Nov 16, 2025. NBC News is reporting (here) that: The nation’s most advanced aircraft carrier arrived in the Caribbean Sea on Sunday in a display of U.S. military power, raising questions about what the new influx of troops and weaponry could signal for the Trump administration’s drug enforcement campaign in South America.
If the US were to take some kind of military action against Venezuela (whatever the pretext), the result would be a strong negative shock to the Economy of Venezuela, which has been through many shocks in the late 20th and early 21st Centuries. According to Wikipedia (here):
An ongoing socioeconomic and political crisis began in Venezuela during the presidency of Hugo Chávez and has worsened during the presidency of successor Nicolás Maduro. It has been marked by hyperinflation, escalating starvation, disease, crime, and mortality rates, resulting in massive emigration.
The VEL20 US-input model (see the Notes below) is based on 50 years of data (1960-2010) drawn from the World Development Indicators (see the Boiler Plate). Without knowing the extent of the shock or whether it might actually happen, we can at least assume that the shock will be negative and ask how the economy has behaved to a large, standardize shock in the past.
The graphic above shows a one standard deviation negative shock (Impulse Response) to the state of the Venezuelan Economy transmitted from the US (see the Measurement Models in the Notes below):
- The First Column shows the effect of a negative shock from US Overall Growth (US1) to (1) VE1, Overall Growth in the Venezuelan Economy (continuing negative effect), (2) VE2, the GDP-Unemployment Controller (continuing negative effect) and (3) VE3, the Environmental Controller (temporary positive effect).
- The Second Column shows the effect of US Financial Markets (US2) on (1) VE1, Overall Growth (temporary positive), (2) VE2, Unemployment (continuing positive effect) and (3) VE3, Environmental (continuing negative effect).
- The Third Column shows the effect of US Globalization (US3) on (1) VE1, Overall Growth (permanent negative), (2) VE2, GDP (continuing negative) and (3) VE3, Environmental (continuing negative).
The overall effect, as might be anticipated, of US military action would be very negative for the Economy of Venezuela, one more negative shock in a long history of negative shocks. The Trump II Administration would probably argue that, in the long run, the effects would be positive if the illegitimate Administration of President Nicolás Maduro were ended. Everything depends on what would happen after any military action and no one knows the future.
One possibility (which seems unlikely) is that Venezuela would return to Business-As-Usual with a competent Centrist, technocratic Administration. You can experiment yourself with the VEL20 BAU model (here) and explore various scenarios. Notes
For more information on other Geopolitical Options, see the Venezuelan Blog Roll (here). For more information about how the Dynamic Component State Space models were constructed, see the Boiler Plate.
VEL20 Measurement Model
USL203 Measurement Model
VEL20 US Input System Matrices
