Jan 24, 2019

The "tremendous opportunity" in Venezuela

A Venezuelan protester with "Freedom" painted on her face. Photo: Jesus Merida/SOPA Images/LightRocket via Getty Images

Investors hoping for the removal of Venezuelan President Nicolas Maduro may get more good news this week. The Trump administration signaled it may impose new sanctions against the country's oil sector — the lifeblood of Venezuela's economy and only major source of revenue.

Driving the news: The news followed the announcement Wednesday the U.S. would recognize Juan Guaido, head of Venezuela's National Assembly, as the country's president, not Maduro.

  • "If things change in Venezuela it would be a tremendous opportunity," Jan Dehn, head of research at Ashmore told me late last year. He predicted Venezuela's bonds could double in price if a new president takes office.

The big picture: The country’s sovereign bond maturing in 2027 rose on Wednesday to its highest level since June. That’s notable considering the 2027 bond, and all but one of Venezuela’s other bonds, have been in default since November 2017.

  • "There's a tremendous rally happening with the expectation that regime change leads to eventual restructuring of these bonds," said a fund manager from a major firm who asked not to be identified because he’s not permitted to discuss Venezuela’s debt. "The market is pricing in Maduro's exit as closer than we previously thought."

What's next? The oil sanctions may be the final nail in the coffin of a leader who has presided over an economy expected to hit 10,000,000% inflation this year with a 90% poverty rate.

My thought bubble: Maduro's ouster could be an inflection point in the country's history, but it will take a lot of work to turn what's effectively become a failing narco/petro-state into a functioning economy.

  • Venezuela owes international creditors an estimated $150 billion. A new regime will need to come to terms with creditors in order to be given access to international credit markets again and start rebuilding.
  • The country is producing oil at a 70-year low and analysts believe it could be three to five years before it is able to pump oil at its potential rate again.
  • There would almost certainly need to be a bailout from the IMF, which hasn't even been allowed to enter the country in years. Simply assessing Venezuela's needs could take years and the economy could continue to falter even after an aid package is administered.

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GM to exit Australia, New Zealand and Thailand

GM's Holden brand is popular among racing fans down under, and it's been a regular fixture at events like the Bathurst 1000 V8 Supercar Race in Australia. Photo: Speed Media/Icon Sportswire via Getty Images

General Motors is retiring its celebrated Holden brand from sales in Australia and New Zealand after 160 years and winding down operations by 2021, the company confirmed in a statement Monday.

The big picture: GM also intends to "sell its Rayong factory in Thailand to China's Great Wall Motors and withdraw the Chevrolet brand from Thailand by the end of this year," AP reports. "The downsizing is part of a long-running strategy at GM since the Detroit-based company emerged from bankruptcy in 2009," per Bloomberg.

In photos: Deadly Storm Dennis lashes U.K., Ireland and western France

A family is rescued from a property in Nantgarw, Wales, on Sunday. The storm comes a week after the U.K. was battered by storm Ciara, which killed two people, per the BBC. Photo: Matthew Horwood/Getty Images

Storm Dennis continued to pummel parts of England, Wales and Ireland over Sunday night with heavy rain after battering Northern Ireland and Scotland, per the official British weather agency the Met Office.

Why it matters: It's the second-strongest nontropical storm ever recorded in the North Atlantic Ocean, with its hurricane-force winds and heavy rains that caused widespread flooding across the U.K., the Washington Post notes. Police in Wales confirmed Sunday they found the body of a man who fell into a river as the storm lashed Ystradgynlais.

Sanders accuses Bloomberg of trying to "buy" the 2020 election

Sen. Bernie Sanders and Mike Bloomberg. Photos: Drew Angerer; Brett Carlsen/Getty Images

Sen. Bernie Sanders tore into 2020 rival Michael Bloomberg at a Las Vegas campaign event Saturday, saying the billionaire and former New York mayor is trying to "buy the presidency" by paying millions of dollars in advertising.

Why it matters: Bloomberg has surged in national polling recently, having poured millions of dollars into campaign ads largely targeting Trump. His candidacy has become an obvious foil for Sanders, whose grassroots campaign railing against billionaires and the establishment has vaulted him to front-runner status.

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