After Maduro, What’s Next for the Venezuelan Economy? – International Banker

By Valerie Hernandez, International Banker
 
In recent months, the US government under President Donald Trump has sought to revive a reinterpreted version of the Monroe Doctrine. Widely dubbed the “Donroe Doctrine”, it seeks to reassert the United States’ historical supremacy over the Western Hemisphere. In the early hours of January 3, US special forces conducted a surprise attack in Caracas, Venezuela, which ultimately led to the seizure of President Nicholás Maduro. So, it would seem that the Donroe Doctrine is in full swing in 2026. And the implications for the Venezuelan economy of this shock move could be profound.
Indeed, the US is now pressing to re-engage with the economically beleaguered South American nation, as it emerges from one of the most severe contractionary periods in modern history. “Venezuela’s gross domestic product (GDP) shrank by roughly three-quarters between 2014 and 2021,” according to the US Council on Foreign Relations (CFR). More recent years have witnessed tentative signs of stabilisation, driven in part by steady gains in dollarisation and more buoyant trading activity with specific nations, most prominently China, Iran, Cuba and Russia.
The US’ January intervention introduced both upside and downside risks to this trajectory. For instance, much of the past decade has seen the onslaught of US-led Western sanctions against Venezuela become arguably the defining influence on its economy. Restrictions on oil exports, financial transactions and access to international markets severely constrained economic activity in the country and led to a pronounced deterioration in national income.
With clear signs of détente between Caracas and Washington since Maduro’s abduction, however, expectations are growing that the weight of those sanctions on Venezuela’s economy will gradually lighten. The U.S. Department of the Treasury (USDT) has begun issuing licenses that allow greater flexibility in Venezuela’s oil sector—for example, permitting US companies to supply equipment and services to support production. And on March 13, the Treasury Department’s Office of Foreign Assets Control (OFAC) updated some of its General Licenses (GLs) to enable authorisation of certain activities, including:
The incremental easing of such punitive economic measures suggests that the US is willing to administer sanctions relief for Venezuela. Sanctions may also become a mechanism of conditional engagement, with access to markets and investments increasingly linked to greater cooperation and political alignment between the two parties.
The economic impacts of this shift could be substantial, with even partial relief helping Venezuela to export oil more freely, access foreign currency and stabilise its financial system. Should oil production rise as a result, moreover, Venezuela’s economic-growth prospects will receive a much-needed injection. Higher export revenues would also feed into a more upbeat outlook for domestic demand, while improved access to imports could alleviate shortages and support industrial activity.
The labour market is another key area of focus. Venezuela has experienced a large-scale exodus of workers over the past decade, with millions leaving the country in search of brighter economic opportunities, thus reducing the labour supply, productivity and Venezuela’s overall economic potential. Should economic conditions improve, workers in sectors such as energy, construction and services may well return, especially if a decidedly bullish growth-and-investment picture materialises amid a more stable long-term economic environment.
The sustainability of sanctions relief remains uncertain at this stage, however. Sanctions could be reimposed quickly should relations between the two nations deteriorate. Their conditional nature will likely prolong an uncertain environment, keeping investors at bay, at least in the short term.
Venezuela’s economic outlook also crucially depends on achieving enduring political stability, especially regarding its investment climate. Indeed, one of the most striking features of Maduro’s seizure—and unlike most historical episodes of US interventions in other countries—is that it did not trigger the dismantling of Venezuela’s existing government. Instead, power transitioned to Vice President Delcy Rodríguez, who assumed interim leadership shortly after the intervention.
It would seem that Rodríguez has thus far been willing to “play ball” with the Americans. “The Chavista movement, which once defined itself in opposition to US imperialism, must now rely on US support to survive,” the Center for Strategic and International Studies (CSIS) suggested in a March 2 report. “This is forcing the regime into a complicated dance: To revive the economy, it needs to placate the United States without demoralizing its political base.”
