Welcome to trains.
I'm Joe Webber and I'm Eric Delchernas.
Eric twenty twenty six is already off to an interesting start. I was on vacation for the holidays, lost track of time, didn't know what day of the week it was, and then I woke up to the Venezuela news and was like, I guess I have to work on Saturday now. It was eventful.
Yeah, absolutely, I think most people were shocked by it. But yeah, the news flow is ridiculous. It's like a year of news in a week every week. But in fact, the Venezuela thing already seems a little distant pass but it is a major deal. And we were struggling to get somebody on ETFIQ, the TV show I do we
want to talk about this? So I did a f search, which is the search through ETFs, and I said, okay, terminal on the terminal which ETFs hold at least one percent of Venezuela, and only four results, and they're all bond funds. And the only one that had the one that had the highest and was act was vemmy right, and that's the het v emy and this is an active manager. I hadn't heard of them. I know Vertics it was a white label, but Stone Harbor was the
name of the manager. I basically reached out to my buddy seth Over at Vertice.
He hooked us up with.
Jim who is on the show today, and we had a great discussion. He came in at last minute and talked about the bonds and why he owned them, and he bought them a year ago, so he saw something pretty early, and I think that's interesting. Then I looked through the portfolio and it's doing really well, and there's some of these really interesting countries that are like really killing it, like Latin America countries, but also outside of that.
So I thought we should really get into this like em debt situation because we could see other situations right where some really left for dead bonds get restructured and like, how can you benefit from that?
Can't wait to continue the conversation. The Jim that you mentioned, Jim Craig, who is the CIO and head of Emerging Market and co founder at Stone Harbor. The ETF that we're going to be talking about Vitus Stone Harbor Emerging Market's high Yield bond ETF. Again, that ticket v E.
M Y.
Also joining us Damien sas hour fixed income analyst with Bloomberg Intelligence, this time on trillions around the world with emerging market's debt. Jim Damian, Welcome to Trillians.
Thank you, thanks for having me.
Okay, Jim, what did it feel like when you woke up? I was on vacation, woke up on that Saturday to you know, the US basically going into Venezuela and extracting its president Maduro as well as his wife. What did it feel like to wake up that morning? For you?
It felt pretty good. We were anticipating something would be happening in short order. You did never know the timing, didn't know exactly what was going to happen, but that was certainly a pleasant surprise. We've been witnessing the kind of collapse of Venezuela for a long time, so this is a positive change in our view.
When were you able to actually get exposure to the country because you know there's sanctions, It's it's very difficult to be thinking about this if you're an oil company. The only one that has a meaningful presence there is Chevron. They have a special waiver. So what makes emerging market debt different.
So this is a country that defaulted and was restructured in the early nineteen nineties. In fact, I was part of that, part of that team. So the debt has been been outstanding and trading for quite a while. More recently, the sanctions were removed from trading the debt, and that was several years ago, and we've been accumulating that debt since then.
How do you go about doing that?
So trades pretty actively. So it's one of the more actively traded entities in our in the emerging market's step market. It trades over the counter. It's all denominated in dollars, has coupons and maturities. Obviously they're in default, so you're you're able to pick from a menu of options.
Okay, quick question on the bond. So you bought them a year ago. I believe they're up like one hundred and forty percent in a year now. They went up like one hundred percent before the extraction, then they get
another boost after the extraction. Was the run up in return because people thought an extraction was going to happen, almost the way like animals can tell a tsunamis coming before humans or would you have a restructuring, even if there wasn't an extraction or was this was this whole thing on bet on something happening with this guy.
It's really the claim value of what you're getting when you buy default of debt. So whf you think about Venezuela, they've been into faults in twenty seventeen, So your claim value was par one hundred cents on the dollar plus past due entrants interest, which is about one hundred another fifty cents or so, So I'd say one hundred and fifty to two hundred points in claim value, and the dollar price was somewhere around twenty, So you're buying something
at twenty. The claim value is very high. That the what is difficult part is figuring out the timing of it. So last year, the timing was getting closer to whatever the whatever that means. We didn't know there was going to be an extraction of Maduro, but there's going to be some sort of change, and that was closer, and as that closeness becomes more of a reality, the bond prices went up.
How do you go about figuring out what percentage of the portfolio you should expose to something that could be you know, kind of a gamble.
