Venezuela and our regionalized world

On January 3, the US captured Venezuelan President Nicolás Maduro and transferred him to New York to face criminal charges. Venezuela’s ruling coalition moved quickly to project continuity, swearing in Delcy Rodríguez as interim president while the country’s institutions debate the constitutional path forward. International responses have been polarized, with much criticism, but little initial reaction, while US officials and congressional leaders stress that the country is not at war and is not seeking a traditional occupation. 

For investors, Venezuela matters less as a standalone “country story” and more as a signal about spheres of influence. The market takeaway is that global politics is becoming more regionalized—a world of overlapping “Monroe Doctrines,” where great powers seek to shape outcomes close to home (and protect strategic supply chains) using tools that sit between diplomacy and open war: sanctions, interdictions, financial pressure and selective force.

Background and geopolitics

Venezuela is highly urban and has experienced an enormous migration shock in the past decade or so: nearly eight million people have left the country as refugees or migrants, about a quarter of the population. During much of this time, hyperinflation has raged, and the economy contracted severely. The mass migration of Venezuelans has become a defining regional issue, influencing politics, labor markets, and security debates across Latin America.

The current Venezuela episode is as much about geopolitical influence as it is about oil. It underscores how quickly politics can reset the investment landscape, especially in regions where strategic resources intersect with major-power competition.

Two geopolitical implications present themselves, the first regional and the second global:

• Latin America’s political map is shifting. The region has undergone a broader rightward tilt, with Chile’s recent election outcome often cited as emblematic of voter priorities around security, migration, and macro credibility.  Argentina is another example. There are elections upcoming in Colombia and Brazil too in 2026.
• Venezuela is not Taiwan, but markets increasingly price geopolitics through a common lens: how far will major powers go, and what tools will they use? If investors conclude that coercive economic tools and selective force are becoming more common, the risk premium can rise around global chokepoints and sanction-sensitive supply chains, issues that sit at the core of Taiwan-related tail risk. Interestingly, however, emerging market (EM) currencies have performed strongly recently despite the Venezuela risk. This is similar to last year where EMs outperformed despite geopolitical tensions in the Middle East and Asia. 

The energy question

Economically, Venezuela remains dominated by oil, but the energy implications of regime change are likely to be blunted by its enfeebled infrastructure. The country holds about 303 billion barrels of oil reserves, the world’s largest by many estimates.  But “oil in the ground” is not the same as oil that can be produced profitably and at scale. Furthermore, years of underinvestment, operational degradation and sanctions have kept output far below past levels. 

In the near to mid-term, the impact on the energy market looks to be muted. Venezuela’s production remains under a million barrels a day with roughly 150,000 of that exported to the US and 400,000 sent to China. Even if all exports were directed to the US, an additional 400,000 barrels of crude per day would be small compared to the roughly 18 million barrels of daily refining capacity in the US. 

By some estimates, an investment of more than $100bn would be needed over the next five to seven years to restart idled oil equipment and grow production in Venezuela. While there is a precedent for restarting production and doubling output with post-2003 Iraq, additional crude supply today would have to compete in a world which is actively working through an estimated two million barrels a day of excess supply. Additionally, the breakeven cost for Venezuela’s heavy and difficult-to-transport crude is higher than many projects already operated by the oil majors.

Legal ownership is another hurdle that must be resolved. Dating back to the early 2000s, Venezuela’s laws require joint ventures with a state-owned energy firm. The country has also experienced mass outflows of the engineers and technicians needed to operate production, design new facilities and manage transportation. With 2026 capital budgets already set by the oil majors, investment in Venezuela looks to be a 2027 event or later even if skilled labor is available. 

The market response

Perhaps it’s understandable, then, that oil prices have seen a relatively muted response so far. The more immediate questions are: who can buy Venezuelan oil, how will they ship it, and how quickly can those barrels be redirected?

Beyond energy, there may also be medium- to long-term opportunities in Venezuela across other sectors such as mining, financial services, consumer staples, consumer discretionary, and industrials. Much hinges, though, on how things play out politically over the next few years, with a new government, diplomatic relations and constitutional changes being required to restore a functioning market economy. The stability we’ve seen in the market bodes well for EMs in the near term; the longer term, as always, will take work.