There is a “Plan A” for the oil-rich nation of Venezuela in its $60 billion debt restructuring.  But odds are the socialist nation, which once attempted to force private companies to produce goods at a loss to keep down inflation, is on the road to a “messy” debt default, according to Deutsche Bank analysis.

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The Venezuelan government didn't believe free market powers and supply and demand constraints existed, and now it pays the price

A lot has happened in Venezuela recently,” Analyst Hongtao Jiang writes in a November 21 report and trade recommendation.

The government has turned into an economic mess under the rule of President Nicolas Maduro. With spiraling inflation at near 4,000% annually and the South American nation arresting four US business executives on alleged corruption charges late Wednesday, the nation’s sovereign debt has moved into a questionable phase as well.

While S&P declared a default, the International Swaps and Derivatives Association (ISDA), led by former CFTC Commissioner Scott O’Malia, is meeting on November 27 to determine if $1.5 billion of credit default swaps (CDS) insuring the bonds are headed for default.

Jiang, for his part, isn’t optimistic.

Although the Maduro government has made promises it will pay investors, “to our knowledge, investors have yet to receive any of these payments,” he wrote. In other words, the check remains in the mail.

He thinks the first step that Maduro and his economic team will explore is a debt “refinancing” deal to create better terms. But such thinking is not likely to win the day, which could plunge investors into the unknown. “Once they figure out it is not possible, then they will resort to a Plan B, which may not be clear for the government at this stage.”

Without a clear Plan B, the likely default scenario is, in fact, a hard default.

Presidential elections not expected to change much

In the near term, Venezuela may continue to pay until the presidential election is complete and is on the way to completing another six-year term. The recent elections took place amid significant vote rigging charges.

Looking at the tea leaves, however, it seems they are positioning for a serious relationship break. Venezuela continues to drop its exposure to the US, which recently placed restrictions on the country and its financial transactions. Now Venezuela has its eye on avoiding a potential oil embargo or asset seizure program, which brings back memories of the battle between Argentina and Elliott Management’s Paul Singer.

Don’t look for politics to be the savior, either.

“We do not believe there is a material possibility for a negotiated deal to be struck between the government and the opposition,” as the ruling government is expected to hold elections “on its own terms in an attempt to stay in power.”