Why Regime Change Doesn’t Mean Stability For Venezuela
Economist Abigail Hall explains what Maduro’s removal means for Venezuela, global markets, and the risks of US-led regime change.
The sudden ouster of Venezuelan President Nicolás Maduro following a US-led operation has shaken global markets, energy circles, and Latin America’s political landscape.
As Washington signals plans to temporarily oversee Venezuela’s government and reopen access to the world’s largest proven oil reserves, questions are mounting over legality, economic fallout, and what comes next.
To unpack the implications, Global Finance spoke with Abigail Hall, associate professor of economics at the University of Tampa and a senior fellow at the Independent Institute, whose research focuses on US intervention, political economy, and Latin America.
Global Finance: How does this episode affect investment banks operating in Venezuela, like J.P. Morgan, Banesco Banco, Mercantil Banco and BBVA Provincial?
Hall: One of the things that has been happening with the US buildup to this point is regime uncertainty. We cannot predict which government policies will be in place in the near or intermediate future. Having some predictability about the regulatory or other government policy environment is essential for planning. This is relevant whenever we discuss domestic planning, such as with tariffs in the US. But it is also important when we’re talking about international business.
In this case, an external actor is imposing changes on a foreign country. I would not be surprised if international companies adopt a wait-and-see approach regarding Venezuela. No one will want to invest resources without knowing what comes next. We don’t know who’s in power or how the transition will occur. From an economic development perspective, that approach is detrimental and necessitates that the US government expend resources to prop up or stimulate Venezuela’s economy. The obvious way is oil, but there’s a lot that goes into that, too.
GF: Should business leaders focus on who controls Venezuelan oil, or on whether institutional incentives will actually change now that Maduro faces an arraignment in New York?
Hall: It’s both. Who is in power and who controls Venezuela’s primary asset—oil—certainly matters. But it’s equally important to understand the institutional structures surrounding the Venezuelan government. If, as the Trump administration has suggested, the US moves to temporarily run the country and impose new institutions, a key question is whether those institutions would “stick” after a potential US withdrawal. At this point, it’s simply too early to tell what Venezuela’s political and economic landscape will look like, even weeks or months from now.
GF: Maduro’s vice president, Delcy Rodríguez, was sworn in as acting president and denounced his capture as an “illegal kidnapping.” Meanwhile, Venezuelan opposition leader María Corina Machado, who recently won the Nobel Peace Prize, has called for Edmundo González, to be recognized as the rightful leader of the nation, considering he won the country’s 2024 presidential election. Will conditions get worse before they get better, given the confusion about who will be running the country and its resources?
Hall: Certainly things could get worse before they get better—if they get better. Whether we liked the regime in power and whether this is an effective way to transition away from it are two separate questions. Thinking broadly, we mustn’t throw the baby out with the bathwater. Maduro has been absolutely detrimental to Venezuela’s economy and its people. He’s guilty of numerous crimes. I don’t think he’s guilty of the crimes that he’s being charged with by the US government, but he certainly has run the Venezuelan economy into a ditch, as did his predecessor, Hugo Chavez. We could now wind up with a situation as we had in Iraq or Afghanistan, where the US has a military presence and they work to hold elections or try to help install a US-friendly “democratic” regime. You could also have a situation like Libya in 2012, where the US takes out the head of a regime and a subsequent power struggle follows. We’re still seeing geopolitical instability across northern Africa as a result of the Libyan conflict. I would not be surprised if we observe a similar scenario in Latin America, particularly in northern South America.
GF: The US alleges that Maduro participated in so-called “narco terrorism,” and that he used Venezuelan government power to facilitate shipments of drugs to the US. But data shows that Venezuela accounts for less than 1% of the US drug market, while Trump explicitly called on American companies to rebuild Venezuela’s oil industry. How do we reconcile that?
Hall: I don’t know that you can effectively reconcile them. In terms of narco trafficking, Venezuela has not been a significant power player in the illicit drug market in the US, or really anywhere. It’s not a key power player. It doesn’t manufacture or transport a lot of illicit drugs. If you look at other places, such as Mexico, you might actually see a significant amount of drugs that enter the US coming through. However, you have diplomatic ties with Mexico, and if you’re trying to negotiate a trade agreement, bombing Mexico would likely not go over well. You have no love lost between Washington and Caracas by going after Venezuela.
But when we start talking about oil, Venezuela is sitting on the largest repository of crude oil. They have vast amounts of resources that should make Venezuela a very wealthy country. A friendlier regime in Caracas could benefit the US by enabling imports of that crude oil. Beyond that, another important consideration regarding Venezuelan oil at this point is to whom it has been sold. The Venezuelan government has deep ties with both the Chinese and Russian governments, allowing them to conduct oil drilling in the Orinoco River basin and Lake Maracaibo. From a geopolitical perspective, this is really poking both of the US’s main geopolitical rivals square in the eye.
