Current Events Q&A: January 14, 2026

How should investors interpret the Venezuela news?

Weekly Summary

The arrest of Pres. Nicolas Maduro over the prior weekend was shocking to many, although the groundwork had been laid for months, with effectively a naval blockade of the country and selected targeting of suspected drug boats. The U.S. bounty on Maduro had reached $50 mil., based on U.S. narco-terrorism and related charges, and represented clearly a high and rising priority of the administration.

Background

The administration’s spin was carefully not postured as an ‘invasion,’ which could have brought even more scrutiny about potential interference with national sovereignty, presidential vs. congressional legal authority, and political pushback in the U.S. around possible financial cost and duration of any military occupation, if it came to that. This is particularly sensitive around the world in light of the Russian invasion of Ukraine, and long-term concerns of a Chinese takeover of Taiwan. It is also regionally sensitive based on the involvement of the U.S. in a variety of Central and South American activities for two centuries, including several in the 1980s under President Reagan, and movement away from the U.S. wanting to be viewed as an overbearing colonial force. Instead, it was described as a targeted ‘law enforcement’ operation, in bringing Maduro to New York to face U.S. courts. Military damage was limited to communications, air defense, a U.S. cyberattack on parts of the Venezuelan power grid, and Maduro’s Cuban-led personal protection force. Importantly, oil facilities and other infrastructure were not disturbed, in keeping with objectives of U.S. involvement in ultimately getting production back up to a functional level. Not losing the ‘hearts and minds’ of the Venezuelan population (and sizable diaspora abroad) appeared to be an important factor as well.

Geopolitical Backdrop

This was seen by some as a bit of a return to the U.S. ‘Monroe Doctrine,’ a policy first crafted in the 1820s that warned the world about further colonization, expansion, or interference in the Americas. In the modern era, the policy has implied that, from a superpower standpoint, everything in the Western hemisphere should be under the influence of the U.S. only. From early on, that policy was designed to keep outside powers away from the U.S. doorstep. Those included Europe in the 19th century, the Soviet Union in the 20th century, and now specifically China and Russia, as well as their proxies, which includes Cuba. Maduro was the 2013 successor to Hugo Chavez, who had run the country as President since 1999 and attempted a variety of socialist reforms, including a re-nationalization of oil company assets (and confiscation of some U.S. energy property, with another objective being financial payback for this).

Natural Resources (mostly oil)

This is especially important in a world where natural resources are again top of mind, with Venezuela’s massive oil reserves (around 300 billion barrels, thought to be among the largest in the world, at just under 20% of total global estimated reserves), as well as rare earth minerals, which could provide the U.S. supply diversification away from China. The oil issue is a big one, especially for Venezuelans, where it represents one of their most important national assets. Venezuela has sold oil to China, as well as illicitly to non-U.S. ally nations—so the Maduro ouster has shifted leverage toward the U.S. A sticking point is that Venezuelan crude oil is ‘heavy,’ with thicker viscosity and higher sulfur content, so it’s more costly and time-consuming to refine, explaining why it’s priced at a discount to higher-quality oil grades. Refineries on the U.S. Gulf Coast are equipped to handle that type of crude, and the administration has already been in talks with U.S. energy companies on public-private partnerships. Venezuelan facilities have suffered from underinvestment and misallocation, with current production at only 1% of total global output, so modernization is likely a multi-year process, but a lot of potential upside.

Current Oil Environment

This also comes at a time when global oil markets appear oversupplied going into 2026, which led to a -20% drop in per barrel market prices during 2025. Lower oil prices in general tend to be positive for economic growth (except for massive oil exporters), since it lowers industrial and transportation input costs, especially in contrast to the headwind created by high prices seen at various times in history. While more oil isn’t needed at this moment, supply assets being brought online in the next several years are assumed to help improve the flex factor if/when those barrels could come in handy to bring prices down.

Sovereign Bonds

Venezuela is considered at the edge of the emerging/frontier market universe, with prior exposure in EM bond indexes years ago in the 0.5-1.0% range, but sanctions have effectively dropped the country from the mainstream index, due to low liquidity for this debt. However, the bonds remain popular with hedge funds and other speculators, due to their very high yields and hopes for an eventual upgrade, which could boost prices. The elevated current yields are driven by a history of credit weakness (like a $60 bil. default in 2017), and weak internal controls, but bond prices did rise 10 points (30%) immediately upon news of Maduro’s capture, upon higher likelihood of a debt restructuring and perhaps some recovery of nearly a decade of owed interest. Improvement in economic and political stability (i.e., getting paid back) also raises odds of an improved borrowing environment and lower interest rates/higher bond prices, which is a goal of most governments.

Non-economic Impact

The removal of a highly unpopular authoritarian leader raises hopes for change toward a freer democracy there, which is also aligned with traditional U.S. policy towards such things (particularly in the region during the 1980s, and struggles against socialist/communist influences). The Maduro regime was assumed to support and have active dealings with a variety of foreign terrorist organizations, as well as drug cartels in Latin America. A fall in economic relevance since the 1970s created a hyperinflationary environment and economic instability, which could be improved under new leadership. While in the news frequently for geopolitical reasons, Venezuelan GDP as a percentage of world GDP has fallen from around 1% in the 1970s to 0.1% today. The economic difficulties have led to a strong outflow of migrants from Venezuela (including to the U.S.) in recent years, which could slow upon domestic conditions improving. For now, the current vice president, Delcy Rodriguez, has taken over, but U.S. diplomatic involvement to prevent a power grab by military officials or criminal groups is likely ongoing, but represents a risk to near-term stability. There are opposition leaders in exile as well, claiming seats at the table, with the hoped-for outcome being a fair democratic election at some point.

Perhaps as much as anything, the big picture view of the removal of one negative is why financial markets cheered as opposed to fretted, but this was certainly not a market-shaking event. Though it could be meaningful as a longer-term factor in the Western hemisphere’s geopolitical and economic backdrop.

Have a good week.

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Sources: Ryan M. Long, CFA; Director of Investments; FocusPoint Solutions, Inc.

FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, First Trust, Goldman Sachs, Invesco, JPMorgan Asset Management, Marketfield Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, PIMCO, Standard & Poor’s, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

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