Although markets had largely anticipated Nicolás Maduro’s departure following the U.S. buildup that began in August, his surgical removal, and Washington’s decision to work with elements of the existing Chavista apparatus, marks an unexpected turn. This development closes one chapter of Venezuelan history and opens a pathway toward political transition that markets would likely welcome, insofar as it could enable economic recovery and support eventual debt restructuring. Still, it should be viewed only as the beginning of a process that remains fragile and is likely to prove complex.
Secretary of State Marco Rubio has outlined a three-step U.S. approach to Venezuela that is as much about controlling cash flows as it is about politics. First comes “stabilization,” aimed at preventing chaos by maintaining a tight quarantine over Venezuelan crude. Then follows “recovery,” framed around restarting the economy by reopening access to the Venezuelan market, particularly the energy sector, to U.S. and Western firms. Finally comes the “transition”: the move to a new political order, in which the country’s ultimate transformation must be led by the Venezuelan people themselves.
Outlook for oil
Venezuela may sit atop the world’s largest proven oil reserves, but its oil sector, still the country’s macroeconomic fulcrum, has been hollowed out by decades of neglect. Output is hovering just below 1 million barrels per day, a fraction of the roughly 3.5 million bpd produced in the late 1990s.1
In the near term, this is a rehabilitation story, not a miracle. With infrastructure degraded and capital scarce, consensus is divided on how quickly production can recover. In our view, a realistic upper-end view points to an increase of roughly 0.4 million bpd by end-2026, meaningful, but not transformative for the global balance.
Over the longer term, the asymmetry is the headline. Venezuela holds roughly 20% of global oil reserves, yet contributes only about 1% of global production.1 That gap signals substantial medium- to long-term upside if the political backdrop turns supportive and sustained capex finally flows into fields, upgraders, pipelines, and export capacity. In that scenario, Venezuela could graduate from a “local story” to a global marginal barrel, the point at which its supply trajectory begins to matter for world oil prices.
Layer in the U.S. angle, policy leverage combined with domestic production, and Washington is positioned to exert outsized influence on crude pricing. If policymakers remain inclined toward lower oil prices (think ~$50/bbl or below), Venezuelan barrels become not just a recovery trade, but a potential instrument in the broader energy-price playbook.
The Trump corollary
A new U.S. National Security Strategy is reportedly pushing Latin America back to the top of Washington’s priority list, explicitly treating the region as part of a U.S. sphere of influence and placing renewed emphasis on limiting external, especially Chinese, leverage. The headline is the branding: the Trump administration is reviving a 200-year-old concept of hemispheric primacy and repackaging it as the “Donroe Doctrine.”2 But for markets, the relevance is not the slogan. It is the attempt to operationalize the idea, with language that frames the hemisphere as a space the U.S. wants politically and commercially aligned, and “free” of hostile foreign ownership of strategically important assets.
For investors, this shift elevates geopolitics to a first-order input in investment analysis. We saw a preview last year when Argentina’s bonds surged on the back of perceived “whatever-it-takes” U.S. support and improving political momentum through the midterms. Now Venezuela is the live wire. Distressed paper has staged a sharp year-to-date rally (roughly 30% by some measures)3, driven by growing expectations that a pathway toward normalization, and eventually restructuring, is becoming less remote.
The obvious question on trading desks is: who’s next? Not in the sense of moral hazard, but in the practical reality that policy signals, sanctions risk, and great-power competition can reprice sovereign risk far faster than fundamentals. In a “Donroe Doctrine” world, the key investor edge is not merely spotting macro turning points. It is mapping where U.S. strategic priorities may compress risk premia, and where they may widen them overnight.
Figure 1: Venezuela crude production
Data as of December 31, 2025
Source: OPEC
1. Source: OPEC
2. The Donroe Doctrine refers to principles of President Trump's foreign policy in the Americas. An adaption of the historical Monroe Doctrine, it describes a perceived desire by the second Trump administration to assert American predominance in the Western Hemisphere.
3. Source: Bloomberg
IMPORTANT DISCLOSURE
Availability of products and services provided by MacKay Shields may be limited by applicable laws and regulations in certain jurisdictions and this document is provided only for persons to whom this document and the products and services of MacKay Shields may otherwise lawfully be issued or made available. None of the products and services provided by MacKay Shields are offered to any person in any jurisdiction where such offering would be contrary to local law or regulation. This document is provided for information purposes only. It does not constitute investment advice and should not be construed as an offer to buy securities. The contents of this document have not been reviewed by any regulatory authority in any jurisdiction. All investments contain risks and may lose value and these materials do not undertake to explain all of the risks associated with any investment strategy referred to herein. Clients and investors should not invest in any strategy referred to herein unless satisfied that they and/or their representatives have requested and received all information that would enable them to evaluate the merits and risks thereof. Any forward-looking statements speak only as of the date they are made, and MacKay Shields assumes no duty and does not undertake to update forward looking statements. Any opinions expressed are the views and opinions of certain investment professionals at MacKay Shields which are subject to change without notice. There may have been, and may in the future be, changes to the investment personnel responsible for the management of the strategy(ies) described herein, as well as changes to the investment process utilized by such investment personnel. Past performance is not indicative of future results.
