The Venezuelan government invested nearly €300 million in Grupo Espírito Santo and would like it back.
Despite starting court proceedings to recover amounts invested by two public funds, Desarrollo Economico e Social de Venezuela (BANDES), and the Fondo de Desarrollo Nacional (FONDEN), the government quietly is hampering Portuguese companies from transferring legitimate funds back to the head office treasuries.
State owned airline TAP has around €100 million tied up in Venezuela, according to state company Párapublica’s annual report for 2014, and Portuguese companies have billions of euros sitting in Venezuelan banks.
Venezuela is trying to recover its investment of €297 million in commercial bonds made by two public funds in Espírito Santo International, part of Grupo Espírito Santo.
The Venezuelan government already has contacted Lisbon and is preparing to go to court to recover the money lost by investing in Grupo Espírito Santo.
Venezuela has started to block money transfers attempted by Portuguese companies. There already exist laws that strictly control the money that can leave the country and it is not hard to delay or frustrate further transfers from targeted companies.
In June 2014, Ricardo Salgado (pictured after his arrest) who at that time was the chief executive of Banco Espírito Santo, sent two ‘letters of comfort’ to Venezuelan banks which guaranteed the repayment of the money invested.
These turned out to be ‘not worth the paper they were written on’ as the letters were signed without the knowledge of the BES board and were signed only by Salgado and his cousin José Manuel Espírito Santo.
Options open to the Venezuelan government include court action against the administrators of Espírito Santo International, against the Bank of Portugal (aka the taxpayer) which failed in its regulatory role, or against the Portuguese state (again, the Portuguese taxpayer.)
The Venezuelan government also can contest the division of BES into ‘good bank, bad bank’ last August which saw its loan remain at bad bank BES where it is close to worthless.