Key Takeaways:

• A new neocolonial pattern is emerging in Brazil. China captures value in Brazilian agribusiness not through land grabs or coercion, but through controlling inputs, trade, and infrastructure, subsidizing its own food security while leaving Brazilian sovereignty formally intact.

• Brazilian farmers experience margin compression under this model. Even though prices are market-driven, concentration of infrastructure and trade in Chinese hands shifts the competitive equilibrium, limiting the farmer’s own productivity gains.

• China may influence price discovery. Controlling infrastructure and origination may allow Chinese SOEs to affect market timing and conditions, ensuring Brazilian soy costs less to deliver to China than competitors, even without directly setting prices.

Last year, passions stirred when the Brazilian government modified the original tender offer of a mega terminal in the Port of Santos.^[1] The shipping industry and the political spheres were flustered, after Brazil’s Port Authority (ANTAQ) followed its own recommendation to sideline established port operators from the tender process.

Brazil almost surpassed the U.S. as an agricultural exporter in 2025. At $169.1 billion sold in agricommodities last year, Brazil’s rise as the next global breadbasket seems less a question of if and more a question of when.

The tender offer process keeps delaying, after Brazil’s auditing body (TCU), upheld ANTAQ’s decision. Last March, the U.S. Consul-general in Sao Paulo cautioned port executives against allowing China to clinch the concession of TECON 10, the mega terminal. The result of this battle may offer clues as to whether Brazil has a plan to capitalize on their agronomic progress, or if instead, they will revert back to being an agricultural neo-colony.

A global breadbasket in the making: Brazil’s ascent to the top of global agribusiness

In 1971, an obscure U.S. Department of Agriculture report noted that Brazil was an upstart agricultural nation, quickly rising through the ranks in export volumes. The main rationale behind it was that Brazil, like the U.S., could produce high-yield soybean crops, high in oil content, which would then go to the profitable crushing industry instead of table food alone.

At the time, only the United States and China produced more soybean than Brazil, respectively.

However, there were other powerful factors driving this agricultural development. The Brazilian government had an elaborate scheme of incentives and policies to wean itself off from food imports. These included R&D on seed strains, crop adaption to tropical areas in center-west Brazil, adopting floor prices for agricommodities, offering federal loans to farmers, compelling commercial banks to destine about 10% of their loans for agricultural production, and favoring the expansion of wheat crops. Wheat planting, specifically, reinforced another incentive scheme where Brazilian farmers entered a yearly, double-crop system of planting soybean immediately after harvesting the wheat.

Wheat, like corn, is a heavy feeder on nitrogen, so the soybean—a legume—was a perfect free nitrogen fertilizer and summer crop, following the winter wheat. The machinery for wheat crops, also, could be shared with the soybean crop, which in turn expanded mechanization, cooperatives, and storage capacity.

The report warned that Brazil’s soybean market was to be observed closely, as the South American nation could turn into a U.S. competitor, eventually.

This was over half a century ago—or 55 years, to be precise.

Today, Brazil dwarfs the rest of the world in soybean production. In 2025, Brazil produced over 166.1 million metric tons (MT) of soybean, while the U.S. harvested 115.9 MT, and China accounted 20.91 MT. The world combined yielded over 400 MT.

Thus, Brazil is 41.5% of the global soybean market: They are the market.

As the world population continues to grow in the dozens of millions every year, food security is an increasing concern for governments around the world. Among the most concerned: The People’s Republic of China.

Connecting China’s social stability, the CCP, and the Brazilian soy market

China has a tough job when it comes to food. China is home to about one fifth of the world population, but it holds only some 9% of its arable land and 6% of its freshwater. This creates a food security bottleneck that could affect governance and the stability of Chinese Communist Party (CCP) rule in the country.

As a Marxist-Leninist institution, by design, the CCP partially draws legitimacy from material-abundance agendas. In other words, the CCP’s legitimacy hinges on delivering tangible economic and material benefits to the population, as its Soviet predecessor illustrated, in the negative.

China’s agricultural sector has modernized significantly, but the country is still technically inefficient, soil fertility is low, and corruption and disorganization still hinder crop output levels.

The General Secretary of the CCP, Xi Jinping, included food security in his Holistic National Security approach. However, his (public) concern with food can be traced back to 2013, during the annual Central Rural Work Conference. By Xi’s account, China should “[m]ake reasonable use of the international agricultural products market”, and “formulate international trade strategies for important agricultural products,” including by optimizing the “layout of import sources” through “stable and reliable trade relations.”

This means that China intends to control not just what it buys but through whom it buys it and through what infrastructure.

That’s according to neat Party authoritative interpretations of Xi’s thought, anyway. Reality, however, is somewhat messier.

In practice, China started buying up land around the world decades ago, under the “two markets, two resources” policy by Hu Yaobang. This strategy accelerated after the 2008 global food price crisis.

The approach granted Chinese state-owned companies (SOE), private agribusinesses and funds large amounts of hectares (ha) of arable land to source produce from across the world, including Brazil. However, the moves were perceived as a foreign “land grab,” and the sovereign backlash was swift. For example, in 2010 Brazil modified its 1971’s Land Acquisition by Foreign Residents Law, to tighten foreign control over Brazilian rural land, after a series of high-profile land purchases across Latin America and an attempt to lease over 1.2 million hectares in the Philippines by Chinese actors.

China also picked up quickly that land ownership is a bad vehicle for food security at scale: a visible, politically vulnerable, and physically dispersed sourcing system cannot match control of the commercial infrastructure through which all producers must pass. That system itself is what captures value from every field simultaneously.

Thus, China pivoted away from the negative diplomatic connotations of land purchases—even if the acquisitions were not necessarily vast—and focused instead on successfully inserting itself in the value chain of global agricommodities. Changing land laws in Brazil and other countries—while reasonable from a protectionist standpoint—did not change China’s intent in addressing its food security problem.

Following this, China continued to target the Brazilian agribusiness—especially it’s soy market—as a significant source of its food imports, and took concrete steps to direct major investments there.

Upstream: China buys access to Brazil through Noble Agri and Nidera

In the early 2010’s, China’s involvement in Brazil was the highest in Latin America, which received about $10 billion in FDI from China in the 2010-2013 period, in total. Chinese involvement in Brazil kept rising in 2014-2017, right after COFCO (China’s SOE food security arm) acquires controlling stakes in two companies: Noble Agri and Nidera.

In that period, COFCO spent over $3 billion acquiring and repurposing both firms.

The first phase consisted of a tiered acquisition of majority-to-total ownership of both companies, separately. First, Noble Agri, the agribusiness arm of Noble Group, a then-powerful commodity trader based in Hong Kong. Second, Nidera, another major agricommodities trader and seed developer company based in the Netherlands.

Noble and Nidera gave COFCO—that is, China—an instant foothold in the origination business of agricommodities in Brazil, where both firms had a substantial presence.

COFCO did not just acquire a balance sheet. It acquired close to a century of embedded relationships with producers, grain elevator operators, and logistics intermediaries in Argentina and Brazil. That is institutional knowledge and commercial infrastructure that cannot be built from scratch in a decade.

