For crisis-hit Venezuela, the new year appears to look a lot like the old, with civil strife, food and medicine shortages, and a brutal recession battering the oil-rich economy.
However, there's one development that adds a new wrinkle to Venezuela's rapidly deteriorating situation. In a surprise move this week, the cash-strapped country issued sovereign bonds for the first time in five years, to the tune of $5 billion.
The deal dovetailed with a separate decision by the government to pledge a nearly 50 percent stake in Citgo, its U.S. refinery subsidiary, as collateral for a loan from Rosneft, Russia's state-controlled energy company. The Citgo collateral deal is already being challenged in court by U.S. multinationals, The Wall Street Journal reported this week,
To some, it may seem like another last-ditch effort to keep lights on in Caracas, but market watchers say the arrangement is one to watch for several reasons.
Russia's contentious relationship with the U.S., combined with Venezuela's own long-standing antipathy toward the world's largest economy, could mean trouble if Venezuela fails to make good on its debts. Citgo — owned by Venezuela state oil company Petroleos de Venezuela SA (PDVSA) — is also a major U.S. oil refiner, and in theory could find its assets seized by Russia.
"If anything goes off the rails, the Russians will call the tune and pick up the pieces," Steve Hanke, a Johns Hopkins economics professor and director of the Troubled Currencies Project at the Cato Institute, told CNBC.
"The Russians are very smart and know how to structure air-tight deals in cases like this," he added.
Then again, 2017 could also be a year of upside surprise from Venezuela. Markets are watching President-elect Donald Trump's ascension with baited breath, and his policies will likely reverberate through Latin American capitals. Mexico, for example, has had to bolster its peso in markets, amid whiplash stemming from Trump's tough talk on trade and immigration.
In the midst of Venezuela's turmoil, President Nicolas Maduro's ruling United Socialist Party (PSUV) has found itself isolated and deprived of political support—something investors say is a good thing on balance.
"Venezuela is in better shape financially because recent opinion polls show that PSUV is no longer the most popular political party in the country," said Jan Dehn, head of research at Ashmore Group, an emerging market specialist investment firm.
"Since Venezuela needs a new government the decline in PSUV's approval rating brings regime change closer," he added.