Venezuela President Nicolas Maduro may be trying to shore up support for next year's presidential election with the announcement of a massive foreign debt restructuring.
Last week, Maduro unveiled plans to restructure Venezuela's $120 billion debt. The restructuring effort will be led by Vice President Tareck El Aissami, who will also start "the fight against the financial persecution of our country," Maduro said.
But a successful debt restructuring seems unlikely at this time, given a series of sanctions imposed by the U.S. earlier this year. The announcement also raises concern that the oil-rich country could default on its debt.
"There's a political angle to this," said Risa Grais-Targow, director of risk consultancy Eurasia Group's Latin America practice. "I think their eye is on the presidential election next year."
Venezuela's next presidential election is scheduled for October 2018. Maduro — the current president and successor to dictator Hugo Chavez — is likely to face pressure from the opposition and from the international community.
The country has been mired in an economic and humanitarian crisis. The International Monetary Fund said last month it expects inflation in Venezuela to reach 2,350 percent in 2018. This has aided the devaluation of Venezuela's currency, the bolivar. One dollar fetches more than 46,000 bolivars in the black market. The country also faces a shortage of food and basic goods.
But by unveiling this restructuring, Maduro can score political points and help secure his place as the most powerful person in the country, said Reggie Thompson, Latin America analyst at Stratfor, a geopolitical analysis platform.
"Maduro and his longtime allies want to stay in power at all costs," said Thompson, noting the announcement of the restructuring seemed like a political move.
"The announcement was done on very short notice," he said. "You also have Tareck El Aissami heading it," who is the target of U.S. sanctions himself. "Finally, there's also a ban on transactions in new Venezuelan sovereign debt, making it very difficult to restructure through the U.S. financial system."