Venezuela - Increasing Signals for Regime Change, Timing Still in Question

The gradual tightening of the Maduro administration by the U.S. government has resulted in a noticeable repricing of Venezuelan bonds, which were previously trading at deep default levels. Debt prices have risen from 10 cents on the dollar to just above 30 cents. We believe the U.S. administration has a clear intent to oust Maduro. While the motivations behind this could range from seeking greater access to Venezuela's oil reserves to eliminating a detrimental anti-democratic actor from the region or even pursuing the new National Security Strategy that designates the Western Hemisphere as part of the U.S. sphere of influence, the reality is that the U.S. will continue to apply increasing pressure on Maduro. At the same time, the Trump administration appears reluctant to commit ground troops, as this could be perceived as a betrayal of the MAGA base. While c ontinued pressure on Venezuela could have devastating consequences for the population , Maduro has previously shown willingness to inflict unimaginable suffering on the populace to maintain his grip on power. Consequently, the current situation seems fluid and unlikely to lead to immediate regime change, though it raises the probability of regime change in the medium term. In this note, we present the evolution of the US-Venezuela relations amid the current geopolitical and oil market context and examine movements in Venezuelan bond and oil markets.