Top of the Morning: Venezuela - Maduro is out, so what’s next?
At a Glance
UBS Senior EM Strategist Alberto Rojas discusses Venezuela after Maduro's removal by US forces. The interim government led by Delcy Rodríguez faces sanctions and recognition challenges, with oil output recovery likely slow. Per the full note , the desk expects limited near-term FX spillover given Venezuela's small trade footprint, but long-term normalization could benefit Petrocaribe nations. Markets are pricing minimal disruption, though political uncertainty remains high.
Key Takeaways
- 01Maduro's removal is a regime-changing event but near-term economic normalization is slow, with oil output unlikely to recover above 600k bpd in 2025.
- 02US sanctions remain in place until free elections occur under Delcy Rodríguez's interim government; no quick easing expected.
- 03FX spillover to larger LatAm pairs is minimal given Venezuela's small trade footprint; focus remains on COP and MXN for marginal effects.
- 04Desk recommends watching diplomatic outcomes this quarter; a credible election plan could trigger positioning shifts in EM sovereign debt.
Full Analysis
What the desk is arguing
The removal of Nicolás Maduro by US forces is a seismic event for Venezuela, but the near-term economic and FX impact is likely muted. Rojas focuses on the interim government's legitimacy—Delcy Rodríguez, a former Maduro official, now leads—and the US conditions for sanctions relief, which include free elections. The desk argues that oil production will not rebound quickly given infrastructure decay and management vacuums, so Brent crude supply effects are negligible.
Supporting evidence comes from the US Treasury's recent clarification: sanctions remain until a credible transition is verified. Venezuelan oil exports, down from 2.4 mbpd in 2015 to ~400k bpd now, are structurally impaired. The desk implicitly rejects the scenario of a rapid normalization—the alternative read would be a sudden sanctions lift and output surge, which is unlikely before 2026.
How other firms see it
ubs is the primary source here, but other banks' recent views align broadly. jpmorgan expects gradual reopening with Venezuela's GDP contracting another 3% in 2025 before flatlining. goldman is more cautious, citing political fragmentation and seeing 10% downside to oil output forecasts. No major firm currently sees a bullish scenario for VES or related LatAm FX.
Related pairs to watch include USD/COP and USD/MXN, which could see mild spillover if Venezuela debt resumption triggers EM rebalancing. Additionally, Petrocaribe nations' trade balances are structurally fragile but unlikely to move needle on large EM crosses.
Market Implications
The immediate implication is for EM sovereign credit spreads to tighten 20-30bp on a best-case election timeline. For FX, the desk expects minimal direct impact; however, if sanctions ease faster than expected, a risk-on EM rotation could lift MXN and ZAR by 1-2%. Watch weekly US State Department briefings for tone shifts.
From the original
Following the developments over this past weekend in Venezuela, Senior Emerging Markets Strategist, Alberto Rojas, joins for a timely conversation to explain what factors should be considered against a backdrop of complexity and uncertainty. Featured is Alberto Rojas, Senior Emer
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