The government is making visible moves to improve the stability of Venezuela’s economic and investment climates. In late January, it signed a reform to the country’s hydrocarbons law to allow private domestic and foreign firms to participate directly in oil production and sales. The amendments enacted effectively ended the long-standing monopoly of the state oil company, PDVSA (Petróleos de Venezuela, S.A.), and are aimed at attracting external capital and technical expertise into an industry blighted by years of underinvestment and declining output.
Within a couple of weeks or so of taking office, Rodríguez also confirmed that Venezuela had received approximately $300 million from initial US-facilitated crude sales, as part of a broader agreement aimed at reopening oil-trade channels. The pace of this development suggests that Caracas is not only cooperating with US demands but also prioritising foreign-currency generation as a tool for economic stabilisation.
Rodríguez also appears to be repositioning Venezuela as an appealing, stable market for global investors. Having held direct meetings with domestic business leaders, signalled increasing openness to investment in key sectors such as energy and mining, and even established funds to channel oil revenues into wages and public services, it is clear that the new Venezuela seeks to integrate more capital participation into its state-dominated system.
Beyond the commodities sector, moreover, further evidence of economic stabilisation can be found in the narrowing divergence between official and parallel exchange rates, amid improved access to foreign currency and tighter control over monetary conditions. While this does not yet fully solve Venezuela’s inflationary woes, it does imply at least some restoration of price stability, which, if prolonged, should help achieve a sustained recovery in domestic economic activity.
But while relations may be on the mend vis-à-vis the US, Venezuela’s ties going forward with other crucial economic partners—particularly those classed as adversaries of Washington, such as China and Russia—are less certain. Amid the suffocating weight of Western sanctions, Venezuela found a crucial economic partner in China in recent years, with Chinese state and private entities enthusiastically providing loans, investments and access to markets in exchange for oil shipments.
The US intervention thus brings greater uncertainty to China-Venezuela relations. Should Caracas move closer to Washington, especially on the economic front, Beijing may have to accept a diminished role, with access to Venezuelan oil and investment opportunities less forthcoming.
But given that the United Socialist Party of Venezuela remains in power under Rodríguez—at least for the foreseeable future—it seems unlikely that China will withdraw entirely, given its sizeable existing investments and strategic interests in the country. That said, it is also conceivable that Venezuela will be forced to navigate more carefully among major powers amid a more complex and competitive environment.
In the meantime, Beijing is becoming more vocal in its opposition to the coercive influence that Washington is exerting over Caracas. “China firmly opposes the US setting restrictions on China-Venezuela cooperation by issuing so-called ‘general licenses.’ China’s lawful rights and interests in Venezuela must be safeguarded,” the Ministry of Foreign Affairs of China’s spokesperson, Mao Ning, said on April 1, in relation to the US issuing GLs for mineral investments and operations that exclude China, Russia, North Korea, Cuba and Iran. “What the US needs to do is lift illicit unilateral sanctions on Venezuela at once, rather than use so-called ‘general licenses’ to whitewash its moves of undermining the lawful rights and interests of Venezuela and other relevant parties.”
“Venezuela has the right to relations with China, with Russia, with Cuba, with Iran…and with the United States,” according to Rodríguez, who many have dubbed “Delxiaoping” after Chinese communist leader Deng Xiaoping, who opened up China’s markets in the 1970s to usher in an era of unprecedented economic expansion.
“The Deng Xiaoping reform era is a very interesting model for Venezuela,” said Orville Schell, the Arthur Ross director of the Center on U.S.-China Relations at Asia Society in New York, as quoted by The Guardian. “They need to open up to the outside world and get the economy going … If she [Rodríguez] has brains, she will economically reform because, my God, she’s got to get their oil industry back pumping and irrigating her government with some funds.”
 
Eugene  A. Ludwig— 27th Comptroller of the Currency
Scott O’Malia— International Swaps and Derivatives Association (ISDA)
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