The Wall Street Journal’s Anatoly Kurmanaev has great scoop on Venezuela’s ongoing trainwreck of a bond debt restructuring process. The report centers on one David Martínez, the Mexican billionaire whose firm Fintech lent the Venezuelan Central Bank $300 million, pledging a collateral of PDVSA hunger bonds with a notional value four times that amount (and who is therefore set to make a killing, or already made one, if BCV defaults on the loan). He is now working as an advisor to the government. His recommendation? To default in upcoming bond payments (which, of course, do not include payments for the PDVSA bonds he holds as collateral).

The term “conflict of interest” is an epic understatement for the kind of ethical and legal black hole Martínez is in here. This is like an evil mortuary advising you on cancer treatment options:

Billionaire distressed debt investor David Martínez urged Venezuela’s struggling government to default on its bonds days before the country’s surprise announcement to restructure its obligations.

Mr. Martínez, who made his fortune buying cheap defaulted debt and selling it after the restructuring, met in Caracas with the Venezuelan Vice President Tareck El Aissami and other members of the economic cabinet in late October, according to Venezuelan officials with direct knowledge of the matter.

The government sought Mr. Martínez’s advice as it was running out of money and overdue bond payments were piling up. Days after the meeting, President Nicolás Maduro went on state television to say he wanted to restructure the country’s debt. He appointed Mr. El Aissami, who the U.S. sanctioned for alleged drug trafficking, to lead negotiations. Mr. El Aissami denies the allegations.

Mr. Martínez has a vested interest in the outcome of debt talks. His New York-based company Fintech Advisory Inc. received bonds with a face value of $1.3 billion as a guarantee for a $300 million loan to the country in March.”

According to the piece, our VP/drug kingpin Tareck El Aissami (who is not precisely an expert on financial matters not involving white powder) is close to Martínez:

The loan allowed Venezuela to make a crucial bond payment and helped Mr. Martinez earn Mr. El Aissami’s trust, said an official who was involved in the deal. “He has a direct line to the vice president for some time now,” the official said.

Martínez is recommending the government to change PDVSA’s oil shipment scheme to avoid seizures of shipments from holdouts:

Among Mr. Martínez’s proposals to Venezuela’s debt task force, was restructuring oil contracts to give foreign trading companies legal ownership of Venezuelan oil exports, said people with knowledge of the meeting. That, he argued, would protect them from unpaid investors who may try to seize the republic’s assets. Two other people familiar with the meeting’s contents have collaborated their account.

The kicker is that due to the impossibility of the government to undertake any kind of meaningful economic reform because of the disagreements among its many cliques, they ended up on compromising on an incoherent strategy that makes no sense.

Mr. Martínez’s proposals generated a heated discussion in Venezuela’s economic cabinet, said Venezuelan officials, with the government eventually settling on a middle course of muddling through payments as it tries to strike an amicable agreement with the bondholders.

This is an absurd position. People restructure if the alternative is not getting paid. If you guarantee you’ll keep paying, why on earth would anyone agree to restructure? The government’s offer right now amounts to: “I’ll definitely pay you 100. But I think you should voluntarily agree to get paid 80, instead.” Uhhhhhmmmmmmm….

Read the whole thing, it’s a perfect encapsulation of chavismo’s inherent criminal and corrupt nature and of their fatal incompetence to avoid the looming cliff our economy is facing.

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