Caracas Chronicles

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.