The political situation in Venezuela seemed to take another twist over the weekend after Juan Guaido's re-election as leader of the National Assembly – which confers on him the internationally recognised position of interim president – was blocked by forces aligned with the Nicolas Maduro government.
Guaido was removed by the Assembly in favour of a dissident opposition lawmaker, Luis Parra. However, the vote was flawed and irregular, with Guaido and some of his lawmakers prevented from entering the assembly by Maduro supporters and the national guard. Guaido later sought his re-election in a vote outside the assembly.
In practical terms, arguably there is no change to Venezuela's political situation, although this latest development might make things even murkier. Maduro will seek to use the flawed vote to reinforce his own position, but the government's antics have fooled no-one – the move was quickly denounced by the US, among others – and Guaido remains the country's internationally recognised head of state. That being said, a year after declaring himself interim president, with US and wider international backing, Guaido and his supporters may be disappointed that they still haven't toppled Maduro. The weekend's events risk a further loss of the opposition's momentum.
Events are probably market neutral to negative, in our opinion. They perhaps show that Maduro isn't ready to go yet; he could still remain in power for some time to come. They could, however, bring forth another round of US sanctions against the Maduro regime, and ever tighter sanctions raise investor hopes of his imminent demise.
But it hasn't happened yet. Maduro has survived the tightening net, increasingly reliant on Russia and other friends for support. For bondholders, it suggests there might still be a long wait for any kind of resolution, while US OFAC sanctions on secondary market trading remain in place; however, patient investors may be happy to wait as they continue to accrue past due interest (PDI).
For extensive detail on Venezuela's debt situation, read the Venezuela chapter of our Developing Markets Guide.