Geopolitical Risk Analysis: US-China Tensions in Latin America and Investment Implications

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The January 2026 US military operation in Venezuela—resulting in the capture of President Nicolás Maduro—represents a watershed moment in hemispheric geopolitics and has profound implications for investors with exposure to Chinese companies and Latin American markets. This analysis examines how the reassertion of the Monroe Doctrine (termed the “Donroe Doctrine” by the Trump administration) is reshaping the investment landscape across the region [1][2][3].

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On January 3-4, 2026, US special forces conducted a unprecedented operation resulting in the capture of Venezuelan President Nicolás Maduro, just hours after he met with China’s special representative for Latin American affairs, Qiu Xiaoqi [1][4]. The operation, dubbed “Operation Absolute Resolve,” represents the most aggressive US intervention in the Western Hemisphere since the Monroe Doctrine was first articulated in 1823.

According to Bloomberg analysis, the operation sent a clear message to Beijing:

[3]. The Trump administration has explicitly revived the Monroe Doctrine through what analysts now call the “Donroe Doctrine”—a modern formulation asserting US dominance over the Americas.

China has maintained extensive economic ties with Venezuela under what both nations describe as an “all-weather strategic partnership” [1]. As of 2025, 21 Latin American countries have signed Belt and Road Initiative (BRI) memoranda of understanding with China, though the region’s share of global BRI investment has declined significantly—receiving only 1.14% of global BRI construction engagement and 0.4% of investment in H1 2025, down from peak lending of $34.5 billion annually in 2010 to just $1.3 billion annually in 2019-2023 [5][6].

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The energy sector represents the most significant area of Chinese corporate exposure in Latin America, particularly in Venezuela, which holds the world’s largest proven oil reserves estimated at

[7][8].

Company	Entitlement Reserves	Joint Venture Status
Sinopec (China Petroleum & Chemical Corporation)	2.8 billion barrels	Largest foreign claimant; partner in controlling joint venture
CNPC (China National Petroleum Corporation)	1.6 billion barrels	Produces through Sinovensa joint venture with PDVSA
Private refiners (“teapots”)	~470,000 bpd purchases	Main buyers of discounted Venezuelan crude

According to Morgan Stanley analysis cited by Bloomberg, Sinopec’s 2.8 billion barrel entitlement represents

in Venezuela [7]. Total Chinese investment in Venezuela’s oil sector since 2016 amounts to approximately , according to the American Enterprise Institute [8].

Venezuela’s oil production has collapsed from over 3 million barrels per day in the late 1990s to just [8]. The US action introduces severe uncertainty about future production levels and China’s access to these resources.

Beyond energy, Chinese infrastructure investments across Latin America now face elevated political risk:

Project	Country	Investment	Status
Chancay Megaport	Peru	$3.5 billion	Operational; designed to bypass Panama Canal
Bogotá Metro	Colombia	Major investment	Under construction
EV Manufacturing Hubs	Brazil	Multiple projects	BYD, Great Wall Motor acquisitions

China is likely to away from Venezuela toward manufacturing hubs in Brazil and Chile, according to ODI analysis [5]. The December 2025 policy roadmap identifies AI, telecommunications, renewable energy, hydrogen, mining, and mineral processing as priority sectors for Chinese collaboration [6].

Despite geopolitical tensions, China-Latin America trade continues to grow:

• Chinese exports to Latin America grew
  almost elevenfold
  over two decades
• By November 2025, while exports to the US fell
  18%
  , shipments to Latin America increased nearly
  8% to approximately $276 billion
• Imports from Latin America to China increased
  fourteenfold
  , dominated by iron, copper, soy, and oil [6]

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According to Morgan Stanley research, the immediate market impact has been

[9]:

• Venezuelan bonds
  : Continuing rally following the intervention
• Other Latin American bonds
  : Limited spillover effects expected
• Gold
  : Gained over 1% as safe-haven demand increased
• US dollar
  : Tested as safe-haven asset amid oil price volatility

notes that the situation tests the US dollar’s safe-haven status, particularly amid Federal Reserve easing stance [9][10].

