JH Explorer in Caracas: Re‑engagement resumes on a fragile road to recovery

A changed trajectory since 2017

Returning to Venezuela after last visiting in 2017 was a reminder of just how dramatically a country’s narrative can change – and how quickly a market long treated as uninvestable can move back into the realm of serious strategic discussion. For me personally, Venezuela has long been one of the most frustrating cases in my 14 years of investing in emerging markets debt: a country with extraordinary potential – not only in oil and gas, but across human capital, geography, and natural resources – repeatedly undermined by non‑democratic governance, policy missteps, isolation, and ultimately economic collapse.

In 2017, Venezuela felt trapped inside a cycle of collapse. Hyperinflation was hollowing out incomes and savings. Sanctions and isolation later deepened external disconnection. The private sector was still operating, but in a defensive way. Institutions were weak, capital had fled, and the national mood was one of exhaustion. A series of elections held after 2017 repeatedly failed to translate popular discontent into political change, reinforcing a sense of stasis rather than renewal. The central question then was not how recovery might unfold, but whether the country could stabilise at all.

That is no longer the dominant narrative.

Nevertheless, the scars of that period remain everywhere. Poverty is still profound. Public services remain weak. Confidence in institutions is thin, and the economic system continues to function, albeit with debilitating distortions.. But what has changed is that recovery is now being discussed as a credible scenario, not as a theoretical one and I could feel the optimism on the ground.

US strategy reshapes the path forward

Much of the change in sentiment can be traced to the evolving US view of the Western Hemisphere. What had looked like a region of secondary importance has returned to the strategic foreground. Energy security, geopolitical competition and a renewed willingness to shape outcomes closer to home have all contributed to a more forceful US posture.

That shift has already mattered enormously for Venezuela. Washington has moved quickly to operationalise progress – working at pace on targeted sanctions relief, re‑establishing diplomatic presence through the reopening of the US embassy and signalling a willingness to support early normalisation steps. Just as importantly, US officials appear to have encountered a high degree of pragmatism on the Venezuelan side, with the authorities demonstrating clear intent to work constructively with the US to unlock development.

The capture of Maduro has created an opening that would have seemed improbable not long ago. It has altered the political balance, accelerated diplomatic engagement and made it possible to discuss transition not as abstract theory, but as a live process. In practice, that has begun to reshape how investors, corporates and policymakers view the country. Venezuela is increasingly seen not only as a distressed sovereign or sanctions case, but as a potential reconstruction and reopening story.

The timing is also notable. The crisis in the Middle East has further reinforced the strategic logic of supporting additional energy supply, particularly from countries that matter to US hemispheric policy. That does not remove Venezuela’s risks. But it does make the country more relevant than it has been for years, both to Washington and to global energy markets.

Oil as the engine of stabilisation

If there is a single sector on which the entire recovery story currently hinges on, it is oil and gas.

That should not be surprising. Venezuela’s hydrocarbon endowment has always been the foundation of its economic relevance, even if years of mismanagement, underinvestment and institutional deterioration rendered that endowment largely inert. Today, the sector is again being viewed as the country’s most plausible engine of stabilisation.

The logic is straightforward. Venezuela needs hard currency, export revenue and a source of growth large enough to begin repairing the broader economy. Oil and gas remain the only sectors capable of delivering that at scale. They are also central to the country’s ability to restore fiscal revenues, improve the external balance, strengthen the financial system and, ultimately, support a more durable political transition.

But the path forward is not simply about drilling new wells. It is about repairing an ecosystem. Electricity must become more reliable. Gas handling and compression systems need to function if oil production is to rise sustainably. Logistics, customs, payments channels and legal frameworks all need to improve.

The first phase of recovery is likely to come from rehabilitation and brownfield investment, but sustained expansion will require much deeper rebuilding. What struck us when in Caracas was how decisively the global energy industry is already re‑engaging; conversations are active, technical teams are returning, and interest – across operators, service companies, and financiers – is intense, even if final investment decisions are still gated by infrastructure, contracts, and enforcement.

That is why the Venezuela story today is best understood as high-potential but execution-dependent. The oil reserves and strategic interest are there. The policy momentum is increasingly evident. The question is whether implementation can keep up.

Momentum builds, but bottlenecks persist

One of the most encouraging aspects of the trip was the degree of confidence visible in parts of the private sector. Across industries, there was a strong sense that Venezuela has moved from stagnation toward possibility. The argument was not that the country has already normalised, but that the direction of travel has changed and many sectors are now positioned for recovery if key barriers continue to ease.

This applies far beyond hydrocarbons. Banking, transport, logistics, aviation, industry, tourism, mining and consumer-facing businesses all appear to offer meaningful upside potential from today’s depressed base. In many cases, installed capacity still exists, even if it has been damaged, neglected or underutilised. In others, the more important story is entrepreneurial resilience: businesses have learned to operate in highly adverse conditions and may be able to scale quickly if financing and regulation improve.

Optimism for recovery, however, should remain measured. Venezuela is still not a normal operating environment, and while the current political configuration appears more aligned with US interests, it largely rests on the same actors who preceded President Maduro’s removal.

Inflation remains high, while the exchange-rate regime remains fragmented. Access to financing for corporates is limited and expensive. Regulatory friction continues to weigh on activity. Infrastructure constraints, especially in electricity, remain critical. Banking channels for cross-border payments are only gradually improving. We believe capital can become interested in Venezuela faster than Venezuela can become easier to invest in.

Stabilisation before political transition

We visited the Presidential Palace in Caracas and met with acting President Delcy Rodríguez along with a number of other officials. Politically, the country appears to be in an unusually fluid moment. The collapse of the old equilibrium has created space for reform, dialogue and repositioning. There is more openness to economic pragmatism, more discussion of institutional rebuilding, and more recognition that Venezuela’s failed economic model cannot simply be preserved. At the same time, the political transition remains unresolved.

^{Meetings at the Presidential Miraflores Palace, (Palacio de Miraflores) in Caracas, Venezuela.}

A central idea arising throughout the trip was that economic stabilisation should come before full political contestation (or open competition for political power and influence). A rush into polarisation before the economy improves could destabilise the process and make reform harder to sustain. In that view, the sequence should be:

• stabilise the economy,
• create room for reconciliation,
• rebuild institutions,
• and only then move toward a more definitive electoral phase.

Notably, even parts of the political opposition appear willing to show patience, accepting a sequencing in which political transition is treated as the final step of normalisation rather than its starting point.

Whether events unfold so neatly is another matter. Venezuela still faces deep distrust, weak institutions, and the lingering risk that politics once again outpaces implementation. The debt overhang also remains in the background: too large to ignore indefinitely, but probably difficult to tackle meaningfully before the country has regained some administrative capacity, legal clarity and economic momentum.

A difficult, uneven reopening

^{Caracas at night.}

The most accurate way to describe Venezuela today is as a difficult, but promising reopening. Compared to 2017, the change is unmistakable. The country feels less closed, less static and less trapped in a downward spiral. US foreign policy has shifted. The political landscape has opened. The oil sector is again being treated as a realistic anchor for recovery. The private sector, though battered, retains a surprising amount of energy and adaptability. And the global backdrop – particularly the value of additional energy supply in an unstable geopolitical environment –  has made Venezuela more strategically relevant than at any point in recent years.

It remains, however, a fragile, high-friction environment with substantial macroeconomic, institutional and political risks. Recovery, if it comes, is unlikely to be linear. Setbacks are almost certain. Execution will matter more than announcements. Still, the shift in direction is real. Venezuela is no longer a story of collapse. It is increasingly a story of optionalities reopening – and that, in itself, is a major change.

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