The US' interference in Venezuela affects other emerging markets

Within the first week of 2026, the US carried out the audacious 'Operation Absolute Resolve', capturing Venezuelan President (and long-time US enemy) Nicolás Maduro for trial in the US. In the immediate aftermath, questions have arisen over the event's financial and political implications, and what this military operation could for other potential flashpoints such as Taiwan.

For us, the key questions at this point are:

1. How has this military operation in Venezuela affected the investment environment for emerging markets?
2. How does this affect the risk calculus of China and Taiwan?

What's behind American forces' capture of President Maduro?

The US National Security Strategy outlines, in no uncertain terms, that it will pursue the restoration of American pre-eminence over the western hemisphere and protect ‘strategically vital assets’ that are ‘consistent with American security interests.’

These interests include the vast oil reserves in Venezuela and the severing of China’s ties to a nation the US considers part of its own sphere of influence. As stated in the National Security Strategy (NSS), ‘Non-hemispheric competitors have made major inroads into our hemisphere.’ There is little doubt as to which state is being referred to here, and in drawing attention to their security externalities, America has underscored the significance of China’s influence in Latin America.

What does Maduro's capture mean for China's interests in Venezuela?

The energy aspect is by no means insignificant; Venezuela sits on around one-fifth of the world’s oil reserves. However, these reserves seem to have served primarily as a means to make pathways into Venezuela and South America as a whole rather than as a critical energy resource. This is made even more evident by China's efforts to pioneer green energy rather than non-renewables.

For years, Beijing has invested significantly in Venezuela through loan-for-oil deals, making it one of the biggest buyers of its crude (The Guardian). However, this oil only represented around 4-8% of China's energy consumption (Atlantic Council). US sanctions meant there was a steady supply of oil at cheaper prices than they otherwise would be, but not a game-changing supply. Venezuela’s indebtedness to China through loan-for-oil deals is thus a key economic tie that binds the countries together.

As the fourth biggest recipient of loans from Chinese lenders, the country’s debts to China were thought to total around $10 billion in 2024 (Atlantic Council). The American incursions so far are unlikely to deal a serious blow to China because they have not been followed up on ground. If the US stops at removing Maduro and goes no further, the economic repercussions will be minimal.

What are the implications for the US?

Restoring previous levels of oil extraction from Venezuela will require huge amounts of capital. Years of corruption, politicisation, a brain drain, and sanctions have crippled the country’s production. Reconstruction of Venezuela’s oil industry would take decades and around $100 billion worth of capital investment. Still, the resource remains a key strategic asset, and at a time when US-Canada relations are strained, the sour crude that could be extracted from Venezuela will help the deficits faced by US refineries.

However, if the US pursues this strategy, the time and money it will have to expend on the endeavour will keep it tied up on the continent for a long time, potentially distracting it from countering Chinese interests in other regions and undermining the broader goal of containment.

Could the US intervene elsewhere in Latin America?

It is speculated that the real strategic asset which the US is looking to protect is not actually in Venezuela, but next door. Guyana, which is home to some of the world's most productive oil fields, has been the target of Maduro’s threats of annexation since the discovery of oil in 2015. As it stands, Guyana produces around 650,000 barrels daily, and ExxonMobil (the American multinational oil and gas corporation) predicts that by 2027 output could reach nearly 1.3 million barrels per day, making it one of the world’s highest-producing countries per capita.(The Guardian)

In the short term, however, the strategic benefits of US (prospective) interventionism will be pressuring or severing China’s bilateral ties with the country, and reasserting Latin America under its sphere of influence. The region has the potential to serve as a launchpad for America’s new hemispheric strategy, signalling its intent and capacities to neighbouring states - particularly those which, like Venezuela, have strong bilateral relations with China or Russia.

Does this set a precedent for Taiwan?

Oil and geopolitical influence aside, the other point of contention which has arisen from the US strikes is what this could mean for the China-Taiwan dynamic. Anxieties over a Chinese attack in Taiwan heightened at the end of 2025 when President Xi Jinping reiterated his pledges for reunification of the 'motherland' and warned against separatist movements. These comments came following the 'Justice Mission 2025' drills by China’s army which simulated a blockade on Taiwan and were the largest to be held around the island to date.

Simultaneously, Taiwan's Vice Minister of National Defence Hsu Szu-Chien, announced that the general budget this fiscal year is set to be NT$561.4 billion (US$17.75 billion), an increase of NT$87.5 billion (US$2.77 billion) from the previous fiscal year, in a potential signal of insecurity. (Taipei Times)

At face value these events coincide with US belligerence in Venezuela, but it does not follow that China-Taiwan dynamics will mimic or be directly informed by those in the Western Hemisphere. Almost every nation, including NATO countries, have recently increased defence spending. It follows that Taiwan will not be an exception as independent security capacities have become more salient around the world.