We do a lot of probability analysis and everything that we do, so we put probabilities around, what's the upside, what's the potential downside, and we weigh it based off of that, and we literally we do this every month for everything in our portfolios. The probability that Venezuela was going to have a regime change of some sort had increased, so that increased our weighting in Venezuela, and that's something
that we feel very strongly about. I mean, you have to factor in the downside as well, and we're not out of the woods yet, but that downside I think is lower now than before, so that warrants a larger weight.
Okay, so the name of the ETF has emerging markets in it. Is Venezuela actually in our market or is it more like a frontier market.
It's more of a frontier market right now, but it used to be just an emerging market. So it's hopefully coming back and adjusting the emerging market category.
And I mean there's so that that line is obviously like where there are countries that are uninvestable almost and
obviously Venezuela's entered into the realm of being investable. But do you how do you think about the risk reward for these profiles, because a lot of the countries that are in the in the portfolio, Lebanon being another one, like these are countries that are you know, the reward could be ten years off really, so how do you go about figuring out what's real and what is just too risky.
That's a great point because the reward could be ten years off, for five years off, for two years off, and that time value of money is very very significant. About half of the emerging markets that morning and that genius and a rockstar, but about half of the market itself is actually investment grade, so a lots change over the past thirty four years I've been doing this. And the other half is non investment grade. And within that there are different tiers of non investment gradeness. Put it
that way. In Venezuela Lebanon are at the lower end of that, and those are the ones where those can be kind of your deal drivers if you think about it from a financial terms, those are the ones that could have if you have a good information as you could, you could do really.
Well in what can't you invest in right now?
Things like Cuba, although Syria may come on board at some point. There's North Korea. These are countries which you that you really can't you can't invest into the.
Ones when you use your compliance training at your job, it's like, yeah, do not do anything that involves these.
Exactly Russia is in that right now. So these are these are countries where you just you you, you get put in the bag into the bad house if you if you invest in those for obvious reasons.
But do you have to keep up on them because at some point, like maybe Russia comes back online and that becomes an opportunity. Right, you can't be completely in the dark about them.
One percent. We have an entire team just going through the oh fact Office of Foreign Asset Control website, see what new new updates there are as a country been put on or taken off. That's very important and obviously you well maybe it's not obvious, but to me, you want to be ahead of that. So so country comes off of that sanctions list.
As Venezuela sounds like it did, it did were there exactly?
The Venezuelan bonds at one point traded at two so now they're trading at thirty five, So you want to be you want to kind of front run that flow if you can't be there when it's two.
Right, Uh, let me bring Namien in because this he's a mile deep in this stuff. I always hear him over here, him talking about this. You're you're writing about this all the time. Were you into Venezuela a year ago? How have that has Let's just start with that country for you. How's your research been on Venezuela before and after the extraction?
Well, I think we have to look back at the fact that these bonds were sanctioned. They weren't you weren't allowed to own them, right until President be former President Biden basically removed the sanctions on trading in the secondary market, which opened the door for Jim and for others to start buying up these bonds again. Right, So that's relatively recent. And if you look at like the return, I mean,
you're absolutely right. I mean, if you look at the JP Morgan NB Venezuela bond index rose one hundred percent last year. But it's not alone Lebanon, Ukraine, I mean, Sri Lanka, Gana, all of these sort of Zambia, these distressed em dollar bond issues. Issuers have had tremendous years in twenty twenty five, so you have to kind of parse out how much of the move is due to people, you know, expecting regime change in Venezuela and how much was just the beta trade that we saw on em
high yield over the better part of last year. My goodness, it's been a good run.
But what's underlying that that beta trade? Like why there why the enthusiasm for countries that we haven't really been hearing that much about.
I would say the risk sentiment, suppression of volatility, the vics, all the things that we look at, right, I mean vall is that cyclical lows across equities, bonds and effects, right, So I mean that's a perfect the environment for investors to go and you know extract carry right, and look, Venezuela doesn't pay off, right, I mean, these are the
faulted bonds. There's no coupon income there. But you know, the point is to take a little bit of a punt on, you know, a very binary outcome makes a lot of sense when the bonds are treading at you know, five cents on the dollar, right, and the rest of
the universe in em distressed is up in double digits plus. So, so you know, kudos to Jim and the team at Stone Harbor for identifying that, and you know, identifying the fact that the bonds are no longer sanctioned and that they do they do demand the place in investor portfolios, albeit probably a very small waiting, you know, relative to other more developed markets.
