After the United States arrested Venezuela President Nicolás Maduro, the value of Venezuela Government Bonds has surged in international financial markets. Prices of Venezuela Government Bonds, which had been treated like scraps of paper for years, soared more than 20% in a single day. Expectations that U.S. financial sanctions will be lifted and the economy will normalize appear to be drawing in capital. Global hedge funds have already pocketed massive revenue and have picked Venezuela as a new investment destination.
According to foreign media and the financial sector on the 6th local time, prices of Venezuela Government Bonds issued by the government and bonds of state oil corporations PDVSA rose quickly in international financial markets on the 5th right after news of Maduro's arrest broke. The Financial Times (FT) reported that the price of the government's distressed Government Bonds jumped 24% from 33 cents per dollar (about 455 won) to 41 cents (about 565 won). That is the biggest gain since 2023. PDVSA's bond maturing in 2035 also spiked 27% from 26 cents (about 358 won) to 33 cents (about 455 won).
The reason investors are flocking to Venezuela asset is clear. With the success of the Maduro arrest operation led by U.S. President Donald Trump, the likelihood has grown that the financial sanctions squeezing Venezuela will be lifted. Since 2017, the United States has completely blocked Venezuela from raising funds or conducting transactions in international capital markets. As a result, Venezuela declared a default on about $60 billion (about 82.71 trillion won) in Government Bonds. The Government Bonds maturing in 2027 and PDVSA bonds traded on the 5th had also been in default for more than eight years since 2017.
Global hedge funds such as Broad Reach, Winterbrook, and Allianz led the latest purchases of Venezuela Government Bonds. They were said to have reaped significant mark-to-market gains after buying. Hans Humes, CEO of Greylock Capital, said in a Wall Street Journal (WSJ) interview, "Optimism is spreading that a path has opened to negotiate with the representative government of Venezuela," adding, "Investors have already spotted tremendous opportunities in this country."
The capital inflow is not limited to rising Government Bonds prices. With the Maduro regime, which lasted 13 years since 2013, overturned, expectations have grown that winds of change will blow across the structure of the Venezuela economy. The most watched area is liability restructuring. Venezuela's total external debt is currently estimated at about $150 billion (about 207 trillion won) to $170 billion (about 234 trillion won). That is more than double Venezuela's annual gross domestic product (GDP) of $82.8 billion (about 114 trillion won).
Experts expect Venezuela's liability resolution process to follow a pattern similar to the Greek debt crisis in 2012. The approach would involve large-scale debt relief talks with creditors and the introduction of an International Monetary Fund (IMF) bailout program. Reuters, citing experts, assessed that Venezuela's liability restructuring will be among the most complex and largest cases in history.
The foreign exchange market is also reacting. The value of the Venezuela bolívar had effectively ceased to function due to crippling inflation. But after Maduro's arrest, the parallel rate traded on the black market began to show a slight strengthening. The gap with the actual transaction rate and volatility is narrowing. Experts also interpreted this as reflecting expectations that the Venezuela economy will be reorganized around the dollar. Some analysis says that if foreign exchange transaction regulations are eased, remittances from Venezuelans living abroad could flow in, bringing warmth to the real economy.
In financial markets, Venezuela asset also showed moves to gradually regain value. JPMorgan Chase had already begun reinstating Venezuela Government Bonds into its Emerging Markets Bond Index (EMBI) from late 2023. Inclusion in the index means global institutional investors are obligated to buy the bonds. If this episode expands the index weight or normalizes transactions, additional funds amounting to billions of dollars are expected to flow into Venezuela.
However, some also pointed out that political uncertainty remains high. It is unclear whether remaining figures such as Delcy Rodríguez, who succeeded Maduro, will readily cooperate with the United States. Allianz fund manager Rob Robie told the FT, "Current Venezuela Government Bonds prices are close to the recovery value we anticipated," adding, "Investors will likely take a more cautious stance from here."
Foreign affairs outlet Modern Diplomacy analyzed that normalizing crude oil production is ultimately essential for the Venezuela economy to recover. Venezuela's current crude output is around 800,000 to 900,000 barrels per day, less than one-third of its peak. Because resources for liability repayment come from oil export proceeds, the key is how quickly U.S. oil corporations invest and how fast they can ramp up production.
There was also an assessment that the Venezuela Government Bonds market is evolving beyond mere trading of distressed debt into an options-like betting venue on sanctions, restructuring, and political developments. Citing an emerging-markets hedge fund manager who requested anonymity, the FT said, "Venezuela is like a giant casino right now," while adding, "It's hard to ignore a market where you can expect a 60% return."