La Movida

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Alfredo Serrano, the Podemos-linked looney-left “economist,” has long had Nicolás Maduro’s ear. But while his influence on the President has always been known, his effect on actual policy has been limited to the brief tenure of his equally crazy minion, Luis Salas.

The limits on his influence, however, are probably about to be lifted.

In order to understand this, it is important to put in context the actual dilemma the government faces. For a long time, the government has been trying to convince international markets that it would pay off foreign debt come hell or high water, even if it meant cutting imports down to a trickle. If folks like little Oliver Sánchez have to suffer for it, so be it.

And while most reasonable people, us included, found this to be insane, the government was clear: we will stay the course.

Serrano, though, thinks differently. His take? Screw foreign bond holders, and go full Argentina. And in order to convince the President of this, he’s bringing the actual Argentine who put this scheme together.

As El Nacional’s Blanca Vera reports, Serrano is bringing former Argentine Central Bank head Alejandro Vanoli – Cristina Kirchner’s go-to man on all things dollar-related – to Caracas to meet with Maduro. Their proposal is to impose a series of distressed exchanges for PDVSA short end bonds, thus effecting a default.

To say this stands in stark contrast with the views of the rest of the economic team (Economy Minister Miguel Perez Abad, BCV President Nelson Merentes, and PDVSA president Eulogio del Pino) is a massive understatement.

Now, to put it all in context: this could all be a smoke screen. Vera is basing the whole piece on an anonymous tip, so this makes us hesitant to take it at face value.

PDVSA is currently in negotiations to ease its short-term debt. It’s unlikely at this point that Maduro would consider a hostile swap as a viable policy option. Even if it is aimed to divert the attention from the current economic crisis, the risks of a credit event (default) on PDVSA’s foreign assets are simply too massive. The litigation alone would cut Venezuela off important international markets, and the consequences could end up being worse than paying the debt.

Then again, we are dealing with a President who is “crazy like a goat.”

It might well be true that the Maduro economic team is openly discussing a default at this stage; the country is in a humanitarian crisis mode, and a government facing a recall referendum that could potentially kill them will be open to any shenanigans that could grant them a short-term political boost, no matter how radical. Then again, those in charge of actual policy think this is destroying with their feet what they built with them hands.

How this plays out will give us a strong signal as to what course the Maduro administration will chart in the remainder of its term – however long that might be. If Serrano is indeed making a move to wrest control of the economy from the current team, then the game changes once again.

14 COMMENTS

  1. I guess there’s one factor that hasn’t been taken into account, and which will likely missile and sink the default initiative, and that is the fact that many holders of debt and creditors are part of the very chavista mafia itself, boligarchs that have used the dollar-monopoly to suck Venezuela dry, not caring a bit what happens with the carcass or the 30 million of folks starving to death here.

    So, the boligarchs and the distinct factors that pull the strings within chavismo, the bolikids, the druglords, the pranes, etcetera, will have millions of green reasons to axe the default in the same way they axed Luis “There’s no inflation and money is useless” Salas.

  2. Que se apuren porque acá Vanoli va a terminar preso por hacerle perder 70.000.000.000 de pesos (5B usd) al estado a propósito en el mercado de futuros.
    Vanoli es un ladrón y un incapaz.

  3. No me sorprendería. Serrano se la pasa en Argentina o en España. Y por todos estos días, Serrano ha estado acá dando charlas y reuniéndose con gente del gobierno. Así que el artículo de Vera podría estar acertado

  4. Any chance this could be a story planted to strengthen the government’s hand in the negotiations? Es decir, take what’s on offer because the alternative is the nuclear option?

      • A student of Latin? The Classics? “Logic and Rhetoric”?
        Not just anyone throws out “cui bono” these days, Francisco. Who would benefit from such an education? Methinks, critical thinkers and achievers?
        Hail, fellow traveler of a Liberal education….

  5. I dont think there are “negotiations” that can take place. Without collective action clauses, all Pdvsa can do us offer a voluntary exchange. Anything else will cripple Pdvsa and will be suicide.

  6. Ulamog May 26, 2016 at 2:01 pm: …many holders of debt and creditors are part of the very chavista mafia itself…

    The question is: how much does the regime owe in dollars to external creditors? I think also that very few of the boliburgesia still have most of their assets in Venezuelan bonds. They know better than anyone how broke the regime is.

  7. Ulamog May 26, 2016 at 2:01 pm: …many holders of debt and creditors are part of the very chavista mafia itself…

    There are two questions: how much dollar-denominated debt does the regime owe to external creditors? How many of the boliburgesia still have most of their assets in Venezuela or PDVSA bonds?

    They would be annoyed if they lost those assets, but if the alternative was fall of the regime and their exposure to prosecution and forfeiture, they’d let the bonds go.

    Also, the regime could repudiate only the bonds held by foreigners – designated as bloodsucking capitalist vultures, not patriotic Venezuelans who support the country with their money.

    • How much are boligarchs holding in bonds I don’t know, but it’s got to be some serious amount, because that’s what the mechanism was conceived for, the same thing as cadivi, just a conduit to easily syphon and plunder public funds.

      I don’t think the heaviest fishes would let the bonds go, chavismo has demonstrated so far that they’re willing to starve and let people die from easily curable diseases and ultimately they are capable to slaughter thousands of people to “shut them up”, the chavista criminal has the mindset of the “malandro lambucio marginal muerto de hambre”, where they frantically only care about their pocket and their own gain above anything else, for what they care, they would happily stab Nicolázzz and Dioscapo if that gained them some benefit and would slit children’s throats as fast too; venezuelan criminals show a much lower intellect and far too more recklessness than criminals from other countries, and chavista criminals are the epitome of that kind of people, since 2002 when Chávez ordered to kill two dozens of protesters to disperse the march has been the best show of what would come later.

      The regime won’t disclose any name, because there’s another part of the chavista mindset, the automatic solidarity, or “alcagüetería” in spanish, where they’re willing to cover up other criminals’ crimes because that way they maintain the biggest fallacy of chavismo and their foundation stone: That “chavismo is composed by infallible saints who have never did anything bad in their lives, and because they are considered perfect beings, free from sin, they somehow are entilted to control Venezuela until everybody else’s dead.” And that’s the reason there’s still people who are starving and eating s**t and still insist on voting chavista, because they still think chavista politicians are paragons of purity.

      And that begun with the corpse himself, and other of the notable examples was the ridiculous horror judge Luisa Ortega when she said she would “publish the list of the briefcase enterprise owners that stole dollars through cadivi” and never published anything by today, she knows she can’t disclose said document because it’s most likely to be full of red enchufado names.

      The day chavismo has a high officer “stained by corruption”, the whole of chavismo as a political current will instantly die and burn to ashes.

      I often copy the comment content I’m posting and then return to recheck the post some minutes later to see if the comment got posted.

  8. Side issue: when I try to comment using Firefox 46.0.1 under Mac OS X 10.11.5, the comment never appears. But I can comment OK with Safari 9.1.1.

  9. I have always thought of the Venezuelan bonds as being the ultimate in money-laundering experiences…

    While they should default, I doubt that they will default until they absolutely have to do so.

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