Wall Street banks are positioning themselves to profit from the US ousting of Venezuela’s leader Nicolás Maduro, betting regime change could eventually unlock tens of billions of dollars in investment related to energy and infrastructure in the South American nation.
Lenders have been talking to consultants and bankers about the funds needed to unlock Venezuela’s vast oil reserves and restore its ailing infrastructure, with the private sector expected to play a key role in rebuilding the country.
“The initial reaction has been one of cautious optimism,” said Charles Myers, chair of Signum Global Advisors, who is taking a group of executives from oil and gas companies, banks and hedge funds to Caracas in March. “It’s not just in oil and gas. This is a country that has to be reconstructed,” he added.
Large US investment banks with big Latin American operations and plenty of cash have shown the most interest, Myers said. However, lenders fear it may be years before they can fund major projects in the country.
The only international lender with a significant retail presence in Venezuela is BBVA, which entered the market in 1997. The unit is blocked from repatriating earnings and dividends to its parent company in Spain because of Venezuela’s strict capital and foreign-exchange controls, the easing up of which could deliver a windfall to the bank.
BBVA could also be among a handful of western lenders to target Venezuela’s energy sector if restrictions are eased by financing projects to upgrade the nation’s oil infrastructure, said one investor. BBVA said it was “too soon to assess realistic prospects at this time”.
JPMorgan Chase has been doing business in Venezuela for nearly 60 years, according to the bank’s website, and it has a representative office in Caracas. But that office has been dormant for years and the bank has no teams there, said a person familiar with the matter.
Citigroup had the largest operations in Venezuela among its peers until recently, with more than a century operating in the country and hundreds of employees, but sold its business to Banco Nacional de Credito in 2021.
Wall Street has been trying to get to grips with US President Donald Trump’s attempt to reshape the oil-rich country since the capture of Maduro last weekend, though some banks were preparing clients and employees for a leadership change beforehand.
Barclays organised two private meetings with investors and Venezuela’s opposition leader María Corina Machado last year during IMF meetings in Washington in April and again in autumn, said people familiar with the matter. The discussion centred around how international businesses could return to the country if the economy opened up, they added.
Conversations around the opportunities in Venezuela have largely focused on the oil sector after Trump’s pledge to take control of its crude sales and open up the country’s reserves to US companies.
But foreign banks would be needed to fund critical infrastructure, said one senior Wall Street banker, pointing to Venezuela’s minuscule financial services sector.
While none of the industry’s major players wants to miss out on the potential opportunity on offer in a country with rich natural resources that has been a no-go area for many years, there are limitations on what they can do in the near term.
“I don’t know many clients that are super excited about rushing back in right now,” Daniel Tannebaum, head of Oliver Wyman’s anti-financial crime practice, said of the situation in Venezuela.
Banks are waiting to see if Trump will lift US sanctions on Venezuela and whether there will be new elections. Delcy Rodríguez, a Maduro loyalist and his former deputy, is running the country with US approval amid uncertainty about its political future.
“The sanctions will have to be lifted and there’ll need to be some degree of backstopping for these firms in the form of legal safe harbour if they go in,” said Tannebaum.
This has prompted scepticism about immediate investment opportunities despite Wall Street’s interest in Caracas since the start of the year.
“What do you need to be successful? You need rules and order, the rule of law and contract law, none of which exist in Venezuela today,” said Brooks Klimley, who previously worked in investment banking focusing on natural resources at Citigroup and UBS.
Bankers say they will be led by industry players such as Chevron and ExxonMobil before putting feet on the ground because oil companies will need banks to help get money in and out of Venezuela.
“The banks are going to be the followers and not the leaders,” said Klimley, though oil executives have privately said they will not be able to enter the country unless there is financing available.
Trump’s desire to spend billions of dollars on reviving Venezuela’s energy sector could mean he will lean on US banks to provide some of that funding, according to industry analysts, but lenders are likely to seek government guarantees in return.
One analyst floated the idea of deals similar to JPMorgan’s refinancing of $1bn debt in El Salvador backed by an insurance guarantee from the US International Development Finance Corporation.
“If you want to get any of this done prior to a [debt] restructuring, you’re going to need some sort of guarantee that if the investment goes belly up, someone is there to backstop it,” they said.
Any corporate dealmaking is likely to be years away. “This economy shrank 80 per cent from 2013 to 2020,” said Rodrigo Naranjo, managing partner at VIPCapital, a Caracas-based investment bank. “It will take at least a year or two for companies to have a value above $200mn to get the big [mergers and acquisitions] guys coming here.”
Wall Street decision makers will also need to shake the feeling that the US has been here before.
“It will be interesting to see if there is any real political change,” said a senior executive at a major US investment bank. “The US has parachuted into countries like this before but tends to have very little interest in what happens next.”