Well that's a really good point, Jim, like the you wouldn't be able to get this exposure through any other ETF right, Like, so, how do you talk to institutional investors about how to put this into a portfolio when you know what you're offering here is not something that anybody else is going to get through, like you know, bond.
Well, it's interesting because most of our most of our client bases is actually in institutional investors and they want that exposure. So they they view the market very differently than a lot of others. They view this as a this is a market that that has historically outperformed by the fixed income comes with higher volatility. They appreciate that, they understand it, but that volatility can be a friend
as well, So they want that exposure. And something like a venezuela is something they understand from a from a risk and reward standpoint, and they want to be exposed to that. But to your point, I'm on the ETFs, aren't that many ETFs that that actually own it?
This is where I think ETFs are perfect because this makes something very complicated and almost impossible for most people very easy. You just, you know, roll out of bed and you click buy and you own all these cool bonds right from these uh frontier countries, the diversification.
Market countries, some of which happen to.
Be em well, I'm looking at the portfolio. I mean, honestly, Kazakhstan, Ethiopia.
Yeah, stand's a pretty good credit. I mean you got to take a step back here, I mean, because now you get it into the long reads with me. You know, like you know, Venezuela is a very unique situation, right, I mean you call it frontier. I mean it used to be one of the most developed of emerging markets going back to the seventies and eighties, and everyti things happened.
Well, you know, ours figured prominently in a James bond. I learned through all.
This, ye Caanakas.
But but look, I mean I think you have to kind of take a step back and say, okay, you know it's not just ETFs guys, and I know this is you know, this is trillions here, but active fund managers. You know, I'm hard pressed. I did a whole research report last year. Last week, I was looking for anybody who had Benny on their books, and outside of a few funds run by Ashmore won by GMO, very few funds have greater than three percent of their portfolio in Venezuela.
And that's after last year's one hundred percent plus game. So you know, it seems like investors have been very very I don't us a conservative, but they've been very They've been managing that concentration risk really really well. Because we're not just talking about many sovereign bonds. We're talking about Petavesa, the state on oil company. Again, these are all dollar denominated bonds, but those are the two big issuers.
There's other little LACR, the utility, there's some other you know, sort of any linked debt out there, but you know, buying and large. What we're talking about is Petavesa and thezel Venezuela sovereign and those bonds sixty call it seventy billion dollars outstanding. Just how much of that can you own in a portfolio to give you, I don't know, double digit exposure. I mean it's it's going to be a challenge.
Yeah, well let me bring real quick here. We don't separate. There's em debt, there's investment grade, which would be the big tickers EMB. Then there's high yield, which is the big tickers emhy. Those are the two big I shares products your high yield. So you're basically trying to be e e mhy. Now let me go back to Damien on this. Like let's say you're you know, I don't know, your college roommate texts you and says, hey, I saw
this venezuela. This happens to me sometimes and it's like I kind of want to get in on this stuff. Like do you tell them, hey, look, uh, maybe don't do high yield? Do more of the investment grade or like is or should you have both? Like what's the normal person's play here in terms of like adding this to a portfolio and the difference between going high yield or investment grade.
So I guess for me, Look, you know, I mean most people link emerging market debt forget about investment grade or highyield with an EM they assume it's HIG yield.
Yeah, I mean that's the historical assumption.
Yeah, you know, we were always the guys we em you know, portfolio managers and traders. We were always the guys they plunk us at the end of the row, right next to the US HIG yield guys. We were like the you know, the stepchild, right, the one nobody wanted. And you know, obviously as the acid classes developed over the better part of the last twenty five thirty years, you know, things have changed. But you know, far be it from me to judge, you know, what makes you know,
investors kind of you know, look at emerging markets. In my opinion, it's going to be about carry. It's going to be about you know, higher coop. It's going to be about you know, and you're paid for that risk, right.
All real quick. Just for anyone who just was like, what does that mean? What is just describe carry.
A return over and above US treasuries. In my mind, if you're talking about US dollar debt, if you're talking about dollar denominated paper, you're benchmarked to the US Treasury curve. Right, So how much excess return excess yield are you getting by investing in an emerging market dollar debt all else equal maturity duration, equal relative to US treasuries and you
get considerable. I mean, there's very few asset classes US dollar denominated fixed in COMACI classes that can give you that additional that that additional, that incremental carry, that incremental coupon.
