The most prominent news over the holidays was the US’ swift operation to capture and indict Nicolas Maduro, president of Venezuela. It remains unclear whether Venezuela will endure a successful regime change.
Our main takeaways on the event and its implications on emerging markets are as follows.
The capture of Maduro was not a total surprise
The capture did not come out of nowhere and has been anticipated by the bond market. The US military presence in the Caribbean has built up since August after President Trump authorised the deployment of naval ships to counter the so-called “narcoterrorists”. Military actions escalated in September and in mid-December with the strike and sinking of a vessel and the interception of crude oil tankers. US rhetoric has also turned more hostile towards the Venezuelan government over the last few months. The recovery value of Venezuela’s defaulted bond has risen from around 20 cents on a dollar in mid-2025 to about 30 cents by end-2025 before climbing to above 40 cents after the capture.
The US is walking the talk
The capture is in line with the latest National Security Strategy which emphasises “enlisting and expanding” the US sphere of influence in the region. The strategy seeks to push back the so-called incursions of “non-hemisphere competitors”. The capture of Maduro has sent a clear message that the US is back to support and influence the Western Hemisphere, its backyard region, as it was in the past. The US is known to have supported many different regimes in Latin America since the coldwar. Its actions involved supporting many coups. It invaded Panama in 1989 to capture its leader, Manuel Noriega, which led to a regime change.
The Trump Corollary to Monroe Doctrine lies in American economic security interests
While the Monroe Doctrine-driven US intervention in Latin America was more ideological in the past, intervention today is significantly driven by economic security interest in our view. China has rapidly expanded its commercial interest especially in the commodity sector in the region and that is now the main worry of the US. Its main goal is to push back China and exerts its control over national resources in the Western Hemisphere, be it strategic metals or energy. In his first remark before the senate foreign relations committee in January 2025, Marco Rubio stated that every foreign policy the administration will pursue must be justified by three questions: Does it make America safer? Does it make America stronger? Or does it make America more prosperous? Despite falling production, Venezuela still has the largest proven oil reserves in the world. It also has rich mineral deposits, including gold and rare earth. Increasing oil production will take some time and require new investment, but it should put downward pressure on the oil price over the medium term.
Right-leaning political factions in Latin America should benefit
What are the implications for emerging markets (EM)? Neighbouring countries’ population likely see a regime change in Venezuela positively although much uncertainty remains. Rising crime rates have been the top concern among Latin American voters. Gang violence has been associated strongly with migration out of Venezuela. The capture has sent a signal of clear support of right-leaning political factions in the region that have been vocal about getting crime and violence under control. The US will likely openly support these candidates in the upcoming elections in Colombia, Peru and Brazil. If they gain in the polls, markets in these countries should also benefit.
Chinese investment in the region is under threat
China’s investment losses in Venezuela are not the main concern. While Chinese policy banks and other state creditors will be more likely to incur more losses if the US takes control over oil receipts and directs them towards US creditors, China has reduced its exposure to Venezuela which peaked in the early 2010s. What is more important is China’s investment in infrastructure and resources in other Latin American countries. Higher US pressure is expected to push out Chinese investment in strategic infrastructure – such as Peru’s Chancay port – and critical resources (mines). A good example is Bolivia’s recent pivot towards the US following its presidential election in October which has led it to re-consider the lithium mining contracts it signed with China.
By Mali Chivakul, emerging markets economist at J. Safra Sarasin Sustainable Asset Management
