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LATAM: JP Morgan Says Path For Eventual Venezuela Debt Restructuring Elusive

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  • President Trump's announcement this week that the US is reversing the oil-related concessions made to Venezuela under the previous administration suggests a sharp pivot from recent policy actions. JP Morgan expects the closure of Chevron’s operation in Venezuela to materially affect the country’s economy, undermining economic activity, while putting significant pressure on inflation and the FX.
    • While President Trump has been nimble in adjusting deadlines related to tariff discussions, JPM takes his statement to revoke Chevron’s oil license to operate in Venezuela from March 1 at face value. The lack of electoral conditions and a slower deportation pace than agreed with Maduro’s regime were cited as the grounds for this decision.
    • This will have a significant macro impact, given Chevron’s relative importance for Venezuela’s overall oil production (230 kb/d) and current FX regime, where it stands as the main inflow.
    • JPM is of the opinion that the repricing across the curve is fair if tensions don’t escalate, with renewed upside probably contingent on any revival of the policy stance. While the fluid nature of this administration’s foreign policy could certainly allow for a shift in stance at some point, JPM expects the renewed US hawkishness to be sustained over the medium term.
    • In this sense, the path for a bilateral normalisation, which in their view is necessary for an eventual debt restructuring, now looks much less tangible than it recently appeared to be.
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  • President Trump's announcement this week that the US is reversing the oil-related concessions made to Venezuela under the previous administration suggests a sharp pivot from recent policy actions. JP Morgan expects the closure of Chevron’s operation in Venezuela to materially affect the country’s economy, undermining economic activity, while putting significant pressure on inflation and the FX.
    • While President Trump has been nimble in adjusting deadlines related to tariff discussions, JPM takes his statement to revoke Chevron’s oil license to operate in Venezuela from March 1 at face value. The lack of electoral conditions and a slower deportation pace than agreed with Maduro’s regime were cited as the grounds for this decision.
    • This will have a significant macro impact, given Chevron’s relative importance for Venezuela’s overall oil production (230 kb/d) and current FX regime, where it stands as the main inflow.
    • JPM is of the opinion that the repricing across the curve is fair if tensions don’t escalate, with renewed upside probably contingent on any revival of the policy stance. While the fluid nature of this administration’s foreign policy could certainly allow for a shift in stance at some point, JPM expects the renewed US hawkishness to be sustained over the medium term.
    • In this sense, the path for a bilateral normalisation, which in their view is necessary for an eventual debt restructuring, now looks much less tangible than it recently appeared to be.