In other words, in a couple M&A moves, China bypassed the entire sourcing and trading business and became itself the frontline trader at farmgate, including with Brazilian soybean farmers and cooperatives, massively cutting its own operations costs, and capturing a margin that would otherwise go to intermediaries and to the farmer itself.

Furthermore, the importance of this development lies in that it gave China a foundational entryway in a business that is virtually controlled at all stages by the so-called ABCD companies: ADM, Bunge, Cargill, and (Louis) Dreyfus.

The results were immediate. By 2018, COFCO was importing as much soy as Dreyfus and more than ADM. The ABCD companies built their positions in South America over a hundred years, China did it in less than ten years.

However, in absorbing Nidera, in particular, China acquired a bit more than logistics gains. At the time of acquisition by COFCO, Nidera Seeds (the seed business within Nidera) held the intellectual property (IP) and commercialization network of one of the most profitable soybean strains in the market: the NA 5909 RG. That soybean variety is vastly disseminated across the Brazilian soybean market. Here, the second phase of the process began, which consisted of a multipronged re-acquisition and partitioning of Nidera by Chinese entities.

ChemChina, a Chinese SOE that deals in agrochemicals first acquired Syngenta, a Swiss-based pesticides and seed business company, between 2016-2017. Syngenta, subsequently, acquired Nidera Seeds from COFCO. ChemChina is part of SinoChem, a SOE holding engaged in agrochemicals, fertilizers and a petroleum industry producer for both civilian and military purposes.

Thus, through its companies, China now has increasing leverage over the Brazilian upstream soybean market not only at farmgate through origination, but also at the input level through IP, by selling to the Brazilian farmer one of the high-yield seeds the market covets.

This is the first stop where margin compression becomes real for the Brazilian farmer. The rent extraction goes on down the value chain.

Midstream: The infrastructure buyout, further margins capture, and Brazilian politics in the way of the soybean market

Last year, COFCO acquired 979 train wagons and 23 locomotives for grain transportation stemming from the Brazilian interior. The company announced it intended to move 4 million MT from “key producing regions” to COFCO’s export terminal in the Port of Santos: TECON 11. Right next door to the coveted TECON 10.

COFCO acquired TECON 11 in 2022, on a 25-year lease that granted it exclusive rights over reception, storage, handling and exporting of all cargo that reaches the terminal. The company has been working on the expansion of the terminal since. This is in addition to CMPort (another Chinese SOE) already owning 90% of the Paranaguá Port, Brazil’s second largest soybean exporting hub, after the Santos Port.

Furthermore, China, Brazil, and Peru have plans to build the so-called Bioceanic Corridor. This is a transnational logistics and transportation project that would connect the eastern Brazilian ports to the deep-water mega port of Chancay in Peru. COSCO (the Chinese shipping SOE flagship) owns 60% of the port, with little interference from the Peruvian Port Authority (APN).

While the Bioceanic Corridor remains mostly a memorandum of understanding (MOU), in practice, the idea alone is a clear signal of the true Chinese ambitions in Brazil. China aims to build a coast-to-coast trade infrastructure for the Brazilian grain market where they control the process from end to end. As a supplementary byproduct—in theory—this system would also become a closed loop, reinforcing a cycle where Brazil ships raw materials at cost and China sends back manufactured products at a premium.

China is re-defining a type of neo-colonial dependency that does not need land ownership, currency manipulation or lopsided trade and tariff agreements. Instead, the relationship is evidenced in the capture of rents at every stage of the production process: There is infrastructure control at the exit points in Santos, Paranaguá (and tentatively Chancay) of the flows control through input (seed IP) and origination (trade and infrastructure) at the interior points.

This is also where Brazilian politics come in again, and realities on the ground bite the soy industry.

Last February, the Lula administration walked back a privatization decree that put Brazil’s northern waterways in the hands of grain operators and logistics companies. These are the three rivers (Tapajós, Tocantins, and Madeira) collectively known as the backbone of the Arco Norte system, which liberates Brazil’s soybean production from the landlocked interior into the Atlantic, via the Amazon river, to which the Arco Norte is connected.

Indigenous peoples in the lower Tapajós river protested that the privatization occurred without their social licensing it, and thus they occupied Cargill’s facilities in Santarém. The Brazilian government ratified the Indigenous and Tribal Peoples Convention (ILO 169) in 2004, so it had to abide by it and side with the protesters, as it was the indigenous peoples’ right.

However, this poses a serious cost chokehold for the soybean market in the Brazilian interior. To the landlocked region, Arco Norte is the cost competitive alternative to the Santos route in the Southeast. Brazil’s center-west region, El Cerrado, has become the tropical savannah equivalent of the American Cornbelt in the Midwest, yielding the highest volume of soy in the country. The original privatization decree aimed to modernize, dredge, and build more grain capacity in the Arco Norte. If that possibility is delayed indefinitely or taken away altogether, cost competitiveness will erode for the region. Thus, the natural reaction of the Brazilian farmer in Mato Grosso or Tocantins may be to turn to China’s growing infrastructure in the Southeast, and even begin to consider the Bioceanic Corridor to Chancay as a realistic option. Political pressure will follow, and margins will compress even more for the farmer.

Again, if the infrastructure owner is also the biggest buyer (COFCO), then the rent captured at the infrastructure layer effectively reduces what the Chinese state pays for delivered grain. The Brazilian producer receives less than a competitive market would deliver.

The point is not that Brazilian producers have no options, the price at which COFCO buys from a farmer is not set in a vacuum, but at the margin of the next best buyer. The point is that the progressive concentration of infrastructure in Chinese state hands shifts the competitive equilibrium in ways that compress producer margins at the edge.

Brazilian producers are not being impoverished by China, nor would they be better off in a world with no Chinese investment, but they are not receiving the competitive market value of what they produce, given the investment Brazil made in its own agricultural development. The producer works harder, plants more, deforests more, and the margin improvement gets captured with the terminals, the trains, the ports. Also, the Brazilian state itself is a participant in this system, not merely a victim of it. They favor Chinese investment and simultaneously create policy bottlenecks (i.e. the Arco Norte walk back) that may drive the market to the Chinese.

China captures Ricardian rent by way of capturing infrastructure rent. The natural and technical advantages of Brazilian farming (abundant and fertile soil, water resources, effective agrochemistry, efficient and mechanized systems) that would go to the farmer in a competitive market gets transmitted instead to the trade and terminal side.

The result is that Brazil’s agricultural prowess is subsidizing Chinese food consumption.

Downstream: Chinese S&D control, future price-setting capacity, and the Brazilian farmer’s exposure.

As COFCO’s margins widen in its trading book, no Brazilian farmer is being cheated on any one contract. COFCO’s vertical integration through the value chain and its “sister” Chinese SOEs (and private companies) can absorb and redistribute costs, internally, in a way that the farmer is offered a price that clears the market while still capturing the rent efficiency as profit.

