.

The government's currency control system has slashed approval of dollars for product imports, leading to empty store shelves and snaking supermarket lines.