Ongoing developments in Venezuela raise critical business and legal questions for companies that do or are considering doing business in Venezuela. Public attention currently focuses on energy companies because of Venezuela’s vast oil reserves, but the US government has also announced that it will be promoting the rebuilding or modernization of electricity and infrastructure in Venezuela, all of which could result in significant business opportunities for other business sectors, including banking, mining, construction, manufacturing, transportation, agriculture, healthcare & life sciences, and hospitality.
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Companies operating in countries President Trump deems responsible for trafficking illegal drugs and sending violent immigrants to the US, including Colombia and Mexico, should be considering business and legal implications.
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The new dynamic extends beyond Venezuela and even outside Latin America, given US President Donald Trump’s proclamation that “American dominance in the Western hemisphere will never be questioned again.” Companies operating in countries that President Trump deems responsible for trafficking illegal drugs and sending violent immigrants to the US, including Colombia and Mexico, should be considering business and legal implications and conducting contingency planning.
Before the recent events on January 3, the US relied primarily on economic sanctions to influence Venezuela. As of today, those sanctions remain in place and broadly prohibit US persons and businesses from dealing with the Venezuelan government, including its wholly owned oil company, Petroleos de Venezuela, S.A. (PDVSA), certain Venezuelan banks, and various other sanctioned parties and vessels, except when pursuant to a license issued by the US Office of Foreign Assets Control (OFAC). However, President Trump’s encouragement of US companies to invest in Venezuela raises the probability that sanctions will be relaxed, although when and to what extent is likely to depend on how things unfold on the ground. Recent announcements from the US Department of Energy and the Press Secretary also indicate that the US is or will be selectively rolling back sanctions to enable the transportation and the sale of Venezuelan crude and oil products to the global markets, but the details have yet to be published.
Beyond sanctions, companies should leverage their learnings from other recent geopolitical events and consider both risks and opportunities from an investment, commercial, litigation, employment, tax, and trade perspective. Mapping operations and supply chains, understanding funds flows and viable banking options, and having ready access to commercial documentation will be key to scenario planning.
Nearly two decades ago, companies that had invested in Venezuela faced expropriation of their assets, particularly in the oil industry. Some arbitration claims from uncompensated takings of property remain pending, while Venezuela’s efforts to run its petroleum industry without foreign control have struggled with internal mismanagement, external sanctions and other issues.
Recently, the Trump Administration has told oil companies hoping to recover compensation for expropriated assets that they first need to invest additional money and rebuild the Venezuelan oil industry. Other companies also are evaluating potential business opportunities.
We expect to see particular interest in the following areas:
- Oilfield equipment and engineering services for upstream, midstream, and downstream upgrades.
- Electric power and grid infrastructure as companies seek to improve Venezuela’s electric grid and energy facilities, especially EPC (engineering, procurement, and construction) contractors. This includes generation equipment, transformers, control systems, renewable integration solutions and related consulting services.
- Agricultural exports, with the potential use of oil revenues to buy U.S. agricultural products.
- Medical devices, pharmaceuticals, and equipment, providing opportunities for US healthcare and life sciences companies to support Venezuelan public health needs, including pharmaceuticals, diagnostics, and hospital equipment.
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Companies that do business in Latin America, or that consider investing in Venezuela, need to weigh legal considerations and geopolitical risks.
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Meanwhile, companies operating in Latin America in other business sectors, including banking, mining, construction, manufacturing, transportation, agriculture, healthcare & life sciences, and hospitality, face new risks from US efforts to combat drug cartels by prosecuting legitimate companies that knowingly or negligently do business with cartels, as well as ongoing tensions with other regional political leaders. A call between the US and Colombian presidents on January 7 appears to have reduced tensions with Colombia, and an announcement was made of a forthcoming meeting between the two presidents at the White House.
Companies that do business in Latin America, or that consider investing in Venezuela either of their own accord or at President Trump’s urging, need to weigh legal considerations and geopolitical risks as they consider the potential business and commercial opportunities.
Baker McKenzie is one of the few international firms with a continued presence in Venezuela – we have been on the ground in the market for 70 years. Our Geopolitical Risks Task Force and our market-leading International Trade team have historically helped our clients navigate geopolitical turbulence in Venezuela as well as during Russia’s invasion of Ukraine, Brexit, tariff wars and tensions with China. We offer unparalleled on-the-ground presence and expertise in national security, trade, sanctions, compliance, litigation, employment, tax, arbitration, and corporate transactions. With offices in Venezuela, Argentina, Brazil, Chile, Colombia, and Mexico, along with lawyers in the US and more than 40 countries, Baker McKenzie delivers holistic, dependable, and actionable advice for corporate lawyers, executives, and directors balancing both international and domestic legal and business risk considerations.
