Most international banks have already pulled out of Venezuela in recent years — including the Bank of Nova Scotia, which sold its stake in a bank there in 2022 — so, recent U.S. action against the country’s leader has no impact on global banks in the short term, says Morningstar DBRS Inc.
In a report released Tuesday, the rating agency said that in the short run, the removal of Venezuela’s president Nicolas Maduro from power has no real direct impact on global banks and the ongoing downside risks “are immaterial” as the banks have very limited direct exposure to the country.
In recent years, global banks have largely abandoned Venezuela, or written down their investments there, as its economy has struggled under economic sanctions that were first introduced in 2005 and have escalated since then, resulting in declining GDP and surging inflation.
“Against this very unfavourable backdrop, most Western banks have exited Venezuela,” the report said — including Citigroup Inc., which sold its operations there in 2021 after more than 100 years in the country, and Scotiabank, which sold its 27% minority stake in a bank there in 2022.
In the meantime, certain Chinese banks “stepped in to fill some of the void as Western lenders pulled back,” DBRS noted.
Looking ahead, while the global banks currently have limited exposure to Venezuela, the country may eventually provide new opportunities for banks, the report said.
“Longer term, there could be opportunities for banks to re-enter the country, if the Venezuelan government is able to get sanctions relief that reopens investment opportunities and creates a more favourable environment for international banks,” it said.