House Views – Venezuela’s turning point: High stakes, open questions, and a long timeline

Executive Summary

Recent developments in Venezuela have created a fluid situation with potentially major geopolitical and economic implications. The U.S. military buildup and blockade measures have set the stage for a longer-term involvement. Moreover, the economic effects will be muted as Venezuela accounts for roughly 0.1% of global gross domestic product (GDP), and about 1% of global oil supply.

While its massive untapped energy resources and potential increased oil output offer major opportunities, these won’t likely materialize soon. Success will depend on efficient management, international cooperation, and substantial investment, which could lead to a resurgence of Venezuela's economy with benefits for regional and global stakeholders. After years of neglect, rebuilding the country will be a long undertaking.

Our take

The fluid situation may result in different outcomes

Since the end of last summer, the U.S. military has amassed an unprecedented military resource buildup, including the Navy’s most advanced aircraft carrier and roughly 20,000 military personnel. Before the large-scale attack on January 3, Venezuela’s airspace was declared off limits for commercial airliners and sea routes were mostly on blockade for commercial traffic. Although President Nicolás Maduro's capture was largely unforeseen, the significant U.S. military presence now suggests they will remain in the region until their objectives are met.

President Donald Trump promised to send American troops to the country if necessary; however, since there is currently no military presence, this suggests a wait-and-see strategy that gives the opposition a chance to gain political power within the country. This process may take considerable time, and there is a risk that events may spiral out of control, potentially causing ripple effects on future U.S. foreign policy.

Economic implications for the world, the region, and the U.S.

The near-term impact for the overall global economy and markets will likely be minimal. Its economy is quite small, even in regional terms. Longer term, if Venezuela’s crude oil production can be increased, it would greatly benefit its economy and could be positive for capping the upside of oil prices and global economic importers.

For the U.S., the energy sector, which our sector strategy team updated from unattractive to neutral in mid-December, would see the biggest impact. The most obvious incremental benefits would be providing the infrastructure and expertise needed to rebuild the energy resources; however, the rebuilding process will likely take a very long time. Construction and engineering firms, heavy‑machinery producers, and other industrials could also benefit, as would utilities given the dilapidated electrical grid and other critical infrastructure.

Globally, energy-importing countries – such as most Asian, major European, and select other emerging economies – could benefit from Venezuelan energy output reaching markets sanction free. But that assumes that happens quicker than anticipated.  

Yet, Venezuela has been seen as unattractive to global investors for decades. Beginning in the mid-1970’s, Venezuela nationalized its oil industry by seizing assets and pushing out most global energy producers, which accelerated more recently under Hugo Chavez's rule (1999-2013). Since then, its economy became largely disconnected from global trends.

If managed well, reintegration into the global economy would greatly benefit Venezuela, its people, nearby countries, and investors involved in the process. Venezuela currently produces less than 1 million barrels of oil per day (BPD), down from 3 million BPD in 2013. Major investment is required to restore energy output, which could increase global supply, helping ease inflation, and maintain low capital costs for economic growth, not only for Venezuela but potentially for the whole world.

Geopolitical implications

In recent years, except for Russia's invasion of Ukraine, geopolitical events like the fall of Assad’s regime in Syria, Israel’s brief conflict with Iran, and developments in Libya have had little adverse impact on global economic activity. The main concern now is that Venezuela's situation could prompt Russia or China to pursue similar military intervention elsewhere. For instance, this could stall Russia-Ukraine negotiations or embolden China to invade Taiwan.

At the very least, Venezuela will likely be a near-term distraction for markets, especially with the court case of President Nicolás Maduro. Meanwhile, investors are already attempting to quickly sift through what companies could be possible winners and losers.

Venezuela’s potential

Venezuela holds the world’s largest proven oil reserves, exceeding those of the U.S., Saudi Arabia, and Russia. Most reserves were discovered in the late 20^th century, with minimal investment since Hugo Chávez’s first term in 1999. Reserves could be larger and more profitable if modern seismic research technologies were used. Alongside potential oil revenues, the country's bauxite, iron ore, gold, and silver reserves could yield substantial benefits if public resource extraction programs were managed efficiently.

In 1950, Venezuela ranked as the world’s fourth wealthiest nation in terms of per capita GDP. Today, it is ranked 161^st by the International Monetary Fund (IMF) projections—behind war-torn countries like Iraq, Iran, and Lebanon. With its educated and youthful population of around 30 million, Venezuela has the potential to reclaim the world's fourth richest country by the century's end, surpassing $4 trillion in GDP in today’s dollars.

Bottom line

While the near-term economic impact of Venezuela’s upheaval is muted, the long-term stakes could be significant. If political stability is achieved and reintegration with global markets accelerates, Venezuela’s vast resource base could reshape energy dynamics, ease inflationary pressures, and create new investment opportunities across emerging and developed economies. Execution risk remains high, and there are still many open questions, but there is potential upside, from regional growth to global supply chain benefits. That said, this will take time – think years, not months.