For Russia, which is fighting a war with Ukraine, having access to relatively cheap resources like oil is essential. A lot is going on here close to the surface. And I think you have a very difficult case making an argument that this would actually be about drugs and narco terrorism, when it has everything to do with Venezuelan oil, but also, more fundamentally, a friendlier regime to the US and Caracas compared to a friendly regime to China and Russia.
GF: At a January 3 press conference, Trump hinted at military action against Cuba, Mexico, and Colombia next. Considering that the US is effectively “poking” Russia and China, did Washington just light a powder keg?
Hall: Geopolitically, the US has engaged in a variety of interventions throughout Latin America, specifically from the 1950s onwards. Look at Guatemala in the 1950s, or El Salvador and Nicaragua in the 1980s. At this point, people have likely heard of the Monroe Doctrine or the Roosevelt Corollary, which essentially states that the US government will prohibit foreign entities, meaning those in the other half of the world, from intervening in the Western Hemisphere. People now point out that this is kind of a return to that more aggressive type of US intervention.
President Obama explicitly signaled that the Monroe Doctrine was dead. Now it’s roaring back. While we don’t have a crystal ball to predict how this will play out, there are broader implications to consider—particularly regarding how other powers, such as China, might interpret these actions in light of its relationship with Taiwan. If the US justifies intervention on grounds like drugs or criminal activity, it may open the door for similar rationales elsewhere. The potential spillover effects are significant.
GF: Is the US involving itself in something that’s unlikely to be economically beneficial?
Hall: History suggests this is unlikely to be economically beneficial for the US. Even setting China and Russia aside and focusing solely on intervention, the US has a poor track record when it comes to regime change and externally imposed democracy. A cursory glance at history makes that clear.
What we can say with certainty is that any form of intervention—whether airstrikes, boots on the ground, or, as suggested in recent statements, running a foreign government—requires enormous resources. History also shows that once external pressure is removed, these efforts tend not to hold, often dragging the US into prolonged, costly engagements. That’s why some are already asking whether Venezuela risks becoming another Afghanistan.
There are also broader consequences to consider, including migration. Venezuela has lost roughly a quarter of its population over the past decade, which is staggering. Further instability could exacerbate migration pressures, not just from Venezuela but across the region. These are costs we rarely account for upfront. While monetary costs are easier to tally, the non-monetary costs—political, social, and human—are harder to predict and often emerge gradually over time.
GF: In the last year, the Trump administration conducted 626 airstrikes against Somalia, Iraq, Yemen, Iran, the Caribbean, Syria, Nigeria, and now Venezuela. Is this a pattern better understood as a strategic necessity, or is it merely political signaling to a domestic audience in the US?
Hall: Utilizing airstrikes is very much a continuation of the policy that we’ve seen for several decades at this point.
GF: It’s already well over what the Biden administration conducted during its entire four years.
Hall: It’s an escalation of what we’ve seen historically, but it’s a difference of degree as opposed to a difference of kind. Many people don’t know that the last time the United States formally declared war through Congress was in the 1940s. Since then, the US has not formally declared war. If you look at the war-on-terror period forward, specifically, we’ve seen the supposed permissions for engaging in this type of activity stem from Authorizations for Use of Military Force, or AUMFs, which came out when we were looking at Iraq and Afghanistan. Even though those have since both been repealed, it’s largely seen as a nominal type of repeal.
Administrations following President George W. Bush have used the AUMFs as a way to effectively engage in all kinds of intervention, if you can link it to terrorism. And this is important in the Venezuelan case, and part of the reason that I imagine you have narco terrorism within the charges. That’s a way to couch this as part of the broader global war on terror. Much of what we’ve seen from the administration is clearly an attempt to flex its muscle and assert what it is capable of: using military force to achieve political objectives. And as you alluded to earlier, I think some of Trump’s statements to Cuba and to Colombia in the January 3 press conference are indicative of that.
GF: Many Venezuelans are happy that Maduro is gone. Is that the biggest upside here?
Hall: It depends on perspective. Anyone who understands Venezuela knows that Maduro is a tin-pot dictator. But being anti-Maduro and anti-US intervention are not mutually exclusive positions. Whether this ultimately benefits the people of Venezuela is to be determined. The country has been in such dire economic straits for so long—it’s the kind of poverty and policy where they hit bottom and kept digging.
To the extent that this pivots Venezuela away from the types of economic policies that have been so detrimental to its population, this could be beneficial to your average Venezuelan—those are the people who are at the direct receiving end of these interventions, regardless of what flavor they come in, whether they’re sanctions, air strikes or boots on the ground, but have largely been ignored in a lot of conversations.
But the thing that I would caution people against is that we’ve been sold these benefits to intervention before. We’ve seen this movie, and yet we are continuously convinced that this time is going to be different. If history is an indicator, we should be highly skeptical of such arguments.