Concerns over the implications of America’s actions are centred around the argument that the attack and capture of Maduro have subverted not only Venezuelan sovereignty, but the very rules-based international order which the US purports to champion. Some claim that using force this way undermines any prospect that the US could intervene on Taiwan’s behalf in the event of a Chinese attack (on the basis that it has lost the moral high ground), and therefore weakens Taiwan’s defence, giving Xi Jinping carte blanche to invade.

How is the relationship between China & Taiwan different to that of the US & Venezuela?

However, China’s perception of Taiwan is fundamentally different to that of Venezuela. Since China doesn't consider Taiwan a sovereign nation-state, it doesn't view an attack on the island as a violation of international law.

Regardless of China’s perception of Taiwan’s sovereignty, there are other factors which distinguish the US strikes from a Chinese intervention in Taiwan and reduce the likelihood that the former could precipitate the latter.

Why Maduro's capture doesn't distance Taiwan from the US

First, such arguments about the US's moral standing don't appear to have affected its foreign interventions in the past. As history has demonstrated, US allies are willing support its interests and actions if their alliances remain critical to national security and have previously been careful to refrain from criticizing US strikes such as those on Syria, Iran, Yemen, Somalia, and explicit threats towards Cuba, amongst others.

Taiwan is democratically governed

Furthermore, Taiwan is recognised as a democratically governed nation, in line with liberal norms, unlike Maduro’s government, making its defence by third parties such as the US more palatable to the international community. It also sits in stark contrast to Venezuela, and the countries listed above, which have been framed as belligerent states threatening global or regional stability. The distinction is usefully illustrated by the reaction of Western governments to Donald Trump's recent suggestion that the US should take over Greenland.

In the past this has allowed the US and its allies to justify incursions on states which have undermined the international order. It will be hard for China to garner this same narrative support when it comes to Taiwan.

Taiwan's position in the semiconductor market sets it apart from Venezuela

Pivotally, unlike Venezuela, Taiwan consists of a developed and extremely valuable semiconductor fabrication industry – a global chokepoint which is fundamental to AI development. Intervention could threaten the fabric of the tech world which China too has come to rely on. This dynamic has been referred to as Taiwan's 'silicon shield'.

The Taiwanese Semiconductor Manufacturing Company (TSMC) for example, has around 67.7% of global market share (Q1 2025) (Taiwan Embassy) and is integral for fabless chip designers everywhere – especially the market-leading US firm NVIDIA. So far, the silicon shield remains an obstacle to destructive campaigns on the island and incentivises other states to push back on the Chinese threat to their continued supply of critical cutting-edge chips.

Does the US attack on Venezuela impact the relationship between China & Taiwan?

US strikes on Venezuela equip China with some narrative fodder, but little beyond this. The superlative privilege the US has in skewing the rules-based order remains unchallenged in the current climate, while China’s strategy towards Taiwan shows continuity rather than acceleration or restraint. Meanwhile, Taiwan exhibits a sensible strategy in its focus on optimising security, both through defence spending and through the entrenchment of its silicon shield.

Ultimately, we do not think events in Venezuela change the risk calculus from the perspective of China and Taiwan. The changing nature of US involvement overseas clearly represents a new age of US foreign policy, and we must analyse these new goals against the backdrop of its national strategy.

But we shouldn’t draw direct parallels between situations when fundamentally different variables are at play (and the stakes are, of course, much higher). With the US and others increasingly dependent on AI as an economic driver (as well as a driver of financial markets), the silicon shield remains more important than ever to American interests.

How does this affect investment in Emerging Markets?

No investor in emerging markets can ignore geopolitics when its effects on currencies, trade and a host of other factors can have such a material influence on company and sector performance. However, the ever-increasing pace of change and the need to revisit some long-held geopolitical assumptions reinforce our view that the relevant insights need to be applied at the level of the individual company under consideration for investment. How much should one invest in Taiwan, in light of recent events? Our approach when managing the Guinness Emerging Markets Equity Income Fund is to let this question be answered by assessing the opportunities in Taiwan as we find them.

Hence we invest in TSMC (to take a relevant example) as a unique company with encouraging prospects for capital and dividend growth, rather than a mere constituent of a target allocation to Taiwan. This reflects the reality for investors that, while there is hardly a more geopolitically relevant stock than TSMC, the relevant risks need to be considered in the context of the returns and fundamental structure of the business.

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Risk: The Guinness Emerging Markets Equity Income Fund is an equity fund. Investors should be willing and able to assume the risks of equity investing.  The value of an investment and the income from it can fall as well as rise as a result of market and currency movement; you may not get back the amount originally invested. The Funds are actively managed with the MSCI Emerging Markets Index used as a comparator benchmark only.

Disclaimer: This insight may provide information about Fund portfolios, including recent activity and performance and may contains facts relating to equity markets and our own interpretation. Any investment decision should take account of the subjectivity of the comments contained in this insight. This insight is provided for information only and all the information contained in it is believed to be reliable but may be inaccurate or incomplete; any opinions stated are honestly held at the time of writing but are not guaranteed. The contents of this insight should not therefore be relied upon. It should not be taken as a recommendation to make an investment in the Funds or to buy or sell individual securities, nor does it constitute an offer for sale.