Investing in Venezuela
Venezuela is one of the world’s biggest oil producers, attracting a lot of attention from foreign investors. The country is an OPEC member and Latin America’s largest crude oil producer with many foreign oil companies holding operating assets in the country. Investors betting on the country’s revival can take exposure to Venezuelan equities through ADRs listed on the OTC markets or through bond ETFs. Currently, there are no ETFs investing in Venezuelan equities. Venezuelan bonds are extremely risky but provide high yields and are available at steep discounts.
Investors willing to take on the risk associated with Venezuelan debt and equities can consider the following bond ETFs:
- iShares JPMorgan USD Emerging Markets Bond exchange-traded fund (EMB)
- VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM)
The iShares JPMorgan USD Emerging Markets Bond exchange-traded fund (EMB) tracks an index composed of US dollar dominated sovereign debt issued by emerging market economies. This fund primarily invests in sovereign debt with Turkey, Russia, and the Philippines forming its top three holdings. Venezuelan bonds form 2.7% of this ETF’s portfolio. YTD the fund has returned 4.8%.
The VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM) invests in a basket of 350 dollar-denominated high-yield debt securities from corporates in emerging markets. Bonds issued by the Venezuelan oil company Petroleos de Venezuela SA (PDVSA) form 3.1% of its portfolio and is the top holding of this ETF. Additionally, Venezuelan securities form 3.2% of this ETF’s portfolio with Brazil, Russia, and Turkey being the top weighted countries. YTD this fund has returned 2.6%.
Foreign investors seeking exposure to Venezuela could invest in ETFs that offer diversification through investment in a single US security. Alternatively, investors wanting direct exposure could consider ADRs of Venezuelan companies listed on overseas stock exchanges.
A number of Venezuelan companies are listed on the New York Stock Exchange in the form of ADRs. They provide a much easier way for investors to buy Venezuelan securities without worrying about illiquidity.
Some of the most popular Venezuelan ADRs are as follows:
- Ceramica Carabobo SACA (CCOOY)
- Corimon CA (CRM)
- Fondo de Valores Inmobiliarios SACA (FVI-B.CR)
- Manufacturas de Papel CA (CR)
- Mercantil Servicios Financieros CA (MVZ-A.CR)