On Tuesday, Venezuelan Vice President Nicolas Maduro confirmed
that President Hugo Chavez passed away, ending a two-year bout
with cancer. Chavez, 58, controlled Venezuela, South America's
largest oil producer, for 14 years. Frequently an antagonist of
the U.S., Chavez even blamed the U.S. for
orchestrating a 2002 coup aimed at toppling his regime
With Chavez's passing, investors and traders with exposure to
Latin America are perhaps hoping a new regime, one with more free
market principles, comes to power in Venezuela. As has been
only a few bond ETFs offer U.S. investors any
form of Venezuela exposure
With no equity-based Venezuela ETF currently on the market,
the iShares Emerging Markets High Yield Bond Fund (NYSE:
) acts as a bond alternative to tapping into Venezuela. The fund
features an allocation of almost 17.5 percent to the South
according to iShares data
On the equity-based front, investors have a couple of options,
stretches as they may be. Start with the iShares S&P Global
Energy Sector Index Fund (NYSE:
Not only is Venezuelan Latin America's largest oil producer,
it is a member of the Organization of Petroleum Exporting
Countries. And not only is Venezuela an OPEC member, but it is
home to the
largest oil reserves in the world
. Yes, even larger than Saudi Arabia's. Some estimates pin the
number at 256 billion barrels. Add to that, the country is home
to the largest natural gas reserves in the Western
Despite its abundance of oil riches, Venezuela long ago
nationalized its oil industry and foreign firms operating there
during Chavez's reign faced myriad challenges. For example, in
2011 the country's energy ministry threatened
some Western oil companies
with loss of their exploration rights if they did not boost
Back to the iShares S&P Global Energy Sector Index Fund.
This ETF and its rival, the smaller SPDR S&P International
Energy Sector ETF (NYSE:
) are ideally positioned to take benefit if Venezuela embraces a
new form of government and opts to act as a partner with rather
than a dictator to Western oil companies.
IXC, which has just over $1 billion in assets under
management, devotes about 28 percent of its weight to Exxon Mobil
), Chevron (NYSE:
) and BP (NYSE:
). In addition to the Boscan Field, Chevron has operations in the
Plataforma Deltana region and in the Gulf of Venezuela.
Exxon's Cerro Negro in Venezuela was seized, but with the
company's need to bolster oil reserves and production, it is not
a stretch to see the largest U.S. oil company warming to
Venezuela once again if the circumstances are favorable.
BP does not have a major Venezuelan presence, but after
selling scores of assets in the wake of the 2010 Gulf of Mexico
spill, Europe's second-largest oil company is looking for avenues
to increase production.
Other IXC constituents that previously had or currently
maintain a Venezuelan footprint include Total (NYSE:
), ConocoPhillips (NYSE:
), Eni (NYSE:
) and Petrobras (NYSE:
). Those four stocks combine for another 9.4 percent of IXC's
As for IPW, that ETF features no exposure to U.S. companies,
but BP, Total and Eni combine for almost a quarter of the ETF's
weight, giving the fund some leverage to the Venezuela oil story.
Additionally, Royal Dutch Shell (NYSE: RDS-A) has done business
in Venezuela for a century. Two different Shell securities
combine for over 16 percent of IPW's weight.
Bottom line: There are no guarantees these stocks and
will react immediately to the Chavez news, but the two funds are
worth monitoring, particularly in the event of legitimate
Venezuelan regime change.
For more on ETFs, click
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