Eventually, if COFCO controls enough of the soy origination business, it can time its buying. It will know, better than any market participant, what real harvest volumes are, what is in storage, and what is moving at any given moment. That information advantage, combined with the ability to accelerate or slow throughput at terminals it controls, means it can influence the conditions under which prices are discovered.

This is not to say that China—today a price taker—may come to set prices itself, only that they may influence the conditions of their discovery.

Vertical integration will not give China the power to dictate what Brazilian soy costs. However, it may give China the power to systematically ensure that Brazilian soy costs less to deliver to China than any competitive alternative.

The Brazilian producer, on the other hand, will remain exposed to global price discovery. China, due to its massive position in the soybean sector, may get market price minus the infrastructure efficiency advantage it has built at state-subsidized cost of capital. Over time, that advantage compounds.

Brazilian politics may be waking up to this fact, nonetheless. The question remains whether they have the capacity (and the interest) to intervene. At 179.8 MT handled per year and expanding, the fight over the Port of Santos is one of the early indicators that Brazilian regulators are at least aware of what’s at stake. Everyone wants a piece of the port, including China. To what degree Brazilian authorities understand the problem is unclear.

In the meantime, it is the Brazilian farmer who continues to be stuck at the center of economic statecraft coming at them from all angles. The farmer, the piece without which the entire system crumbles, is also the weakest. Real profits elude the Brazilian fields and the biomes they take over through land conversion, which are getting decimated in the name of production volumes that do not get re-distributed to the true owners of the wealth it generates.

Brazil spent the 20^th century trying to leave its colonial past behind—often unsuccessfully. Now, they’re facing the same problem in this century, yet again. Oligopolist practices by SOEs overseas have the capacity to take what’s sovereignly Brazil’s without so much as the threat of violence, like the old powers used to do.

^[1] The port of Santos, South America’s largest port by volume, sits just east of Sao Paulo and south of Rio de Janeiro, at the intersection of the southern axis of Brazil’s agricultural production. Facing the southern Atlantic, Santos handles over 5 million shipping containers (TEU) per year. The tender the government wants to issue is for a 25-year concession worth $1.26 billion in development plans. The resulting expansion of the terminal could bump Santos to 9 million TEU per year.

What to Read Next:

On March 3rd, 2026, I woke up to the news that a few blocks from home in Washington, D.C., a San Francisco nonprofit had filed a complaint in federal court against Chubb Limited, one of the world’s largest insurers. The nonprofit, As You Sow, and Chubb have been embroiled in a never ending boardroom and legal battle since 2019 that may end up deciding whether climate change activists can exert indirect influence over climate policy in the Global North without political control earned at the voting poll. This strategy, however, may end up passing on the cost of Green Capitalism to the Global South in the process.

The relevance of this particular lawsuit is embedded in the nature of the ask, tucked behind the legal jargon. As You Sow argued that Chubb blocked a shareholder proposal containing one single demand: that Chubb commission a report to assess whether it is viable to “pursue compensation” from “responsible third parties,” to offset the cost of climate-related losses. In other words: As You Sow wants Chubb to sue the oil and gas industry worldwide.

At scale, this may produce deep, even crippling consequences for the petroleum business. The effects, however, would not be contained to the target industry alone. Cripple the fossil fuel industry at a global scale and you get a spillover effect extending to all the other industries highly dependent on it, including the logistics, infrastructure, transportation, and agricultural sectors. This is so because there is no substitute for fossil fuels today at scale. No matter what activism says, physics says otherwise, unfortunately.

But why Chubb?

Chubb is a company with global presence, with gross premiums revenues of $62 billion, and asset values of $272 billion. If Chubb were a country, its GDP would be larger than Iceland’s and its balance sheet would be the size of its entire banking system. Their reach and their pockets are deep. Then, there’s also what they do for a living.

Chubb’s core business by volume and revenue, its property and casualty (P&C) line, registered a $31.29 billion in net premiums earned (NPE) in 2019 and $53 billion NPE in 2025. P&C risk underwriting is what pays for your smashed phone, or your busted kitchen after you torched it cooking farmed salmon. This is Personal P&C. However, P&C is also what pays for a blown up oil refinery in the Gulf after an accident, it is what secures project finance or lending for a state-owned oil company like Mexican PEMEX to drill, and it is also what pays for cold storage for agricultural produce waiting to be carted north to the United States. This is Commercial P&C, and Chubb’s Commercial P&C is about 38% of its total NPE in North America alone.

Chubb, as it turns out, is virtually present in every aspect of the mechanisms that control our daily lives, like our communications, our transportation, our electricity, the packages we order on Amazon or Shein, and the food we put on our table. Through its clients, Chubb underwrites risk, insures and invests with a depth that no other industry has the power to replicate. Thus, Insurance is king.

To Kill an Industry, First Kill Its Insurance

Every major industry in the Global North faces moral and material pressures to adopt more climate-friendly policies and corporate strategies. Aeronautics could develop more fuel-efficient turbines; Mining could deal more competently with waste and tailings. For those industries and many more, it is relatively easy to point to the pressure point and target it. However, insurance is different insofar as the industry itself is not where the target of climate activism is, but rather the infrastructure that sustains it. That is, a coal company can be protested and divested from, and it will still operate as long as it can finance and insure its assets.

This defeats the purpose of climate activism. Thus, activists realized that if they cannot eradicate an industry directly, they must remove the preconditions for its existence. Insurance is one of three such preconditions, alongside with banking and project finance. A business cannot build, operate, or finance an industrial asset without insurance in any modern economy. There’s no escaping this basic financial tenet.

This makes insurance the master key to all other target industries. A bank can be pressured to stop lending to fossil fuels, but the bank can be replaced by another bank, including non-Western ones beyond the activist’s reach. However, when Chubb underwrites a refinery or a port terminal, it does not carry that risk alone. Instead, Chubb re-distributes that risk across a network of global reinsurers to share the burden if the assets are lost. That industry network is finite, and it faces the same activist pressure simultaneously. There is no replacement for this industry. Thus, if activists pressure an insurer of Chubb’s caliber to stop guaranteeing certain activities or to operate under certain criteria, the replacement problem becomes systemically impairing for the uninsured.

Insurance, also, is special because of its access to information. On paper, an insurer knows more about a client’s operations, risk profile, and exposure than almost any other counterparty. Activists understand that embedding greenhouse gas (GHG) emissions criteria into underwriting decisions means embedding climate policy into the most intimate financial relationship a company has, where the insurer can demand disclosures, set behavioral conditions, and price non-compliance directly. No other financial intermediary has that operational visibility.

Enter the climate insurance wars.

An activist call to arms: Chubb stops underwriting coal in 2019

The standoff between the activist shareholders and the insurer didn’t just suddenly come to a head this March. It all started with seemingly good news in 2019, when Chubb announced, of its own accord, that the company would stop underwriting risk for coal-related activities and investments. This was, in all honesty, an important step forward in fighting climate change.

