After Maduro's era, the revaluation of Venezuelan assets has only just begun!

After Venezuelan President Maduro was ousted by US military action, the country's bond market is facing a revaluation window.

According to CCTV News, on January 3 local time, Venezuela's Constitutional Court issued a ruling ordering Executive Vice President Rodriguez to assume and exercise all the inherent powers, obligations, and authorities of the President as "acting president", to ensure administrative continuity and comprehensive national defense.

This dramatic geopolitical shift directly impacted financial markets. According to Chasing Wind Trading Desk, the JPMorgan Katherine Marney team analyzed on the 4th that Venezuelan bonds could open up by 8-10 points on Monday, and subsequent gains will depend on the stability of US-Venezuela relations. The country holds more than 300 billion barrels of oil reserves, and with the Trump administration explicitly stating its intent to recoup its investment from intervention, participant enthusiasm is expected to persist. Venezuela’s current debt is about $150 billion, of which $102 billion is market bonds (including $43 billion principal plus default interest).

Though the market partially priced in regime change expectations since US troops began gathering in the Caribbean last August, the Trump administration's unexpected strategy of cooperating with the existing Chavista government brings uncertainty. The durability of this framework will determine the further movement of Venezuelan assets.

An Unexpected Political Path: Pragmatism Leading the Transition

JPMorgan states that the market had widely anticipated a regime change led by opposition leader Maria Corina Machado, who gained broad international recognition in the 2024 election. However, the Trump administration pursued a more pragmatic, transactional strategy. Trump publicly stated he has not contacted Machado, considering her to lack sufficient domestic respect and support. Instead, the US government opted to cooperate with the current government headed by Rodriguez, Secretary of State Rubio revealed that direct contact has been established and expects more “compliance and cooperation” than before.

This strategy shift marks a significant adjustment in US policy toward Venezuela. Despite Rubio emphasizing that current “cooperation” does not amount to immediate full legitimacy for the new regime, and formal recognition may require a transition period and elections, this arrangement lays the groundwork for short-term stability. For bondholders, this “non-orthodox” transition path could mean future debt restructuring will be more driven by the US bilateral agenda than the traditional IMF framework, directly impacting creditor recovery expectations.

Oil Industry: Recovery Engine and Uncertainties

JPMorgan notes that oil is key to Venezuela’s economic recovery. In 2025, the country’s crude output hovered between 900,000 and 950,000 barrels per day. According to JPMorgan’s commodities team, if the political environment stabilizes, licenses resume, diluent supply returns, and Chevron operates without restrictions, output could = increase by 250,000 barrels/day above the 2025 average in the short term. Within two years, daily output may climb to 1.3-1.4 million barrels, contingent on large-scale investment.

Trump stated that all US "sanctioned" Venezuelan oil will remain isolated, impacting about 400,000 barrels/day of crude and 100,000 barrels/day of refined exports. The US currently imports about 120,000 barrels/day of Venezuelan crude, delivered by Chevron. The exact sale price of Venezuelan oil is opaque but reportedly far below market price.

Venezuela possesses massive oil reserves exceeding 300 billion barrels. If crude output rebounds to the 1.1-1.2 million barrels/day range and is sold near market prices, the country's economic growth could rebound sharply from a very low base—driven by new oil sector investment, fresh dollar inflows, and some political stability.

Severely Contracted Economic Scale

Because Venezuela has released virtually no economic data since 2018, macro assessment is extremely challenging. The IMF’s latest World Economic Outlook estimates its nominal GDP at $82 billion in 2025; by the current exchange rate, the figure nears $60 billion. Alternative estimation by annual import volume yields a similar range. This is a steep drop from $100-120 billion in 2023/24, less than half its scale before default and major crises at the end of the last century.

JPMorgan estimates that the economy may have slowed in recent months due to declining oil revenues and dollar inflow. Nonetheless, growth in imports, local retail activity, and oil output suggest the economy’s base was relatively solid before Q4. Growth could be hampered in the short-term due to political pressures, dollar shortages, and a possible hit to oil output (especially with ongoing isolation exhausting storage capacity).

Oil income may have been declining all year, partly from global price drops, and partly from changes in Chevron and other oil sales arrangements. Dollar tightening has widened the gap between the official (DICOM) and parallel exchange rates. US isolation added pressure in early December, leading to a spread of about 90%—parallel rate up 760% year-on-year, official rate up 473%. With local prices responding quickly to exchange rate shifts, inflation may rapidly accelerate again.

From a fiscal perspective, after years of tight financing, the fiscal account may be near balance. Independent estimates show off-budget resources are positive, while monetary base is steady after adjusting for valuation changes.

Debt Restructuring: Highly Attractive Risk-Reward Profile

JPMorgan states that despite limited data transparency, market consensus puts Venezuela’s external debt at $150-170 billion, with bond debt around $102 billion. Notably, after default since 2017, overdue interest (PDI) makes up a substantial share of total sovereign debt claims—about 46% of sovereign and 38% of PDVSA claims.

Given current global emerging market high-yield bond yields are low (EMBIGD single-B yield ~7.6%, a 5-year low), Venezuelan bonds are a scarce, deep-discount asset. Since 2025, Venezuelan bond prices have doubled, but even after recent gains, their valuations remain attractive considering their massive resource base and strong US government intervention.

Analysis believes that under new bilateral ties, future debt restructuring may include oil-linked value recovery instruments (VRIs). In the short term, the market will continue to favor sovereign bonds with weaker collective action clauses (CACs) such as the 2027 maturity and 13.625% 2018 maturity, and bonds where PDI hasn't been fully priced in, like PDVSA 2021 and 2035 maturities.

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The above brilliant content is from Chasing Wind Trading Desk.

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