Yeah, so, Joel, I'll give you the numbers. The GOVT, which is the I shares government bond ETF to covers the whole curve is up seven percent in the past two years. VEMMI is up thirty one percent, EMHY up twenty seven percent, and emb up twenty one percent. So that's the carry, right, you got So it has worked out for sure, and high yields done even a little better.
Yeah, fair to say, yeah, absolutely. And look, you know again what we're kind of when you look at you know, emerging market debt, most people it's mostly sovereign quasi sovereign issuers, you know, but in this instance, you know, there's there's you know, we're talking about both, right, We're talking about peteveesa, which is a you know, state on oil company i EA quasi sovereign issuer and you're talking about Venezuela the sovereign, right, So when you look at EMB, it's all sovereign, it's
all quasi sovereign, but they avoid all EM corporate stuff. Right. So if you want to kind of expand the universe into EM corporates and start looking at the Pemmexes and the Petrobrass, well, PEMS is a quasi but you know valet is another one. You know, carry I mean incremental coupon, you know, return potential goes up that much more. So
it's really about how you carve up the universe. And you know, from from I guess you know, Jim's perspective did a pretty good job of identifying what was really one of those last few vestiges of you know, incremental upside and EM because I mean, as far as the I could see, there were very few with the potential to do a triple digit return year over your return like Beny did.
It's been a it has been a it's been a good year. There's been a not a lot of those opportunities out there. There's still a few out there that are right now. But no, to your point, you have to you have to identify them. That's the benefit of you know, tooting our own hon here from an active management standpoint. But I think it's important to note an actively managed GTF in this format I think really does work well in the strategy because you can't overweight those opportunities.
Yeah.
Actually, on the question of sovereign versus corporate, and you brought up Petavesa there, like, Jim, what exposure.
Do you have?
Is it all sovereign or and is there any desire to try and go get the Pedavesa debt.
No, we definitely own Petasa debt. In fact, that's we're more overweight in the product and in the exactly. So overall we're about fifty five percent sovereign forty five corporate. So we do yea by design by design, so it's fit roughly fifty to fifty by design, but we're overweight
sovereigns right now. But to your point, the corporate market is has grown substantially in size and volume, and it's very liquid and these or name brand you know, companies that are world renowned and they do quite well, and they actually offer a lot of extra yields, So why not take it well.
Jim, can I ask you how much of your position is in those eight and a half percent Venezuela. I'm sorry, Petavesa twenty twenties, because you guys should be aware not all bonds are created equal, and this particular bond is secured by fifty point one percent of SIDCO, you know, SITCO here in the US, Venezuela, the three big huge refineries here in the US, as well as convenience and gas stations across the country. You know, there has been
quite a bit of movement there. I'll let Jim go into it a little bit about Paul Singer and the folks at Elliott and some of the recovery that's already been priced into that particular issue.
Right, and that bond never really sold off as much as the rest of the Venezuela and Pedasa debt, and it's now trading at par so the claim value is obviously very very real in that and that's working its way through the court system. We don't know that we preferred to put the risk in lower dollar price bonds and try to get somemize more of the upside, but
I'm very happy that that's working its way through. I'm I'm happy for the bondholders that they'll get some recovery value there, and I think that's appropriate.
Let me ask you about Latin America, because you twenty eight percent of the fun is in Latin America. A couple of weeks ago we did our twenty six ets to Watch in twenty six Joel knows. I picked OTGL, which is a latinam ETF. I saw the news in Chile about their new leader there. Just saw what happen
in Argentina. That stock market was on fire. And I know from covering ets for twenty years, if there's ever like even a little hope that a pro business leader takes over for a socialist, the market goes wild.
Right.
I always say it's a geopolitical sports book. Is these single country em ETFs. You have a lot of these in here, and like Ecuador was a big winner, you know in Latin America, how big is this story of political change there?
It is big because we are shifting more towards the right, and we had shifted more towards the left. A lot of reasons why, but the shift towards the right is very important. If you look at a country like Argentina, ten percent yields You've had a big transformation there. You've had a pro market government that came in and put some very significant fiscal discipline. Great team obviously engage with the US Treasury, which has been well publicized, and all
of that is transformative from a country standpoint. So if you look down the road, you're going to see a lot of foreign direct invests of going in Argentina. Do the GDP coming down, inflation coming down, et cetera, which is we want to be part of that story.
And how do you decide that twenty eight percent is the right number?