Chubb committed to stop insuring new risks for companies that generate more than 30% of revenues from thermal coal mining and to phase out existing coverage by 2022. At the time, this was framed by Chubb’s CEO, Evan Greenberg, in the spirit of environmental stewardship. Across the boardroom, however, an activist shareholder coalition read the move as a tactical opening and an invitation to escalate. Chubb, in that moment, did not realize that a particular logic was being embedded in the activist rationale for the company: a concession, instead of a settlement, was actually both a sign of weakness from Chubb and a beachhead for the activists’ climate goals.

The first coordinated action happened in 2022, when Green Century, one of the activists in the coalition, filed a resolution requesting Chubb to adopt policies to stop underwriting new fossil fuel extraction, in line with the IEA’s Net Zero Emissions by 2050 Scenario. As You Sow, separately, filed a proposal requesting Chubb to issue a report on whether and how it intended to measure, disclose, and reduce GHG emissions from its underwriting. The Board recommended against both proposals. Green Century’s proposal was voted down, but As You Sow’s passed, after garnering more than a 72% support. This is how the highly controversial Scope 3 protocol entered the world of Chubb Limited.

This was a pivotal moment and the height of institutional support for the coalition’s goals. The kind of support that As You Sow’s proposal received was not a mere protest vote. Nearly three quarters of institutional shareholders voted yes, including the New York State Common Retirement Fund, a nearly $298 billion investor behemoth with political clout that represents a key U.S. constituency of over 1.2 million New Yorkers.

That year of 2022, I spent my spring break at the U.S.-Mexico border in Laredo, Texas, conducting interviews in Spanish with destitute immigrants turning up at the border. To get there, I’d driven south from San Antonio. The highways of Texas stemming from the border were an endless stream of north-bound trucks carrying products to the interior of the United States. The large majority of these fabulous fleets of diesel sponges were carrying agricultural products. I was amazed at the sheer scale of the logistics keeping the United States fed, and got overwhelmed at the thought of the operating costs of these supply chains. Then and there, and for the longest time, I did not realize that each truck, the owners of the cargo, the people loading or unloading goods, the fuel producer, all had two things in common: they depended on the petroleum industry, and they all needed insurance. Knock down a single one of these delicate pieces, and the system collapses like a domino chain.

By 2023, Green Century tried again to phase out all fossil fuel underwriting. Chubb suppressed the initiative by taking the matter to the U.S. Securities and Exchange Commission (SEC.) The SEC found for Chubb, saying that in their view, the proposal micromanaged the company. Chubb won the procedural fight, then immediately announced an oil and gas underwriting restriction in protected areas, surrendering the point. As You Sow, meanwhile, re-filed and lost its Scope 3 proposal. This time support collapsed to 28.93%.

The signs were clear that activist pressure was not relenting. The government also got involved in the summer of 2023. The U.S. Senate Budget Committee opened an investigation into the underwriting practices of major insurers operating in the United States, dragging the controversy to the public eye. In 2024 Green Century and As You Sow co-filed for Scope 3 one more time, but by then the mood on the topic had soured across the shareholder crowd, and support collapses again to 28.3%.

Scope 3: When the Math won’t cooperate and nobody backs down

It should be said that the proposals based off Scope 3 disclosures were not a vague gesture toward greener values. This was a specific technical demand made to Chubb to implement: collect GHG emissions data from every entity Chubb insures, across their entire value chain, processed against international reporting standards, and embed those emissions profiles into underwriting decisions.

Chubb’s Board correctly understood that this was methodologically impossible, including from a scientific point of view.

In their proposals, the activist coalition repeatedly asked for a highly advanced, technically complex combination of often unavailable data disclosures by third parties in the value chain of the underwritten activities, as well as for reporting practices that remain unstandardized, and resource allocation efforts that may not be reasonable to expect, even in the context of a large company like Chubb, which commands a great deal of human and financial capital. Indeed, Scope 3 data collection would require disclosures by entities throughout an insured client’s entire supply chain, who are generally private companies in multiple international jurisdictions with no legal obligation to report anything.

If a company is based in and operates from select areas of the Global North, on a relatively closed-loop supply chain, with relatively known (and a small amount of) partners who share the same regulatory, fiscal and incentives regime, then Scope 3 may not seem such high-bar standard to comply with. However, when you operate at a global level, and your business covers virtually every aspect of commercial (and non-commercial) activity under the sun, the task of complying with Scope 3 becomes not just Herculean, but simply unfit for the purpose.

In the case of Chubb, their legacy business model is different from that of a research institution, which is what the company would have had to turn into in practice, to satisfy the standards of Scope 3. That is, Chubb’s subject matter expertise lies in assessing risk on a case-by-case basis, not on a global scale as the GHG disclosures system requires.

At least until the end of 2024, the proxy campaigns for Scope 3 persisted, but the votes in favor continued to be low, even as Chubb repeatedly made important concessions. The insistence on the point, however, wore down the patience of the institutional shareholders, and their support for the activist coalition declined considerably.

Mexico and the cost dilemma of the humble tortilla

At the very end of 2024, I am in Mexico City for work. I am in a high-rise office in La Reforma, surrounded by U.S. State Department officials, taking notes like a maniac on security cooperation programs between the Mexican and U.S. governments. I can see the Angel de la Independencia Monument from the window, barely a block away, and the Popocatépl volcano smoking away in the distance. It’s so beautiful and perfect.

Yet, when I come downstairs during lunch, I realize that prices are higher than they were six months earlier, when I last visited. It is not lost to me this time that a lot more people are buying their food from street stalls than they are sitting in restaurants. Masses of white-collar workers are huddling around the budget-friendly stalls.

I spent a week having lunch around the office, and befriending the stall vendors. In snippets, I learned from them that there was a drought that year, and the crops were not that plentiful, so the price crept up little by little. Mexico’s government had also cut off subsidies for the country’s major corn producers after a reform in recent years. This forced Mexico to import large quantities of corn, including from the United States.

If the corn comes from farther away, the corn tortilla’s price experiences upward pressure. The entire supply chain runs on the diesel that powers the trucks, the trains, the ships, the cranes at the ports, and the corn mills. In the 2018-2024 period, the cost of tortillas steadily rose more than half, from MX$14.33/kg to more than MX$22.0/kg. Thus, diesel is not only the lifeline of the Mexican tortilla, but also its price floor. This is not to say that climate activism caused a tortilla price spike in retrospect. Rather, it means that activism is certainly not factoring in any of these costs when trying to decide future climate policy, with global implications, through boardroom battles and lawfare in U.S. courts.

Chubb is the third largest property and casualty insurer in Mexico by total premium volume, writing MXN 28.2 billion annually. Within that book, the industrial lines matter most. In General & Commercial Liability, covering operational risk for refineries, gas pipelines, and petrochemical plants, Chubb writes MXN 2.04 billion annually. In Marine & Transportation, covering logistics chains moving fuel, produce, and manufactured goods across the country, MXN 1.79 billion. In Fire & Industrial risk, covering fixed industrial installations against explosion and damage, MXN 1.49 billion. And in Catastrophic Risk, covering tail risk on large-scale infrastructure, MXN 1.68 billion. This is the insurance backbone of Mexico’s fossil fuel-dependent industrial economy, and the coverage that no domestic Mexican insurer has the reinsurance architecture to replace.