At the time of writing, MacKay Shields LLC maintains investments in the securities, issuers and/or companies cited herein. References to such securities, issuers and/or companies for educational and informational purposes only, and are intended to convey factual information and current market conditions. Such names are not intended, nor should they be construed as, a recommendation to buy and sell any individual security.
Information included herein should not be considered predicative of future transactions or commitments made by MacKay Shields LLC nor as an indication of current or future profitability. There is no assurance investment objectives will be met.
Past performance is not indicative of future results.
NOTE TO UK AND EUROPEAN UNION AUDIENCE
This document is intended only for the use of professional investors as defined in the Alternative Investment Fund Manager’s Directive and/or the UK Financial Conduct Authority’s Conduct of Business Sourcebook. To the extent this document has been issued in the United Kingdom, it has been issued by NYL Investments UK LLP, 200 Aldersgate Street, London UK EC1A 4HD, which is authorised and regulated by the UK Financial Conduct Authority. To the extent this document has been issued in the EEA, it has been issued by NYL Investments Europe Limited, 77 Sir John Rogerson's Quay, Block C Dublin D02 VK60 Ireland. NYL Investments Europe Limited is authorized and regulated by the Central Bank of Ireland (i) to act as an alternative investment fund manager of alternative investment funds under the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) and (ii) to provide the services of individual portfolio management, investment advice and the receipt and transmission of orders as defined in Regulation 7(4) of the AIFMD Regulations to persons who meet the definition of “professional client” as set out in the MiFID Regulations. It has passported its license in additional countries in the EEA.
This document only describes capabilities of certain affiliates of New York Life Investments and/or MacKay Shields LLC. No such affiliates will accept subscriptions in any funds not admitted to marketing in your country or provide services to potential customers in your country, including discretionary asset management services, except where it is licensed to do so or can rely on an applicable exemption.
MacKay Shields LLC is a wholly owned subsidiary of New York Life Investment Management Holdings LLC, which is wholly owned by New York Life Insurance Company. "New York Life Investments" is both a service mark, and the common trade name of certain investment advisers affiliated with New York Life Insurance Company. Investments are not guaranteed by New York Life Insurance Company or New York Life Investments.
NOTE TO CANADIAN RECIPIENTS
The information in these materials is not an offer to sell securities or a solicitation of an offer to buy securities in any jurisdiction of Canada. In Canada, any offer or sale of securities or the provision of any advisory or investment fund manager services will be made only in accordance with applicable Canadian securities laws. More specifically, any offer or sale of securities will be made in accordance with applicable exemptions to dealer and investment fund manager registration requirements, as well as under an exemption from the requirement to file a prospectus, and any advice given on securities will be made in reliance on applicable exemptions to adviser registration requirements.
Information included herein should not be considered predicative of future transactions or commitments made by MacKay Shields LLC nor as an indication of current or future profitability. There is no assurance investment objectives will be met. Past performance is not indicative of future results.
NOTE TO JAPANESE RECIPIENTS
In Japan, this is issued by New York Life Investment Management Asia Limited (Financial Instruments Business Operator, Kanto Local Finance Bureau (FIBO) No. 2964, Member of Japan Investment Advisers Association and Type 2 Financial Instruments Firms Association) for institutional investors only. As costs and/or fees to be borne by investors vary depending on circumstances such as products, services, investment period and market conditions, the total amount nor the calculation methods cannot be disclosed in advance. All investments involve risks, including market fluctuation and investors may lose the principal amount invested. Investors should obtain and read the prospectus and/or information set forth in Article 37-3 of the Financial Instruments and Exchange Act carefully before making investment decisions.
MacKay Shields LLC is a wholly owned subsidiary of New York Life Investment Management Holdings LLC, which is wholly owned by New York Life Insurance Company. "New York Life Investments" is both a service mark, and the common trade name of certain investment advisers affiliated with New York Life Insurance Company. Investments are not guaranteed by New York Life Insurance Company or New York Life Investments.
SOURCE INFORMATION
“Bloomberg®”, “Bloomberg Indices®”, Bloomberg Fixed Income Indices, Bloomberg Equity Indices and all other Bloomberg indices referenced herein are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by MacKay Shields LLC (“MacKay Shields”). Bloomberg is not affiliated with MacKay Shields, and Bloomberg does not approve, endorse, review, or recommend MacKay Shields or any products, funds or services described herein. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to MacKay Shields or any products, funds or services described herein.
Subscribe to get MacKay Shields insights delivered to your inbox.