Yeah, So there's a lot of opportunities around the world. You mentioned Lebanon and Ukraine, and there's a lot of Sub Saharan Africa, so it's kind of a nice buyer's market out there. So the twenty eight percent of Latin America, we don't have a huge weight in Mexican sovereign right now, we don't have a huge weight in Chile. A lot of things going very very well. The yields aren't high
enough for us at this point. But we do like you know, Venezuela, and we like Argentina, we like Ecuador, We like countries such as that and that gets you from the bottom up to your desired weight. But those are other opportunities around the globe which are equally as fascinating.
Well, I mean, you know, let me just expand a little bit on that pro right pivot across the whole of Latin America, referring to we have a number of elections coming up this year. Right, We've already seen Chile, that's the pro right pivot. By pro right, we mean more business friendly, more of a pro US pivot. We've got Peru coming up, and we've got quite frank Columbia coming up, sorry in May, and we all know what's
going on there. And the fact is the Columbia President, Gustavo Petro can't sit for another term, right, so there will be changed. So by and large, the next person sitting in that seat will undoubtedly be more pro US than the current administration. And then you've got Brazil at the end of the end. Now, don't get me wrong, Lula has nine lives.
We all know this.
But you know, this pro right pivot that's going on across the whole of Latin America is real, and it makes sense, and it's good for business, and it's good for the bond prices, and that's the way the market tends to be trading. Here one thing about Venezuela. If you want to kind of read through into what this means for financial markets and for investors, and again Latin America speaks to this out and clear commodities, not just oil,
but minerals and metals as well. Right, And you know, if you just look at you know, Venezuela, it's a top three holder of in ground gold. If you look at you know, gas, it's the seventh largest holder of gas reserves in the world. It's obviously got the largest
proven reserves of oil in the world. If you think about this, if the US actually does have some modicum of say over you know, energy supply or oil supply coming out of Venezuela, you take Gyana, you take Venezuela, and you take the US and you add it all together, the US is going to have I guess a say,
over thirty percent of the world's oil reserves. That's a massive geopolitical shift, considering Saudi Arabia controls only what twelve to fourteen percent, So this is this is kind of striking and this is pretty big news.
All right, Jim, we've covered Latin America, Venezuela. Now your portfolio again. I look at it and I just it's like a trip around the globe. You know, it's really it's there's Honestly, there's a country year I'd never even heard of, and I feel like I'm pretty smart. But anyway, I'm gonna yell out a country or I'll say it. I won't yell it, but I'll say a country lightning round.
You guys, give me real quick, like you're one sentence or two sentence take on this country in terms of your you know, optimism or pessimism.
Okay.
Jim also has to say if he's been there, Yeah, okay, okay.
Great, okay, all right, Well, Dominican Republic.
Been there, So a shift to the right. Similar to our prior conversation, a lot of yield tourism is up. It's a significant part been upgraded. Spreads your continue to tighten.
You gotta let me talk about Dominican Republic. It has been one of my favorite calls for the better part of the last not only year, two years. And I'm not just talking the dollar denominated debt. They have local currency DP denominated debt as well. This is a country that is still running a current account deficit with the US, so it's not on Trump's radar yet. It is the fastest growing economy in you know, Latin America writ large.
I've been there a couple at times of myself. They have some good golf courses, and look, the reality is Theminican Republic is it's credit rating, it's credit profiles improving, it's friendly the US business, and so yeah, I mean, I'm I'm very bullish on Dominican Republic. Okay.
Sri Lanka have not been there extremely important in geopolitical sense, So if you think about where it is in the globe, there's a big ocean right around it, so it's very very important. China's made some huge in roads there. We think that that's changing where we went through a restructuring last year. We like the restructured debt a great deal. We do think there's been a fairly significant political transformation
as well. But I think the big important point here is how strategically IMPORTANTCE Sri Lanka is in the world, and I think the US understands that, it appreciates it. So I would expect that that's going to be a big focal point for the US going forward.
Yeah, you know, I've not been to Sri Lanka either, but I will say when you think Sri Lanka from an investor standpoint, you think China. And by the way, this just dials right back to Venezuela. I mean, did you know that loan commitments by country coming out of the China the Development Bank. Venezuela is the sixth largest country that has received loans from China. Right, So let's think about, you know, a workout scenario for these Veny
and PETABSA bondholders. Right, there's a lot of bilateral loans to China and Russia that need to get paid off as well. And where do you sit within the capital stack, right, Who's priority, who's subordinated? These are questions that are going to take a while to kind of come through. This is going to be a very complicated restructuring in Venezuela. But when I think of Sri Lanka, I think of
the port that's been funded by China. I think of you know, its ties to China, and whether or not those continue or not is going to be, you know, really front and center in the eyes of US dollar investors.