Thus, beyond incremental curtails of fossil-fuel underwriting, if Chubb is also eventually steered into suing the fossil fuel industry, then the consequences may extend well beyond the target. Activism would not simply be effecting justice for homeowners on the coastline of New York or on the wildfire-prone hills of California, they would also be creating, slowly, the conditions for structural food shortages and political unrest in the Global South. Mexico is but a sample drop in a sea of countries dependent on insurance to finance their agricultural, infrastructure and logistical operations.

The cost transmission mechanism of climate insurance, and the lawsuit in D.C.

In Mexico, what makes Chubb’s role structurally distinct from a regular market participant is not even its balance sheet exposure. Rather, what’s important is its position as the point of entry into the global reinsurance network. Chubb is the biggest cedent in Mexico by total premium volume, 30% ahead of its closest competitor, Mapfre. What’s more, if Chubb were to exit the country and Grupo Nacional Provincial (GNP)—Mexico’s second largest P&C insurer—tried to absorb its book, GNP would need to multiply its entire reinsurance cession by a factor of four.

When Chubb underwrites a PEMEX offshore project or a cold-storage logistics hub in Monterrey, it redistributes about 61.5 cents of every peso of premium into a chain of international reinsurers who absorb the tail risk. Again, re-distribution is what makes large-scale industrial activity insurable in the first place. Restricting Chubb’s legacy business model will not simply remove one insurer from the Mexican market, but rather impair the access point to the entire chain. Without it, the risk becomes uninsurable at a cost, and therefore unfinanceable.

In 2025, Green Century tried to get Scope 3 passed one last time. Support cratered to 13.9%. As You Sow took notice and moved on from Scope 3, understanding that the way to keep going was to sprint ahead. This is what led As You Sow to file the proposal that Chubb last tried to suppress, and that landed them in Court this March, after the SEC refused to intervene.

This lawsuit now sits astride the convergence of administrative law, securities regulation, and corporate governance, all at the same time. As You Sow is no longer asking for meticulous directives of Chubb’s day-to-day operations, like Scope 3 required. That would land them again in the trap of shareholder overreach. Instead, they are cleverly asking for a report that would force Chubb to evaluate its own corporate posture on climate liability, which could then be resolved by the routine mechanism of subrogation. There is a question of public policy.

A substantive issue of law is being presented as a procedural matter. It may be that As You Sow is using the threat of court as a dispositive tool, simply to make Chubb settle quickly by re-including the proposal in this year’s shareholders meeting. Chubb, on the other hand, may try to stall the case, unglamorously, until proxy season is over and the issue becomes moot, instead of trying its hand at litigation in a case so inscrutable.

Caution, market sense, and science should be the guiding principles of exerting influence over companies, not zealotry alone. The solutions to climate disasters are not solutions at all if a minuscule group of constituents in one corner of the world imposes top down policies through the conduit of a multinational corporation outside all democratic processes. Activism for climate change, however laudable, cannot turn into ideological capture of any or all institutions with a balance sheet. This is so, especially, if the costs—which are serious—are just being swept under the rug and sent elsewhere later.

To the South of the globe, the realities of life are still run by combustion engines and extractive economies. The Global South is already paying for climate change in drought years, in erratic harvests, in coastal erosion, in extreme heat oscillations. Indeed, the Global South also contributes to climate change, but it did not cause the original problem in any proportionate sense. Now, it may soon be asked to pay again, in higher logistics costs, in restricted access to project finance, in uninsurable infrastructure. The folks selling or buying tortillas in Mexico City may eventually absorb both bills, as a tax they did not vote for, imposed by people no one elected to hold office, neither in their country nor in the U.S.

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Ricardo Roa, Ecopetrol’s CEO, is in the news again these days over corruption accusations. The executive remains formally implicated in alleged electoral irregularities tied to Gustavo Petro’s 2022 presidential campaign, despite continued support from his board. This, of course, is not good news for the business he runs nor for its shareholders. Corporate governance of the company that shoulders up to 10% of Colombia’s annual revenues is in freefall.

Political interference by the Petro administration is dismantling the board of directors’ independence at Ecopetrol, inflating costs and forcing the rejection of valuable business. These developments are setting the stage for potentially long-term damage to Colombia’s economy. Undue government influence over Ecopetrol threatens not only shareholder value, but also the country’s fiscal backbone and future business climate.

Ecopetrol is Colombia’s biggest oil producer and one of the largest on the continent. The company is listed in the New York Stock Exchange (NYSE), and it is a majority-state owned company. The government of Colombia holds over 88% of the company’s stock, with the remainder publicly traded. In November 2025, Colombia’s Electoral Board (CNE) imposed a fine of ~$1.4M on Roa and other Petro campaign associates for violations of campaign finance rules on spending limits. This was an administrative process, and President Petro vehemently objected to the finding against the CEO, attributing it to a political persecution by the opposition. Now, the attorney general has also indicted Roa over the matter. Furthermore, the executive’s legal woes are only increasing. Roa is also being investigated for an apartment purchase he made, after the original owner was granted Ecopetrol gas concession contracts, allegedly with Roa’s influence.

At this point, the situation is hardly surprising. Roa’s tenure at the helm of Ecopetrol has been marked by controversial decisions inside the company, including alleged interceptions of internal communications and interferences with contract management processes. Additionally, Roa’s character has repeatedly been called into question by a number of Colombian senators, after he disobeyed summons at Congressional hearings. As the president of a majority-state owned company, Roa is considered a public servant under Colombian law, and his conduct is subject to stricter standards than private individuals.

Roa was appointed Ecopetrol’s CEO soon after Petro assumed Colombia’s presidency. The Petro administration has an aggressive anti-fossil fuel policy that orchestrated a fracking ban in Congress and halted exploration projects in Colombia, including suspending agreements with ExxonMobil in 2023. Instead, President Petro favors a renewable energies transition agenda. Ironically, his ex-campaign manager, Roa, has been the one quietly pushing back in favor of more conventional exploitation of fossil fuels. However, Roa remains a close political ally to Petro, so he has dutifully enforced Ecopetrol’s green transition since his appointment. Consequently, the company’s legacy business and its bottom line have taken a nosedive.

Under Roa, Ecopetrol’s key performance metrics have declined sharply from their 2022 peak. Net income fell from $7.85B in 2022 to $3.6B in 2024. Likewise, earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped ~28% over the same period. The company’s share price remains well below its 2022 year‑end levels, despite intermittent rebounds. Proven reserves are down a net 3.3% overall (2,011 mmboe in 2022 to 1,944 mmboe by end-2025), even after a small recovery last year. The moratorium on new exploration, however, means the company’s remaining reserves will be depleted by 2030. Consequently, Ecopetrol is sweating its wells from mature fields to offset the loss of reserves.

