Venezuela’s sovereign dollar bonds have rallied strongly over the past few weeks as investors appear to be betting on a swift regime change and a smooth debt restructuring, but the markets risk getting ahead of themselves. Some of the latest newsflow suggests that the transition could be protracted and messy. President Maduro and key personnel within the military and state-owned oil company PDVSA have rejected amnesty in exchange for relinquishing power. Mr. Maduro has proposed discussions (mediated by Russia, which is pro-Maduro) with opposition leader Juan Guaidó, but the current regime may just be playing for time. Similar negotiations over the past few years have failed and actually resulted in Mr. Maduro doubling down on political and social repression. Hyperinflation and US sanctions are ultimately likely to force Mr. Maduro out of office. But for now, he seems to be digging in.
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