Guaido's call for military uprising forces a turning point in Venezuela

August 23, 2019 — In this Q&A, the Eaton Vance floating-rate loan team offers its perspective on today’s loan market.

By: Craig P. Russ; Andrew Sveen, CFA; Ralph Hinckley, CFA; Christopher Remington

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By John R. BaurDirector of Global Portfolio Analysis, Eaton Vance Management

Boston: The call on Tuesday by Venezuela's "interim president," Juan Guaido, for a military uprising against the regime of Nicolas Maduro, was a high-stakes move with decisive implications for the country. As of this writing, the situation was still fluid, but we see two potential scenarios emerging:

  • If the uprising is successful, Guaido will take over and lead the country out of the economic and political crisis.

  • If the uprising fails, Guaido will be finished as a political force.

But even if Guaido is successful, the challenges to rebuilding the devastated economy are enormous, and the renewal of investment opportunities will take a long time. In 2017, the government of Venezuela and PdVSA, the state-owned oil company, stopped servicing most of their debt obligations (PdVSA continues to service one bond). The restructuring of defaulted Venezuela and PdVSA debt will be extremely complicated and time-consuming.

Bottom line: Venezuela's mismanagement of its finances and oil resources has been a major factor in the country's slide into near chaos under the Maduro regime. Even if Guaido prevails under the best-case scenario, the road ahead will still be long and painful.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.