The most important consideration when evaluating a given country for investment is the rule of law. Everything else is secondary.
If there’s no rule of law — which is to say if the rules aren’t fixed and equally applicable to everyone — the country’s uninvestable for the vast majority of people.
When Xi Jinping earned the “uninvestable” label for Chinese equities during his infamous antimonopoly crackdown, it was the direct result of mercurial, opaque policymaking and the impossibility of knowing who might be next in a regulatory environment where the rules were subject to change overnight.
In the same vein, investors have to be sure there are impartial arbiters and a reliable, responsive system of redress such that contracts can be enforced in the event of defaults and the like.
This is why so many observers shuddered at the appearance of ad hoc policymaking and clear-cut cases of favoritism and influence peddling on the part of the Trump administration early last year. It had nothing to do with a made-up psychological affliction called “TDS” and everything to do with concerns that the US might experience capital flight — so, the opposite of the foreign investment Trump promised to deliver — in the face of constantly shifting policies on everything from trade to the treatment of US Treasurys.
It’s with all of that in mind that at least some investors are skeptical of the notion that Venezuela’s suddenly an attractive place to deploy capital just because Nicolas Maduro and his wife are locked away in a New York prison.
Stating the obvious in an interview with Bloomberg on Tuesday, Venezuelan native Elliot Dornbusch, who manages $15 billion at Florida-based CV Advisors, called the notion that Venezuela’s a desirable investment locale “nuts.”
His argument’s simple: Trump left the regime in place sans Maduro, and even if he hadn’t, it takes decades — sometimes centuries — to establish the rule of law in a place where it’s either never existed or hasn’t existed recently.
“Expecting transformational change while leaving in place the thousands who enabled, benefited from and sustained this corruption is unrealistic,” Dornbusch said. “You can’t go and invest in Venezuela because you don’t have long-term freedom, democracy [and the] rule of law.”
There you go. I could leave it there, but I won’t because as Dornbusch noted, “Everybody and their mother” suddenly wants a piece of the action in Caracas, particularly given the perception — played up by Trump and Marco Rubio — that Delcy Rodriguez is just the woman for the job when it comes to revitalizing the country’s oil industry.
The figure above’s a reminder of what’s at stake. Venezuela’s sitting on nearly 250 billion barrels of recoverable crude, but managed to produce just 900,000 barrels per day in 2025.
Trump says he’s going to fix that or, more accurately, that big US oil’s going to fix it. And recoup some of the $10 billion that’s owed it by the Venezuelan government along the way, all with the help of a pliant Rodriguez, who has two choices: Let America access the oil or join Maduro in a US jail cell.
This whole gamble rests on the notion that Rodriguez — oil minister since 2024 — is reasonably competent, knows PDVSA and as a known quantity in global oil circles, is someone The White House could get a read on ahead of time by sounding out industry heavyweights on her capacity to right the oil tanker, so to speak.
More importantly — and I’ve been over this multiple times since Saturday, so I won’t dwell on it here — Rodriguez is a dyed-in-the-wool regime insider. That’s demonstrably bad for democracy but continuity’s good for security and stability, which you need if you’re going to get started straight away on a massive modernization project to more than triple Venezuela’s oil output if the country intends to produce at peak levels.
For all the Trump administration’s pretensions to sustaining the oil blockade, Rodriguez will get sanctions relief sooner rather than later. PDVSA started shutting in wells late last month. The longer they’re shut the harder they are to restart, and they can’t be restarted until Venezuela can free up storage space.
Of course, Trump will want to control where Venezuela’s oil goes. One place it won’t be going is Cuba, where The White House is hoping the government collapses in the wake of Maduro’s capture. Maybe Trump will let some of the oil go to China maybe not, but one way or the other, Venezuela needs to start loading. That oil represents their only source of hard currency if you don’t count cocaine.
Apparently, Trump’s going to ask American taxpayers to foot the bill for some of the reconstruction effort. “It’ll be a lot of money,” he told the US media. “A tremendous amount of money will have to be spent and the oil companies will spend it, and then they’ll get reimbursed by us or through revenue,” he added, in the course of suggesting US majors could be “up and running” in Venezuela in less than 18 months.
I don’t know how I feel about that, frankly. I own a lot (or a lot for me) of stock in US energy companies, so this is potentially good news. But as a US taxpayer, I’m no more excited about the idea of subsidizing a Faustian bargain with a deposed dictator’s deputy than Venezuelans are about a devil’s deal with an acquisitive US strongman who just kidnapped their president.
Coming full circle, absent the rule of law, any and all contracts associated with the revitalization push for the Venezuelan oil sector aren’t worth the paper they’re written on. Even if the penalty for Venezuela of breaking them’s a US invasion which, I’d gently note, would come at an even steeper cost to the American taxpayer if the $2 trillion the country threw at the Iraq war’s any indication.