All right, this Ivory coast, I couldn't even tell you where. I know it's in Africa, but like I couldn't point it out on a map. What's going on there?
High growth, recently upgraded, cocre prices are high. It is really a poster child for what to do right in subterran Africa. We expect that that is a country that's going to continue to see a lot of foreign directive investment going in. I mean, it's major export is coco, so we like to see high coco prices there. But they've really gotten to handle on the finances and it's been reflected in the fact that they've been upgraded and
spreads and yields are are much lower. So it's one of the countries we've actually started to take off a little bit. It's done so well.
Yeah, well, I think I think one thing you have to point out, even though these are dollar denominated bonds from Coutevar, the it's part of Ekowas, so effectively the currency that's used domestically on the ground in Kotevar is the Euro. Right, it's a French ship's former French colony, and that whole region there's probably seven or eight of
them from beneath to Berkino Fassis Senegal. They're all you know, euro denominated, so you know their balance sheets and their sort of trade deficits are a little bit easier to read, so to speak. But yes, Kotevar has had a wonderful run, unlike it's partners Senegal. But the risk there is a lot of the risk were seeing in places like Nigeria. It is very very close to the Sahel region, where you know, there's a lot of terrorism, there's a lot of isis, there's a lot of you know, potential for
things to kind of derail the success story there. But now it's it's managed really really well well and it's had some considerable upside. Yeah, all right.
Another country I was actually in the last well not about fourteen months ago, Vietnam. My wife is of Vietnamese descent, so we went there. We go like once every twelve years. And look, is a hard working group of people. But I don't sense a lot of innovation. Like it's a lot of like selling stuff out of the front of your house kind of economy, but very hard working. Nobody is like slacking off. There are no people just hanging around. Really, it's very busy, But what's the deal there, what's the
trade there? Is that also opening up or is it just more you know that they're taking a lot of the manufacturing from China.
They're taking a lot of the manufacturing from China. That's pretty well known and it's also known by the Trump administration as well. So if you think of the tariffs that were put in place, and really outside of China, Brazil to a certain extent, Vietnam and maybe handful of others really didn't affect our market, but Vietnam is one that that does stand out to us as being more vulnerable. So that's one that we've taken down more recently. Economy
is doing very well. It's a hardworking society. It's a fantastic long term investment, but probably more from an equity standpoint than at debt.
So there's a moment in which you start to pair back because you're just like, this is we've done this already and it's had its upside, and now we have to kind of laura. So when you go from two to four percent in Venezuela, you go from four to two in Vietnam.
Right, And that happens a lot in our markets. You know, things get ahead of themselves and the euphoria comes in, and I think in a country lament Vietnam, I understand why just don't you don't get a lot of upside out of that?
And how active do you have to be as an active manager in a portfolio like this? How often do you have to be recalibrating these numbers?
I wish more often. These things take a while to play out, so it's usually you know, our well, our holding period can only be anywhere from a week to a year and a half on average, so they take a while to play out. We'd love to see him play out a little faster sometimes, but more often than not, they just take a while to play out. And Vietnam's are a classic points trades wall under two hundred now and spread and extra yield, so that doesn't offer a lot of value for us, you.
Know, Jim, how much Vietnam is their outstanding right now? I mean I've always struggled to find any dollar dollar pay Vietnamese bombs.
There's there's one, but I mean there's really not a lot out there.
Then hence your point that it's an equity play, right, I mean, if you want to get your Vietnam explorerure. It's easy to do with VIA.
I would do an aequity market, right.
Okay. Actually, there's like two countries in here I've never heard of, and then a third one that I faintly think I might have heard of, but I don't even know. Okay, don't make fun of me. I'm just being honest here, Okay, I'm just gonna spell it. I mean, I'll try to say that's it. Surinam?
What is that? Great little country? Were also defaulted its dead. Latin America also defaulted on its debt and has been restructured it. How did you know?
I was going to say that I know everything.
That's pretty good, dude.
I've been doing this far too long.
