Consider This: How to think about Venezuela

By now, we’ve all heard about the developments between the United States and Venezuela.

So today I want to focus on things that you might not read in the newspapers. First off, from an investment perspective, what should investors care about?

Economy

In its most recent World Economic Outlook report, dated September 2025, the International Monetary Fund (IMF) estimated Venezuelan gross domestic product (GDP) at around US$82 billion. Adjusting for foreign exchange moves, it is around US$60 billion today. That is about the same size as Cameroon, Myanmar and Tunisia. As an investor, the key things we believe are important to think about with regard to Venezuela are debt, commodities and geopolitics.

Debt

We think there is about US$150 billion of debt,¹ of which US$100 billion is sovereign debt from PDVSA (the state oil company) and the Republic of Venezuela. Estimates suggest US$43 billion of this amount is past-due interest, which means that it is interest that keeps building up on defaulted bonds. In any future negotiation over financing, this outstanding interest is extremely relevant, and it continues to grow by the day.

Who owns this debt? We know that multilateral lenders own about US$4 billion of it, split about 50/50 between the Development Bank of Latin America and the Caribbean² and the Interamerican Development Bank.³ China, we think, could own around US$15 billion.⁴ And Conoco Phillips, the US oil company, has around US$10 billion.⁵ In September 2025, a judge in the United States declared Citgo bonds to be valid, and arbitration is ongoing for US$19 billion of that debt in auction. The likelihood of a successful negotiation over this outstanding debt will depend to a significant degree on China’s willingness to cooperate. (We know from recent renegotiations in Africa and Asia that Beijing prefers to negotiate directly with the sovereign, bypassing other claimants.)

If fixed income investors think that the country’s governance is changing and this is an opportunity, many of them are likely to think immediately about oil.

So, the next question is, how much oil sector investment is needed for bond investors to want to come back? So, let us look at the oil. There are widely accepted estimates of 303 billion barrels of oil in the ground.⁶ Production last year was around 900,000 barrels per day. The peak production in Venezuela was 1997, when it was 3.45 million barrels per day.⁷ So, these numbers give you an idea of just how low production has fallen. Currently, the United States imports approximately 100,000 barrels per day of crude from Venezuela,⁸ and that is under a production agreement with US company Chevron. Theoretically, Chevron has stated on the record that the company could raise production to 250,000 barrels per day, but the country will need significant investments to get production up to around about 1.3 or 1.4 million barrels per day in two years’ time. Now to give an idea of what this means in context. The overall world market is around about 100 million barrels per day. Currently, Venezuelan output is less than 1% of that market. Whatever happens, even if it doubles to 2% of the market, it is not likely to shift the oil price in the short term. And do not forget, the United States is the biggest oil producer in the world today, at around 13.5 million barrels per day (mbpd).

Another thing to consider: Venezuela is the story of collapsed production of very heavy oil, with infrastructure that has degraded since 1998 when Hugo Chavez became president. What does that mean? Venezuelan oil is 8° to 16° API (the American Petroleum Institute measure of crude oil density or specific gravity). That means that this oil is heavy, it is literally viscous, like tar, and requires heating to make it more fluid. That makes it more expensive to refine, and only a limited number of refineries around the world are complex enough to be able to process this kind of oil. Most of them are in the United States (6), because historically they consumed heavy oil from Venezuela (pre-1998), Canada and Mexico. But from an investor’s standpoint, the key takeaway is that Venezuelan oil typically sells at a discount and has struggled to get above US$45 per barrel, regardless of the market price. Saudi oil, for example, is around 32° to 34° API, and typically trades at $65-$72 per barrel.

Geopolitics

The key surprise concerns governance. Delcy Rodriguez, the vice president of Venezuela in the Maduro regime, remains in charge, and the United States is explicitly excluding the possibility of working with the opposition in the short term and excluding the possibility of elections anytime soon.

This is a surprise for a couple of reasons: First, global observers generally believe the opposition won the last election in July 2024. Therefore, to suggest (except among regime people) that the opposition has no support seems odd. Second, the Venezuelan constitution demands that, if the president is clearly incapacitated/absent or dies in the first four years of the six-year term, a new election must be held within the next 30 days.⁹ So, we will see how that all plays out, but the assumption must be that this (current) regime is going to be easier for Washington, DC, to influence than a democratic opposition that has won an election and thinks it has a popular mandate would be.

The charitable interpretation is that it is realistic to consider the difficulties of regime change when there are a myriad of armed actors in the country and regime loyalists who do not want to go to prison.

The Iranian Revolutionary Guard has a long relationship with the Caracas regime and has built drone manufacturing facilities in the country. So, if you think about it this way,  factories that produce Iranian drones are only 2,400 kilometers from Miami. Iran’s Revolutionary Guard also supplies Venezuela with fast patrol boats equipped with anti-ship missiles. Alongside the Iranian Revolutionary Guard, Hezbollah is also active on the ground in a wide variety of endeavors. In this way, Iran has built a forward operating base in the Caribbean, with power projection capability uncomfortably close to the United States.

Russia has had a very long relationship with Venezuela and Cuba, alongside other Central American states. Venezuela and Russia have signed bilateral defense cooperation treaties and mechanisms to expand military and political ties, although details are not public.¹⁰ Currently, an estimated 120 Russian military advisors¹¹ may be in the Venezuelan army, possibly deploying Russian integrated air defense systems and Sukhoi Su-30 fighters, with Russian air-launched anti-ship missiles. The Russians called this the “Equator Task Force.” It is symbolic that the current leader who rotated in to run that operation is a general called Oleg Makarievich,¹² who commanded the operation to destroy the Kakhova Dam in Ukraine. The deployment of this senior general to Venezuela shows that Russia considers this a theater of strategic importance in the US backyard.

Separately, there is evidence of Colombian guerrilla activity (the ELN and elements of the FARC that refused to lay down arms in 2017) involvement in drugs, mining and arms smuggling.

Critical minerals

A top priority for the Pentagon is critical minerals, because China has a chokehold on either the minerals themselves or their refining and production, and the United States is desperately dependent on imports. The One Big Beautiful Bill Act of 2025 explicitly allocates US$7.5 billion¹³ for critical mineral supplies. Venezuela is rich in minerals, including critical minerals. And interestingly, in the absence of Western players due to sanctions, Chinese companies have effectively taken operational control of mining output. The Venezuelan government invited these companies in 2016¹⁴ to develop the so-called Orinoco Mining Arc (AMO). Chinese companies are buying at source because they have the money to invest in production. They direct the production of different minerals, and they then route them through to Colombia for refining, mixing them in with Colombian and Brazilian ores. As a result, the origin of these minerals is unclear, and they sell on the open market. One of the explicitly stated objectives¹⁵ of the US administration is to exclude non-hemispheric competitors from access to resources in the Western Hemisphere, as it may strategically harm the United States in the future.

The next year is going to be critical for Venezuela and the region. Investors will be watching.