Does Trump Want a Regime Change in Venezuela?

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00:00Robert Konigsberger, founder of Gramercy Funds Management, a global leader in emerging markets,

00:05writing, it is so hard to imagine that the art of the deal leads to something short of Maduro

00:10ceding power. The path to de-escalation has become quite narrow. Robert joins us now. Robert,

00:14thank you so much for being with us. How are you understanding this from an investment standpoint

00:19about what U.S. involvement with Venezuela looks like now and what it will look like, say,

00:24six months from now? Sure. Good morning. I think you need to break it down into a couple pieces,

00:29which is, one, is there going to be regime change? What's the motivation of regime change?

00:35Then if there is regime change, what does that look like? And then ultimately, what does, you know,

00:39what's the environment look like in Venezuela post? So from where we stand today, I mean, I believe,

00:46you know, we, Gramercy, believe that the motivation is less about democracy and the stolen election from

00:512024 and more about narco-terrorism and, quite frankly, taking back the Americas. You know,

00:57there was the Monroe Doctrine, then there was a Trump, pardon me, the Roosevelt Corollary,

01:02and now we've got the Trump Corollary. So this is bigger than just a stolen election last year.

01:07And I think the way that this narrative has played out will play well with MAGA. And I think that was

01:13always a concern. I don't think MAGA cares about democracy in Venezuela. They do care about 8 million

01:18Venezuelans who have immigrated, a great deal have come to the U.S., security, what have you.

01:23So then, you know, we believe this is more than just regime change. We believe that Trump and

01:29Rubio have, you know, bigger aspirations in mind. This isn't just about, you know, a show of force in

01:36the Caribbean and then move on. But then to your question of regime change, and, you know, we at

01:40Gramercy spend a lot of time thinking about what might regime change look like. You know, there's capital

01:45R regime change, which I think many would like to see, which is, you know, the Maduro regime leave,

01:51the Chavistas leave, and Machado and her people come in, capital R regime change. That may be

01:56difficult. We may see something more like smaller regime change, where it's some sort of governor

02:01transition, where the Chavistas and the opposition still collaborate towards new elections.

02:07What do you think the timeline for all of this is?

02:11I mean, it's so difficult to say, but, you know, as you saw in Eastern Europe, when the wall fell,

02:17so to speak, you know, regime change takes longer than you think it's going to take. And then it

02:22happens faster than you thought it would happen. So, you know, there's a lot of metal in the

02:27Caribbean right now. You know, would be surprised if we're in the same position at the end of the

02:33first quarter. You know, be surprised to see this status quo at Easter. But it's really hard to tell.

02:40You talked about narco-terrorism. You talk about immigration. For the Trump administration,

02:46is this also about China and its encroaching on U.S., what the U.S. would probably view as its

02:54sphere of influence in South America writ large?

02:58Absolutely. I mean, I think, you know, the evolution of globalization is back towards

03:02regionalization and, as you say, spheres of influence. And, you know, I referred to the Monroe

03:08doctrine. And that was about, you know, the Americas for America, if you will. And then

03:13the Roosevelt corollary went further and said, you know, we will intervene militarily in Latin

03:17America to protect ourselves. So I think what the Trump administration is focused on is just what

03:23you said, which is getting the Chinese and their influence out of the Americas, getting the Russians

03:28and their influence out of the Americas, and going back to a world of spheres of influence where,

03:32you know, maybe we'll be less focused on their region and more focused on our region. And

03:37who knows what the deal was in Alaska between Putin and President Trump as it related to

03:43Ukraine versus the Americas. But, you know, Russia's been pretty darn quiet. China's been

03:47pretty darn quiet.

03:48Robert, does this make you want to invest more in Latin America or less?

03:53In Latin America? I mean, I think as, you know, there's a lot of different opportunities in Latin

03:58America. I mean, for us, we've been more focused on private credit rather than public credit. But I think,

04:05you know, as many have started to realize, you know, emerging markets isn't necessarily more risky

04:10than developed markets. And we're seeing plenty of opportunities within Latin America. I mean,

04:15Venezuela's a, you know, there's very few ways to express interest in Venezuela. I mean, most of it's

04:20through the external debt at the moment, which is, I think, up three times since the bottom.

04:26You said something there that I think a lot of people are going to find interesting,

04:28which is that you think that emerging markets might not be more risky than developed ones right now.

04:33It's something people have been flirting with. Are there dynamics in the developing world that

04:38you're seeing take place, take hold in places like the United States or Europe that you find

04:42concerning and that you think that emerging markets in some ways is almost a reprieve from?

04:47Sure. I mean, I grew up when we had two worlds. You know, we had developing markets and we had

04:52emerging markets. I think today we have developing markets, emerging markets and submerging markets.

04:57And it's the developing markets that are moving right to the submerging markets. And the things

05:02that we saw in the 80s and 90s that concerned the world about emerging markets, we're seeing about

05:06developed markets. You know, quite frankly, large debts, large deficits and what have you. You know,

05:12the emerging markets never had the flexibility to not adjust, you know, to when COVID happened and

05:18what happened. And their fiscal houses are generally in order. Now, of course, emerging markets is a really

05:22big label. It's not a homogeneous asset class, nor is developed markets, but we're quite constructive on here.

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