Under the previous Iván Duque administration (2018-2022), Ecopetrol benefited from pro-oil policies and oil price recovery post-COVID, leading to growth and overall profitability in early 2022. This is not to say that Ecopetrol was free of problems under Duque, but in the Petro era, the moratorium on new licenses, tax reforms, and alleged political interference have notoriously coincided with declines in profits and share value, fewer business opportunities, and elevated executive turnover.

It is true that the Petro administration has faced challenging global factors like oil price volatility, but Colombia’s president inherited a profitable company with rising reserves that also greatly benefited from a spillover of talent fleeing neighboring Venezuela and economic collapse. Oil engineers, geologists, lawyers, logisticians, and operations managers have been leaving Venezuela in droves for Colombia since the early 2000s, after Venezuela’s PDVSA was purged of technical experts in favor of corrupt political appointees. This talent managed to bolster Ecopetrol’s production levels to new heights, driving record profits for the company. Now, the company’s downturn under Roa correlates with Petro’s reforms, signaling squandered opportunities and an executive branch progressively encroaching on the company’s business decisions, eroding the board’s independence.

Ecopetrol’s board of directors has been overhauled almost entirely since Petro assumed Colombia’s presidency. To date, 17 executives have either resigned or been ousted. Many departures occurred amid reported turmoil, purges, and government influence on the company, though some were described as voluntary resignations or retirements. This has accentuated the perception that the company’s decisions are increasingly driven by political considerations rather than corporate ones.

One of the most poignant examples took place in 2024, when two executives on the board of directors resigned over the company’s decision to decline the invitation by partner company OXY to increase its position in the Crownrock Project to 30%, in the Permian Basin, Texas. For a company with embattled finances, the Crownrock Project meant further expanding a lifeline of 67,000 barrels of oil extracted daily in one of the most prolific and cost efficient basins in the world. The decision to fold from additional investment only added more uncertainty to the company’s business model.

Today, there is still an ongoing public debate in Colombia about Petro’s public desire to sell Ecopetrol’s position in the Permian Basin altogether. Ecopetrol could lose 30% of its value and 10% of its reserves if it sells the company’s most valuable asset.

Ricardo Roa has no opinion on the matter other than favoring the government’s position—that is, Petro’s position. Despite his dismal record, however, it is unlikely that the CEO will be deposed in the upcoming voting season, next month. Shareholders may be less scared of Roa than of a more radical appointment by a presidency bent on imparting policy guidelines to the company.

The Petro-Roa tandem has clearly undermined the board’s independence and the company’s legacy business model, and in practice the pair has abolished Ecopetrol’s corporate governance all but in name. However, losing Ecopetrol to mismanagement is not an option for Colombia. The consequences of the company’s decline may be felt for decades, given its contribution in taxes and royalties to government coffers, and could limit fiscal space for public service delivery and economic development. Indeed, Colombia has some of the region’s highest poverty rates, where over half the workforce is employed in the informal sector, a child born in the bottom decile needs 11 generations to reach the top, and 7.3 million people are internally displaced due to an unresolved armed conflict.

Furthermore, Ecopetrol is listed on the New York Stock Exchange, and it must file its financial reports with the U.S. Securities and Exchange Commission (SEC). Thus, the prolonged legal exposure of its CEO and credible concerns about Petro’s political interference are no longer merely Colombian domestic matters. U.S. securities rules require full disclosure of material risks, including governance breakdowns that could impair fiduciary duties to minority shareholders or even raise issues under the Foreign Corrupt Practices Act (FCPA) under certain circumstances. If U.S. regulators conclude those risks are not adequately addressed, the company could face heightened scrutiny, enforcement, and reputational damage in U.S. capital markets.

In the meantime, on the other side of the Amazon forest and down in the Patagonian deserts, another two state-owned oil companies, Brazil’s Petrobras and Argentina’s YPF, seem to be following a very different model of governance. Both governments have largely refrained from micromanaging day-to-day business decisions, allowing each company’s board greater operational autonomy. While these companies are not free from historical controversies, their governments’ recent approach has coincided with stronger income-tax and royalty flows to the state, accelerated adoption of technological innovations in deepwater and shale extraction, and sustained exploration successes in Brazil’s pre-salt fields and Argentina’s Neuquén Basin. This model seems to be an ironclad rule across partisan lines for both Brazil and Argentina, which are controlled by left wing and right wing parties, respectively. Colombia, on the other hand, appears intent on killing the goose that lays the golden eggs by insisting that political priorities should override corporate governance principles.

Ecopetrol is not a discretionary instrument of the Petro administration. Rather, it is a majority state-owned company whose fiduciary obligations extend to the Colombian public and to its domestic and international shareholders. If the company’s governance continues to erode at such aggressive pace, the consequences will not be defensible under the guise of political arguments. Under Petro’s and Roa’s influence, the company risks making operations more expensive, and strategic partners may think twice before joining ventures. Minority shareholders may demand higher risk premiums, potentially leading to sovereign credit risk downgrades.

For a country that relies on Ecopetrol for a meaningful share of government revenues, weakened corporate independence will soon stop being a mere political issue and could adversely impact the country’s economy. Next door in Venezuela, Colombia’s neighbors learned that lesson the hard way.

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HAVANA — Two weeks since the Trump administration announced an oil embargo on Cuba, the island’s fragile economy is grinding to a halt. However, the external actions of Washington are only a nudge in a decades-long process of decline driven by government mismanagement and institutional rigidity.

Businesses are shuttered, public services collapsed, and transportation is almost non-existent. Rhetorically and in practice, the country’s leadership has no proposition other than so-called “Resistencia Creativa” (or creative resistance)—an amorphous statement by President Diaz-Canel that he repeatedly pitches as the solution to the crisis. Reality on the ground, however, is much starker.

“Folks at the crematorium say there’s no petrol,” my cousin texted me over a week ago, “so I’m just here, chilling, looking for ‘the petrol guy’ to incinerate grandma’s body.” There is no “petrol guy”—crematoriums run on gas—it was code for the employee stalling my cousin’s turn in line until receiving off-the-books fees. I read the text with the same “chilling” attitude but got to work, telling him I’d arrive in 24 hours. We chatted on, unfazed. Cubans are used to dealing with such grim situations or worse.

I flew to Havana the next morning with cash and 36 pounds of both dry and frozen goods, gathered on short notice. Typically, trips to Cuba take months to plan and ~$500 for every 50 pounds of essentials bought like clothing, shoes, medications, vitamins supplements, coffee, toothpaste—notwithstanding plane tickets and subsequent in-country expenses, like transportation and gifts. This excludes monthly grocery delivery bills that many Cuban emigrees pick up for a bevy of essential staples, through government-controlled online shops, and payable only in foreign currencies like dollars or euros.

The average monthly salary in Cuba is 6,649CUP, or ~13USD, and the average retiree’s pension is ~4USD—less than what it costs to buy a carton of 30 eggs in today’s market (~5USD). It costs a Cuban emigree roughly $200/month worth of assistance in goods and services per family to subsidize the Cuban government. I say subsidize the Cuban government, and not one’s family there, because Cuba has a centrally planned economy. Every major source of services, products, and commercial activity is owned by the government, not private initiative, by constitutional mandate.