So yeah, I mean Surinam is northeast Latin Erica, you know, not far from g Know where you know Excellent Mobile has some offshore drilling rigs in place there, and you know some of the spillover people would kind of argue for is you know, some of the oil wealth that's being generated offshore outside of Guiana can kind of filter over into Surnon. But they've had their issues. They defaulted, as you know, and you know it's it is a country. I mean, what's what's its biggest export? I mean, well
it is oil, right, yeah? So I mean so yeah, I mean you know, go figure right, I mean what do I know? But I think I think yeah, the bonds are probably they've come back quite a bit, but there's probably some upside there if you listen to people who are far smarter than I had.
Joelhead, you heard of that country? Okay, thank you for being honest. One and one more I'd never heard. I'll spell it, see if you can guess it. Damien uh cursik san No, I have heard of that barely though gabone.
Gave bones Easybone's an old steward.
Yes, because I didn't look that bad last time. But where's this country?
Africa as well? So it's an interesting little little oil trade if you think about certain think about how to how to frame it so it suffers from oil volatile. It's a small country. We happen to like it right now because we know it's oil. Prices here are are favorable to it. But it's I would say, on the on the spectrum of being dicey non dicey, it's one of the dice er credits. So we're pretty nimble in Gabon, but right now it's pretty attractive.
How important is it to visit any of these countries.
I'd say it's very important. I have not been to Gabone. I will say that Evan most of the other countries in our market, but it's very important. You know what you do. You meet with government officials, you try to meet with the Secretary Finance, the economy mysteries, you meet with a lot of the embassies. Great intel there. I mean it helps you paint a picture. So you can have all the great assumptions in the world, but when you get there, you really do figure out if they're
right or if they're wrong, and that's what's helpful. So we typically visit thirty five forty countries a year.
Jim, if we put on that optimistic here for Venezuela as we wrap restructuring of the debt is something that seems like it's going to be out there. As if we look ahead to what's next for Venezuela with that optimism had on, what would that restructuring look like and how would impact how you view investing there.
So we would take our defaulted bonds in dollars and we'd sit across the table from Venezuelan's. Probably the IMF would be involved in assuming you a treasury, other investors, et cetera, and you hammer out a restructuring which allows them to grow. So the debt payments have to be lower. The probably the stock of debt needs to be lower as well, and it's something that gives us the ability
to get paid back. So that restructuring is very similar to the I would expect to the restructurings that we dealt with in the early nineteen nineties, where you're exchanging your default the debt for new debt. There also may be what we call a new money component, which means you may want to put in more money. There could
be an element there. There could be a value recovery right, or some sort of warrant that's given to you GDP warrant or an oil warrant like the old Venezuelan bonds that give you some upside if that does work, if the plant does work. But ultimately what you're going to be doing is exchanging your default the debt for new debt, which is then serviced by Venezuela and PETABSA and.
You have to remember there. I mean, look before before the bonds, the fault in twenty seventeen in Venezuela. I mean you had nationalization by the jobs by Hugo Chovas in his regime of a number of projects on the ground. I'm thinking Conical Phillips. I'm thinking x on Mobile. Conical Phillips is own ten billion dollars and so that's why it's stock popped on the news. But the reality is, good luck trying to get somebody to pay you back for that. That's all part of a restructuring here and
the conversations that go hand in hand. And I don't know if you just saw the news. You know, just over the weekend, President Trump had a bunch of US oil majors into the White House to talk about what a you know, Venezuela structuring might look like from from a perspective of investing, you know, US dollars into the oil sector. He didn't like what x On Mobile had to say. So, you know, this is a company that is owed one point five one point six billion because
their assets were nationalized previously. That Venezuelan government has already paid back two hundred and twenty five million of that. So they've already almost agreed that they owe this money, right, so good luck try and I new tho she hd all this at It's going to be very, very complicated. There's a lot of different investoral interests involved. I mean, and like I said, the Chinese and Russian have a lot of bilateral loans in place as well. I mean, where do they fit in the capital stack?
Well, this is what we get to watch.
Yeah, no, it's fascinating and like this kind of stuff like is nowhere in a sixty forty portfolio. I mean, so I like ETFs that bring something different that your normal like sort of beta. This definitely checks that box.
Jim Damien, thanks for taking a sum of tour the world our pleasure. Thank you, Thanks for listening to Trillions until next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you'd like to listen. We'd love to hear from you. Hit us up on social I'm at Joel Weber Show, He's at Eric Balcino's. Trillions is produced by Magnus Hendrickson. Brendan Newman is our executive Pretty Sir Sage Bauman is the head of Bloomberg Podcast.