The energy sector showed the weakest performance following the Venezuela events:

Sector	Daily Change (Jan 10, 2026)
Real Estate	+1.36%
Industrials	+1.32%
Basic Materials	+1.27%
Energy	-1.59% (worst performer)
Financial Services	-1.01%

The energy sector’s decline reflects uncertainty about Venezuelan oil supply and potential disruptions to global oil markets [11].

Country	Risk Level	Rationale
Venezuela	Critical	Direct US military intervention; Chinese assets at immediate risk
Panama	High	Exited BRI in February 2025 under US pressure
Nicaragua	High	Close China alignment; potential US targeting
Cuba	High	Longstanding US sanctions; limited Chinese investment
Brazil	Moderate	Large diversified economy; maintains balanced relations
Mexico	Moderate	Critical US partner; modest Chinese investment
Argentina	Moderate	Milei government aligning with US

Countries “too large and diversified” like Brazil are likely protected from similar treatment due to their economic scale and strategic importance [5].

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1. Asset Expropriation/Confiscation Risk
   • US-aligned governments may nationalize or seize Chinese-funded infrastructure
   • PDVSA assets could be transferred to US-friendly entities

2. Secondary Sanctions Risk
   • Companies facilitating Chinese-Venezuelan trade may face US sanctions
   • “Teapot” refiners and trading companies most vulnerable

3. Operational Disruption Risk
   • Supply chain interruptions for oil and commodities
   • Port and logistics infrastructure access uncertainty

4. Debt Repayment Risk
   • Venezuela’s debt to China exceeds
     $10 billion
     [8]
   • Restructuring or default probability has increased significantly

5. Currency and Repatriation Risk
   • Bolívar volatility
   • Capital controls likely to intensify

Risk Type	Description	Affected Markets
Regional contagion	Other Latin American markets may face investor risk aversion	Brazil, Argentina, Chile equities
Commodity price volatility	Oil supply uncertainty affecting energy markets globally	Oil, related equities
Safe-haven flows	Flight to quality affecting emerging market debt spreads	Latin American bonds
Currency volatility	Real, peso, sol under pressure	Latin American FX

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• US-Venezuela situation stabilizes under US-aligned government
• China responds with diplomatic protest but limited military countermeasures
• Trade negotiations between US and China proceed as scheduled (April 2026)
• Chinese investments in Venezuela are “grandfathered” or compensated

• Sinopec/CNPC maintain Venezuela access through negotiated arrangements
• Broader Latin American investments largely unaffected
• Short-term market volatility creates buying opportunities

• US expands pressure to other China-aligned nations (Nicaragua, Cuba)
• China implements retaliatory measures in Asia-Pacific
• Secondary sanctions target Chinese financial institutions
• Latin American countries forced to choose between US and China

• Significant write-downs on Venezuela-related assets
• Chinese companies face restricted access to Latin American markets
• Regional growth slowdown affecting all asset classes

• US-China trade negotiations yield comprehensive deal
• Venezuela situation resolved through diplomatic channels
• Status quo maintained for Chinese investments
• Belt and Road expansion continues

• Minimal disruption to existing investments
• Continued growth in China-Latin America trade
• Market returns aligned with fundamentals

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Sector	Recommendation	Rationale
Energy (Sinopec, CNPC)	Underweight	Direct Venezuela exposure; sanctions risk
Infrastructure/Engineering	Neutral	Diversified portfolios; BRI alternatives
Manufacturing (EV, Tech)	Overweight	Shift toward Brazil/Chile manufacturing hubs
Financials	Underweight	Potential secondary sanctions exposure

Country	Recommendation	Rationale
Brazil	Neutral-to-Overweight	Large diversified economy; China manufacturing hub
Mexico	Overweight	USMCA alignment; nearshoring benefits
Chile	Overweight	Lithium/copper demand; stable governance
Argentina	Neutral	Commodity exposure but political uncertainty
Peru	Neutral	Chancay Port uncertainty

