The post-Maduro era, the revaluation of Venezuelan assets has just begun!

After Venezuelan President Maduro was ousted by U.S. military action, the country's bond market welcomed a reassessment window.

According to CCTV News, on January 3 local time, the Venezuelan Constitutional Court ruled that Venezuelan Vice President Rodríguez should assume and exercise all powers, obligations, and authorities inherent to the position of President of Venezuela as "acting president" to ensure the continuity of national administration and comprehensive national defense.

This dramatic geopolitical turn directly impacted the financial markets. According to news from the Chase trading desk, the Katherine Marney team at JP Morgan analyzed on the 4th that Venezuelan bonds may open up 8-10 points on Monday, with subsequent gains depending on the stability of U.S.-Venezuela bilateral relations. The country has over 300 billion barrels of oil reserves, and with the Trump administration clearly stating its intention to gain investment returns from intervention, market participants are expected to remain enthusiastic. Venezuela currently has a debt scale of about 150 billion USD, of which market bonds amount to 102 billion USD (including 43 billion USD in principal and default interest).

Although the market had partially digested the expectations of regime change since last August when U.S. troops began to gather in the Caribbean, the Trump administration's choice to cooperate with the existing Chavista government was unexpected. The durability of this framework will determine the further trajectory of Venezuelan assets.

Unexpected Political Path: Pragmatism Dominates the Transition Period

JP Morgan stated that the market had previously widely expected the regime change to be led by opposition leader Maria Corina Machado, who received broad international recognition in the 2024 elections. However, the Trump administration adopted a more pragmatic transactional strategy. Trump publicly stated that he had not engaged with Machado and believed she lacked sufficient respect and support domestically. In contrast, the U.S. government chose to cooperate with the current regime structure led by Rodríguez, with Secretary of State Rubio revealing that direct contact had been established between the two sides, and it is expected to achieve more "compliance and cooperation" than before.

This strategic shift marks a significant adjustment in U.S. policy toward Venezuela. Although Rubio emphasized that the current "cooperation" does not equate to immediately granting full legitimacy to the new regime, and formal recognition may require a transition period and elections, this arrangement provides a foundation for short-term stability. For bondholders, this "unorthodox" transition path may mean that future debt restructuring will be more driven by the U.S. bilateral agenda rather than the traditional International Monetary Fund (IMF) framework, which will directly affect creditors' recovery expectations.

Oil Industry: Engine of Recovery and Uncertainty

JP Morgan stated that the key to Venezuela's economic recovery lies in oil. The country's crude oil production is expected to hover between 900,000 and 950,000 barrels per day in 2025. According to estimates from JP Morgan's commodities team, **under conditions of political stability, restoration of permits, resumption of diluent supply, and unrestricted operations by Chevron, production could increase by 250,000 barrels per day in the short term compared to the 2025 average In the next two years, the production is expected to rise to 1.3 to 1.4 million barrels, depending on the implementation of subsequent large-scale investments.

Trump stated that the isolation of all "sanctioned" oil from Venezuela will continue, affecting approximately 400,000 barrels per day of crude oil and 100,000 barrels per day of refined oil exports. The United States currently imports about 120,000 barrels per day of crude oil from Venezuela, delivered by Chevron. The exact selling price of Venezuelan oil is opaque, but it is presumed to be far below market prices.

Venezuela has over 300 billion barrels of massive oil reserves. If crude oil production rebounds to the range of 1.1 to 1.2 million barrels per day and is sold close to market prices, the country's economic growth could rebound significantly from a very low base—thanks to new investments in the oil industry, new inflows of dollars, and a certain degree of political stability.

Economic Scale Severely Shrinking

Since Venezuela has hardly released economic data since 2018, assessing the macroeconomy is extremely challenging. The International Monetary Fund estimates the country's nominal GDP in 2025 to be $82 billion; at current exchange rates, this figure is closer to $60 billion. A similar range is derived from an alternative estimation method based on annual imports. This represents a significant decline from the $100 to $120 billion range in 2023/24, less than half of the economic scale before the defaults and severe crises at the end of the last century.

JP Morgan estimates that the country's economy may have slowed in recent months due to declines in oil revenue and dollar inflows. Nevertheless, the growth in imports, local retail activities, and estimated oil production indicate that the economy is relatively stable before the fourth quarter. Due to political pressure, dollar shortages, and potential hits to oil production (especially as isolation continues to deplete storage capacity), growth may be hindered in the short term.

Oil revenue may have been declining this year, partly due to falling global prices and partly due to changes in Chevron and other oil sales arrangements. The tightening of dollars has widened the gap between the official exchange rate (DICOM) and the parallel exchange rate. The isolation imposed by the U.S. in early December exacerbated the pressure, leading to a gap of about 90%—the parallel exchange rate rose 760% year-on-year, while the official exchange rate rose 473% year-on-year. Given that exchange rate fluctuations quickly transmit to local prices, inflation may accelerate rapidly again.

From a fiscal perspective, after years of financing constraints, the fiscal account may be close to balance. Independent estimates show that off-budget resources are in positive territory, while the monetary base remains stable after correcting for valuation changes.

Debt Restructuring: An Attractive Risk-Return Ratio

JP Morgan stated that despite limited data transparency, the market generally estimates Venezuela's total external debt to be around $150 billion to $170 billion, with bond debt accounting for about $102 billion. Notably, due to defaults since 2017, overdue interest (PDI) occupies a significant proportion of total debt claims, accounting for about 46% of sovereign debt claims and 38% of PDVSA debt claims.

In the current environment where yields on emerging market high-yield bonds are low (EMBIGD single B yield is about 7.6%, at a five-year low), Venezuelan bonds offer scarce deeply discounted assets. **Since 2025, the price of Venezuelan bonds has doubled, but even after accounting for recent increases, considering its vast resource base and the strong willingness of the U.S. government to intervene, Its valuation remains attractive.

Analysis suggests that under the new bilateral relationship, future debt restructuring may include value recovery instruments (VRI) linked to oil revenues. In the short term, the market will continue to assign higher valuation premiums to sovereign bonds with weaker collective action clauses (CAC), such as the bonds maturing in 2027 and the 13.625% bonds maturing in 2018, as well as bonds (such as PDVSA 2021 and 2035 bonds) where PDI has not been fully priced in