In practice, when the Cuban government struggles to deliver goods or services, much of the gap is filled by Cuban emigrees abroad through remittances, direct shipments of essentials, and informal support. As a result, emigrees absorb substantial costs—essentially the price of maintaining their families’ basic stability—allowing the system to persist without meaningful reforms to state controls and limits over private sector growth.

Thus, news outlets are now highlighting the energy and multi-factor crises following Washington’s tough stance on oil against Havana, noting that the island had only about twenty days of reserves beyond the U.S. executive order. Yet, these conditions—fuel scarcity, daily blackouts, persistent inflation, acute shortages, and public health crises from Dengue and other tropical fevers—were already entrenched a month, a year, or five years ago. Cuba produces on average ~ 41,000 bpd of heavy or extra heavy crude (8-15° API), but production has declined steadily. That covers just 40% of its ~100,000 bpd demand, leaving a deficit of about 60,000 bpd that imports have struggled to fill. This is consistent with the persistent electricity deficits of over 1,600 MW during peak hours against a 3,300 MW national demand, where more than half remains unmet, fueling prevalent blackouts and economic strain well before the U.S. executive order.

In 2025, Cuba’s GDP reached a 15% contraction from 2018 levels. The government invested no more than 2.3% of its total budget in either Agriculture, Health, Education or Science, while it allocated 22.2% in Real Estate, to build hotels destined to the Tourism industry—even when visitor numbers indicated a multi-year decline and downward pressure in room demand. The hotels now sit mostly empty, a number of them are closing operations under the current circumstances, and employees are being furloughed in large numbers. Last year, Cuba received the lowest number of tourists in decades, with just 1.8 million visitors, and far from the peak 4.7 million it attracted during 2018. Experts are pointing out that a 20-year gain has been erased, and Cuba is now back to the early 2000’s in terms of number of travelers.

After the COVID era, many Caribbean nations slashed prices and offered incentives to lure back tourists, but Cuba’s tourism struggled with upward pressure on operating costs after a monetary reform that shot up inflation, leading to higher prices that hampered recovery. This strategy made the revenues of the already embattled sector plummet, and diverted business to competitors in neighboring countries. By 2021, these economic pressures compounded over shortages and COVID restrictions, leading to countrywide protests over living conditions. The government’s law-enforcement response at the time drew significant international scrutiny, and stoked a new multi-year exodus that drove away over 1,200,000 of overwhelmingly young, able bodied Cubans from the country.

Last week, President Diaz-Canel offered a 2-hour press conference on TV, addressing the crisis in the wake of Washington’s actions. Many people were not able to tune in due to blackouts, and others reported simply not being interested in what he had to say. “I didn’t waste my time with that,” I overheard a street grocer tell a customer in Alamar, Havana, as I sorted through carrots and onions on the curb. “What was he going to say? Nothing. They only appear on TV to ask for more patience.”

Transportation is one such area where “patience” will be needed. Buses are the main mode of transportation for the average Cuban, but for years the number of active buses dwindled to a trickle, leaving a void on increasingly quiet streets. Now, the government ordered what is left of the public transportation system to stop entirely, among other measures. Until 2025, they argue, officials had been “prioritizing energy for households,” but in 2026 the priority is “the economy” and so the people will have to endure (even) longer blackouts than before, which typically last 10-16 hours a day in Havana alone. “They think they can run a country like this,” the grocer continued, shrugging and grinning, in disbelief. “I truly don’t know where we’ll end up.”

The streets of Havana look empty, desolate. Young people are now a rare occurrence in a city that was known for a vibrant youth culture in the past. Seniors spend their days in endless bread lines or trying to draw their meager pensions from ATMs to pay for just a few staples, as Cuba is a cash-based society. The government does not pick up the trash for weeks at a time, and for a long time now, piles of garbage and refuse grow even next to well-to-do residences in previously posh neighborhoods like Vedado or Playa. The panorama in the rest of the country is even worse, with recounts of hollowed-out towns, collapsed services, and longer daily blackouts than Havana endures. Cuba’s fragility thus gives the U.S. potential leverage if any negotiations ensue—despite official statements that the island won’t collapse and a rebound strategy is already in place.

Historically, the U.S. government position towards Cuba has been regime change. Today, Washington’s foreign policy for the Western Hemisphere is a brainchild of Marco Rubio. His reasoning seems to be that coalitions of left-wing governments and right-wing juntas both had their chances and they blew it: now is the turn for a hybrid model where U.S. intervention is back on the board, but quickly followed by a managed market opening and governance structure that secures space for U.S. interests, not by boots on the ground. Yet, it is not clear from his policies how he tallies human costs. Mr. Rubio himself is of Cuban heritage and has a track record of staunch support for regime change in Cuba, Venezuela, and Nicaragua. After the events in Caracas this past January, Rubio’s policies are no longer confined to the U.S. Senate floor—and thus, his statements should be taken seriously, if not literally at times.

Rubio’s tenure advising aggressive stances to Trump will produce very adverse results for the Cuban people, as is the case already. In the meantime, decision makers in Havana seem convinced that their approach is in touch with the realities of the Cuban public—somehow. They also insist that longstanding U.S. sanctions are to blame for most, if not all, of the country’s woes. It is the case that U.S. sanctions hurt, but picking up the trash, limiting private sector growth, or managing dissent are solely internal decisions.

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Ever since Maduro was spirited away from Caracas in the dead of night, suddenly everyone is an expert on Venezuela, and surprisingly, also on Venezuelan crude.

Commentators are fixated on what a nightmare it would be to wrangle even diesel out of Venezuelan oil. Apparently, Venezuelan crude is a thick paste that is difficult to drill out of the ground, will clog and corrode any pipe system, and yield nothing but low quality derivatives at the refinery. So, why would U.S. refiners want to pump that nasty mud into their equipment?

To top it all off, Darren Woods, ExxonMobil’s CEO, recently stated at the White House that Venezuela was “uninvestable”—right in Trump’s face. The statement surprised administration officials, who wanted to put up a united front with U.S. oil companies. Thus, for the boss of the biggest oil supermajor to publicly back down from the enterprise in front of the president of the United States—just a week after a fleet of Chinook helicopters stormed Caracas—was, to say the least, anticlimactic.

The media ecosystem swelled with Woods’ statement and immediately linked it to the apparent hopelessness of the Venezuelan crude venture and perceived risks associated with re-starting the Venezuelan oil industry.

Not all commentary is off-track. Some reporting recognize increased access to Venezuelan crude as a net benefit. Nevertheless, the internet is rife with contradictory information.

Venezuela is not “uninvestable” because of what’s inside the barrel or some pumps are rusty. Investment is not the issue; fear of forfeiting it is.

Worried about heavy grade oil?: U.S. refineries are ready.

Oil grade is largely divided into three types: light, medium, and heavy crude, according to their API Gravity, the measure to assess oil quality. The higher the grade, the lighter the crude. The lower the grade, the heavier the crude. Lighter oil is considered of higher quality and commands a bigger premium in the market, while heavier oil is of poorer quality and usually sells at a discount.

