“They’re worried the opposition will come in and not necessarily want to honor their contracts — or find loopholes,” said Russ Dallen, managing partner of investment bank Caracas Capital Markets.
But Dallen acknowledged that Beijing’s loyalty may not last. “The Chinese don’t know what to do. They’re not getting paid by Maduro’s guys … and the situation keeps deteriorating.”
A desire to avoid antagonizing the United States during an already complex, high-stakes trade war may encourage China to consider a change of allegiance from Maduro to Guaido, according to Dallen.
“It would not be unusual for the Russians … to try and exercise the lien they have on the Citgo collateral, just because it would be very disruptive and chaotic to the U.S.,” said Dallen of Caracas Capital.
Where Venezuela goes from here?
If Guaido wrests control of the government, there won’t be widespread default, but nobody is going to get paid immediately.
The International Monetary Fund will likely take the lead in what would be one of the largest and most complicated sovereign debt restructurings ever. Venezuela will essentially have to be rebuilt completely.
The good news for Venezuela is that it sits on 300 billion barrels of oil, as well as underground reserves of gold, iron ore and other resources.
“What they have is a liquidity crisis, but not a solvency crisis. Everyone should be pretty sure they are going to get paid back,” said Dallen.