Venezuela is a complex country with imbedded government corruption, random military type units providing ‘stability’ and a population tired of authoritarian rule with its attached endless inflation. It certainly doesn’t make for a no-brainer investment environment. And how much pushback will there be from the rest of Central and South America that they don’t want to be US vassals. Seems like it wouldn’t take much of a match to make the investment plan go up in flames.
I realize it sounds distasteful to us, but sometimes its easiest to get things done in a totally corrupt system when they want to be paid off for cooperation and easily recognize the threat, and the consequences of not cooperating. So there is a system there actually, not anarchy. It’s just not a transparent legal structure that we would prefer. Also, here we aren’t dealing with young radical jihadis in the Sunni triangle, who actually believed with deep conviction that the glory of heaven awaits them and God/Allah himself is definitely on their side . Still there may be a military strongman who believes instability is his golden opportunity to be the El Jeffe, the power broker and deal directly with the Americans rather than thru Delcy’s civilian govt.
H-Man, you remove the king and replace the king with your king (who happens to be a queen). You tell the king/queen you will pay me X or 3X or whatever and if you don’t, well there will be a new king/queen in short order. The new king/queen says “I’m in”. The king/queen says we only have oil. You say that will work, and you then haul home 20% of the world’s oil reserves back to the US on captured oil tankers and designate the money as you see fit. And you tell the king/queen that will be deal for the next 50 years. Venezuela is now the 14th colony with the best income stream payable to the the good old USA. Much better than a “tariff”.
It’s going to take a decade and tens of billions of dollars to rebuild Venezuela’s production capacity. That’s a lot of risk without any certainty.
This will likely work out to be as profitable as the Ukrainian minerals deal.
I wonder if John Hess has, or will have, a role in any of this? He seems to sit at the crossroads of every thing and every one needed to pull off whatever these shenanigans are.
I also wonder how large China’s loan exposure to Venezuela is, who’s on the hook and what the repayment terms are? The figure I heard was $106 billion that we know about.
Lastly, what’s going to happen to Machado, the political prisoners and the media? Are Venezuelans just going to accept a continuation of the exact same regime? https://www.bbc.com/news/articles/cd6w4y0eq70o
This whole thing, to borrow a Rumsfeld, is filled with known unknowns and unknown unknowns but the only known knowns seem to be that Congress was not involved and that Maduro was taken.
See Paul Singer and his timely Citgo buy.
Oil, Gold in the ground, wasting away. Even an increase of just 1 million Gals. would bring relief the that misbegotten nation!
AI response to “Who proved Venezuela oil reserves?”
No single person “proved” Venezuela’s massive oil reserves; rather, Venezuela’s state oil company (PDVSA) reclassified huge amounts of heavy oil in the Orinoco Belt as “proved” in the late 2000s/early 2010s under President Hugo Chávez, officially making it the world’s largest, though these reserves are difficult and costly to extract. While early exploration involved geologists like Ralph Arnold for foreign companies (e.g., General Asphalt/Royal Dutch Shell in the 1910s), the scale-up to 300 billion barrels was a self-declared reclassification by PDVSA, not an independent scientific validation of new discoveries.
Isn’t there a decent chance that Chavez pulled yet another con job and Venezuela, while of course having a lot of oil, doesn’t have anywhere near the amount of oil reserves that Trump is salivating over?
Thanks. I wondered about this point.
The answer to your question is absolutely and unequivocally Yes.
Sweet, light crudes demand the highest price because they are mostly oil with little sulfur and other undesirable impurities… this makes them easier and cheaper to refine into typical petroleum products. Vz has a few tens of billions of barrels of sweet crude, but the vast majority of what Vz has is heavier crude oil and asphalt.
Think of it this way, which is almost true: A really nice light oil is only a little darker and more viscous than kerosene. As that light oil sits around, especially in shallower oil reservoirs (less than 1000m burial), oil-hungry bacteria get into the oil and start metabolizing the lighter bits, leaving behind the heavier bits. Gradually the oil turns heavier and more viscous as it loses the lighter bits. Left long enough, it will go all the way to tar and asphalt. There are places in Vz (and elsewhere, I visited one such place in Texas) where the oil reservoir is so close to the surface and is such heavy crude that the rock hosting the oil can be mined, and ground up and used as road-quality asphalt. On a hot day, the ground is sticky with goo… plan your visit for cooler weather if possible.
The expansion by Chavez of the “proven” reserves was a paper one, by counting much of the heavy oil as recoverable, proven reserves. The rest of the world more or less considers “proven” reserves to be those well-delineated reservoirs that have oil recoverable by conventional means (drill well, pump out oil) economically at projected oil prices… so one part delineation, one part oil quality, one part economics. If advanced means are required (e.g., steam-heating the heavy oil in situ so that it can flow to an extraction well), generally that makes it hard to meet the economic factor of a “proven” reserve.
The US doesn’t have a really good estimate of the actual recoverable proven reserves in Vz, not something the USGS was tasked with in recent decades. Vz doesn’t really know either. It’s very clearly less than 300 billion barrels in any practical discussion. And that would be far less if the price of oil remains depressed.