Venezuela’s Economic Reopening Creates a New Investment Opportunity

During their recent episode, Taylor, Carlisle, and Francisco Amador discussed Venezuela’s Economic Reopening Creates a New Investment Opportunity. Here’s an excerpt from the episode:

[Francisco] Yeah, I think so. And there’s actually been some pretty, maybe I wouldn’t say substantial, but there’s been some early encouraging evidence that that’s already taking place, right? So we’ve, we’re currently undergoing oil sector reforms, which is, you know, it’s the priority number one, because as some of you may, may, may know, Venezuela is well known for having the largest oil reserves in the world.

And one of the first things the Trump administration did and basically pushed the, the, the interim government to do was to, to reform the, the oil and gas sectors. So we’ve slowly started to see sort of the smaller independent energy companies starting to come back to, to Venezuela. The big ones are sort of the, the integrated oil companies are still negotiating, but, you know, in, in that sector, in that sector, things are starting to, to, to move already in the, in the ground.

And, and then there’s, there’s been other sort of smaller deals that we’ve, that we’ve seen that were basically unimaginable a year, a year ago, right? There was, for example, a, a large Colombian sort of CPG holding company, it’s called Nutresa. They decided to, to invest in, in one of the, the big, big, the biggest ice cream brand in Venezuela, which is very, very popular.

So that, that was a big headline at the moment, because it’s sort of the first time that a large Colombian company decided to sort of go back to, to, to Venezuela, right? Something that really hadn’t happened in a, in a, in a while. And then more related to the, to the venture capital side of, of, of things, you know, one of the, I guess, or technically the largest tech company, which is really a BNPL company, raised a hundred million.

They just announced that a month ago. And that was also a very big, important headline because it’s, again, more evidence that, that the appetite and the, and the, and the capital, you know, appetite for, for Venezuela is starting to come back slowly.

[Tobias] Do you, do you feel like the, there’s broad based support for, for the changes? Was it the Chavista regime was sort of totalitarian, preventing these sort of things from happening? It didn’t have any sort of broader support?

[Francisco] Yeah, no, definitely. I think the, I mean, if you look at any sort of, of polls, the, the support for, for the, the, the Chavista regime is, is probably, you know, certainly less than 20%, probably less than 10. So you’re talking about 80 to 90% of the country really wanting, you know, big changes in terms of the political situation.

So from that standpoint, and what, what had happened in the last, probably two elections, but, but more, more specifically and more sort of in your face in the last one was that basically the government rigged them. And, and, and in that, that last election, the opposition basically found a way to prove that they had the votes, but it was, you know, the, the, the government controlled everything from the National Electoral Council to the Supreme Court to the Congress. So there was really nothing, nothing to do.

And again, all of this right now is, is being, is, is, is being sort of changed into, into a more democratic face.

[Tobias] What are your expectations about the sort of investment opportunities that you can find in Venezuela?

[Francisco] I mean, it’s, it’s, it’s really so broad based because the, the country had been so starved from capital for, for so long that there’s, there’s a tonne of things to do. A lot of, you know, a lot of companies and, and sort of the more of the legacy companies like, you know, we can talk about a manufacturing plan or, or, or things like that. A lot of that stuff is, is almost obsolete in many, in many cases.

So there’s, there’s going to be a lot of, of, of capex that needs to, that needs to take place. And this is super prevalent in the, in the oil and gas sector too. Right.

So I think you have to be selective in terms of, of more than the sectors, it comes down to the companies that you, that you’re looking for. Because we can get into the specific risks of, of, of companies that are, would be sort of more idiosyncratic. But in, I would say in terms of sectors, there’s so much stuff to do with, you know, consumer in the consumer space, retail space, tourism, agriculture, obviously oil and gas.

It’s not just building data centres. Yeah, exactly. But even, even like in financial services, right?

Like the banking sector is completely dormant. The credit as a percentage of GDP is around three to 4%. If you look at any other country in Latin America, it’s between 40, 60, even 70%.

So, you know, getting exposure to, to things like that normalising, I think are, is a very interesting theme to try to, to try to play this, this normalisation and reopening.