Most Venezuelan crude is indeed a heavy grade, of the sour kind—due to its high sulfur content. It is viscous, and transporting and processing it is certainly more energy and resource-intensive than higher quality oils. However, lower quality does not necessarily mean a bad product, nor a bad investment.

The industry uses heavy crudes to produce the diesel that feeds trucks across the globe. Likewise, it is heavy crude that carries the highest rates of bituminous components and resins, which are turned into asphalt, lubricants, waxes, petcoke and also heavy fuel oils (HFO) that cargo ships and most industrial-grade heavy machinery use worldwide.

Thus, Venezuelan heavy crude is not a synonym for bad oil—it’s just a different kind.

Then, there is the concern that this dark, sulfuric jelly will shoot through the pipes of U.S. refineries and eat away the infrastructure. As it turns out, U.S. refiners have invested considerably in adapting their units to process heavy crudes for decades. The large majority of the refining hubs in the United States undertook this transformation before the Shale Boom of the late 2000s, hedging that as U.S. crude levels dwindled, supply would increasingly come from heavy crudes producers like Mexico, Colombia, Ecuador, and of course Venezuela—unaware that they were on the verge of fracking vast shale reserves.

The media, then, has been quick to rule out Venezuelan oil as a bad business for which the United States has no capacity, on the superficial basis that a heavier crude sells more cheaply and is more difficult to handle.

Venezuelan oil is commercially viable thanks to oil price differentials

Despite high production costs and discounts over quality, oil companies can still operate at a profit in Venezuela. Oil does not have a unified price. Because different oils come from different locations, and extracting, transporting and processing them may vary in difficulty, oils even with the same grade may sell at different prices.

This is what is known as the oil price differential. Already cheap crude flowing out of Venezuela is likely to come to the United States at a steep discount, given the clear preferential treatment Washington secured after scrambling the government in Caracas.

Therefore, U.S. companies will pay a lower price for a barrel of heavy Merey (the name of the Venezuelan benchmark) than for a barrel of Light/Sweet Brent crude or West Texas Intermediate (WTI), the benchmarks for high-grade crude in the market. The Merey lived in the $50s per barrel through 2025, and a price increase is difficult to justify in the present conditions, unless extreme unforeseen events disrupt major-oil producing regions such as the Middle East. In fact, the price may continue to decline as more volume comes online in the future, before it stabilizes.

On the other hand, a price drop is unlikely to cripple U.S. oil producers, who by industry practice, build the discount into the frontload investment. Once production is on, operating costs per barrel are relatively low and stable for long periods. Some discussions signal that the breakeven price in Venezuela can already be set as low as $30-40/barrel if U.S. oil companies ramp up production to 1 million barrels per day—so, there’s enough margin for profit even immediately.

Washington wants barrels: more oil to erode the oil cartel

Another point that deserves more attention is that higher volumes of Merey flowing to the United States—and its finances under control of the U.S. government—will have positive ripple effects for consumers and businesses worried about high energy costs.

While the geopolitical consequences of the U.S. launch of a military operation against a sovereign territory are indeed disquieting, Maduro’s ouster is now a sunk cost, and we can only focus on future implications. As such, it is a remarkable thing that Venezuela, a founding member of the OPEC+ Group, may have to align itself with the interests of the United States, a non-OPEC+ country, moving forward.

OPEC+, the oil cartel, has for decades influenced the price of oil, controlling supply to match the political goals of its members. The politics of energy may change in the future, then, as the United States becomes increasingly assertive over the volumes of crude from Venezuela, the OPEC+ member with the largest reserves. If the United States displays a surplus capacity on all fronts of the oil market, this will erode OPEC+’s capacity to collude against lower oil prices.

Thus, Maduro’s ouster may signal the birth of a new type of energy diplomacy, where the U.S. may be ready to undercut OPEC+-led artificial shortages both in material terms, by keeping production volumes up, and in political terms, by influencing the Venezuelan delegation’s vote in Vienna, where OPEC+ members convene regularly.

“Uninvestable” does not mean what people think it means

The spat between Exxon and the White House has nothing to do with the quality of Venezuela’s crude or the feasibility of recovering the country’s oil infrastructure. Instead, it has everything to do with real liability concerns on the part of U.S. oil companies, suggesting that future developments in the country may not be conducive to a safe investment climate.

For example, in the recent White House meeting, Woods addressed the elephant in the room that Exxon was expropriated from Venezuela twice—in 1976 and 2007—their assets confiscated, the second time without compensation and a still-pending legal battle over a $1.6 billion award, for their troubles.

Understandably, oil companies are more than wary of simply trusting the word of the U.S. president and jumping in, blindfolded, into considerably large deals with such financial uncertainty and risk. What happens to their investment if the President changes his mind, or if the next administration fails to honor Trump’s promises?

However, the matter doesn’t stop there. Under current Venezuelan law, U.S. companies will be required to enter joint ventures (or “empresas mixtas”) with PDVSA—the country’s state-owned oil company, itself a well of corruption. PDVSA will control at least a simple majority stake in all ventures. Its outsized role is a source of concern for oil companies due to a plethora of compliance problems, including the Foreign Corrupt Practices Act (FCPA).

Powerful individuals with notorious records, who guarantee PDVSA’s activities, remain in place in Venezuela after the fall of Maduro, along with the entire military and security apparatus. U.S. oil companies will need stronger sign posts from the administration that moving forward, they won’t face major legal and financial consequences for PDVSA’s activities. Corporate decision-makers do not want to be on the docket of the federal court of the Southern District of New York—next to Maduro and his wife—appearing before a grand jury of their peers.

Furthermore, history does not support the idea that a U.S. oil company will be deterred from doing business abroad simply because of logistical costs or political challenges in the host country. When U.S. oil companies hesitate vis-à-vis big business, they aren’t doing so because of what’s in front of them, but because of what they leave behind them, at home: the U.S. government.

Precedent indicates that the U.S. government turns more sympathetic to the troubles of Big Oil when geopolitical pressures are at play. In 1943, Jersey Standard (today merged into Exxon) was forced into a 50-50 oil profit-sharing scheme with the Venezuelan government, who at the time was leading a nationalist onslaught over its own oil. The U.S. government acquiesced to the deal—even as this meant a lower income tax bill from Jersey Standard—given the need for reliable oil sources during World War II. The pattern repeated in 1950, when Saudi Arabia also renegotiated a 50-50 deal from the country’s concession to U.S.-founded Aramco. The Cold War was in full swing, and the United States needed cheap energy to guarantee the dominance of its military and industrial base. Now, with Venezuela on the roster, the United States is on the verge of controlling a combined 30% of global oil reserves—welcome leverage in another geostrategic race against powers like China and Russia. As in the past, an understanding with oil companies is coming.

For oil companies, “uninvestable” has less to do with technical or financial challenges of operating in Venezuela than with better positioning in the deal with the Trump administration.

Big Oil will go in. The prize is too great, and they have waited the length of the latest dictatorship for it, but they are asking for assurances that this time won’t be like the last.

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