Instrument	Recommendation	Rationale
Venezuelan Bonds	Avoid	Extreme uncertainty; legal complications
Brazilian Bonds	Neutral	Sound fundamentals; commodity linkage
Mexican Bonds	Overweight	Safe-haven within LATAM; US alignment
Chinese Corporate Bonds	Underweight	Sector-specific risks in energy/infrastructure

Commodity	Recommendation	Rationale
Oil	Neutral	Venezuelan supply disruption balanced by demand concerns
Copper	Overweight	Chile exposure; EV/mining demand
Lithium	Overweight	Chile production; battery supply chain
Soybeans	Overweight	Brazil/Argentina exports to China

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Investors should track the following indicators for early warning signs:

Indicator	Threshold	Action
US-China trade talks progress	April 2026 summit outcome	Monitor for détente signals
Latin American election results	Brazil, Colombia, Peru 2026	Watch for US-aligned candidates
Chinese BRI investment flows	<$1.5B annually to LATAM	Decline indicates strategic withdrawal
Venezuela oil production	<800,000 bpd sustained	Negative for Chinese asset values
Secondary sanctions announcements	Any targeting of Chinese institutions	Immediate risk-off signal
Latin American bond spreads	>200 bps widening	Regional contagion indicator

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The US military operation in Venezuela has fundamentally altered the investment landscape for Chinese companies and Latin American markets. While the immediate market impact has been relatively contained, the

:

1. Chinese energy investments in Venezuela face unprecedented risk
   , with Sinopec’s 2.8 billion barrel entitlement now in doubt. Total exposure exceeds $10 billion in debt and $2.1 billion in oil sector investments.

2. China is likely to pursue strategic rebalancing
   , shifting from Venezuela toward manufacturing hubs in Brazil and Chile while leveraging the China-CELAC Forum and Digital Silk Road initiatives.

3. Latin American markets face a new geopolitical reality
   , where alignment with China carries demonstrable political risk. Countries like Brazil and Mexico may benefit from “safe haven” status within the region.

4. The “Donroe Doctrine” establishes precedent
   that US military force may be employed to counter Chinese influence in the hemisphere, potentially extending to other China-aligned nations.

For investors, this environment demands

, portfolio diversification away from direct Venezuela risk, and increased monitoring of US-China diplomatic developments. The April 2026 summit between Trump and Xi Jinping will be a critical inflection point for near-term market direction.

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[1] Al Jazeera - “China finds risks, opportunities as Trump pushes for ‘spheres of influence’” (January 8, 2026)
[2] Vision Times - “US Capture of Maduro Raises Stakes for China’s Venezuela Strategy” (January 7, 2026)
[3] Bloomberg - “Trump Opens New Front Against China With Brazen Arrest of Maduro” (January 8, 2026)
[4] ODI - “Trump’s Monroe Doctrine 2.0 defines great power competition” (January 2026)
[5] ODI - “China and Russia in Central & South America - January 2026”
[6] Mexico Business News - “China Expands Influence in Latin America Amid US Tensions” (December 29, 2025)
[7] Investing.com/OilPrice.com - “Oil Traders Reassess Venezuela Exposure” (January 5, 2026)
[8] Reuters - “China’s oil investments in Venezuela” (January 5, 2026)
[9] Morgan Stanley - “Market Implications of U.S. Action in Venezuela” (January 6, 2026)
[10] Reuters - “Investors face more geopolitical whiplash from Trump’s Venezuela gamble” (January 4, 2026)
[11] Goldman Sachs Asset Management - “Market Brief: Venezuela, Geopolitical Flashpoints and Investment Implications” (January 9, 2026)
[12] Duane Morris - “U.S. Actions in Venezuela Are a Cause for Concern for Chinese Investors” (January 6, 2026)