In IMF Fall roundup, fund manager noted consensus emerging around "imminent and inevitable" regime change, pondering significant impact for bondholders.
This fall, much of the hopes of South American fixed income watchers remain set on Argentina's newly-promising, post-election prospects. The greater intrigue may lay further north, however.
VanEck's Eric Fine provides delightfully unvarnished takes, and his roundup of this fall's IMF meetings contained a doozy of footnote - before the news has ratcheted up for several weeks - suggesting preparations appeared to be moving forward for a concerted, US-led effort at removing the Maduro regime in Venezuela.
The privatization of assets - among them one of the world's largest petroleum producers - would come in that action's wake. Earlier could come a potentially liberating boost for those holding zombied Venezuelan debt.
Not parsing words, Fine said it "all feels imminent and inevitable" adding from an investment perspective that even positive news on a potential change could fuel the bonds higher - bonds which, unlike Argentina's perpetual public intrigue, remain well out of the limelight, and deeply discounted.
State of Play: Donald Trump has suggested that Maduro's grip on power is in "its final days" - without specifying exactly how that conclusion would come, or when. Premature pronouncements on the country have come before, and it remains a far greater risk and undertaking than any of his foreign policy has implied to date, even if it is one that makes sense ideologically.
And that's why it could be different this time. In the near term for bondholders, even the imprimatur of change could trigger a 'hope trade' windfall. Given the debt's complexities and delinquency, which for several years have left it in legal purgatory, these notes trade at cents on the dollar. With any regime change would come the help of international financing levers. A boost for the notes' aggregate value by billions is possible without any incursion at all - simply because they are so discounted. Some long and very patient bets could already be looking better as we move into 2026.
But in the longer term, the how is everything. As VanEck's Fine also noted, there are reasons to believe that a collapse could be partial and messy, given the resources at stake and factions in the country. US war games showed the same. The extreme (if unlikely) downside looks more like the messes left in Iraq or Libya, which makes questions about US planning and commitment to the day after all the more important. Not issues that can be wished away in a Washington boardroom.
OQ View: The noise - and maneuvering - hasn't died down. But successful regime change against what, until now, has been limited probing actions against small craft, still seems a long way from A to B. No doubt, specialist managers holding Venezuelan debt will feel encouraged if not ebullient by the prospect of unlocking its value though chasing after it, for those who can find inventory, still makes for a complicated distressed target, one for which the price has surely gone up.
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