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Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM).

In this issue, you will find:

• The Specter of Invasion: Venezuela and Iran on the Brink

• The Fall of a Giant: Pemex and Mexico’s Energy Reckoning

• MERCOSUR, a shift in geoeconomic power

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Best,

The GCaM Team

A U.S. military invasion of Iran and Venezuela seems unlikely—and that's exactly the point.

The Big Picture. The deployment of Aegis destroyers, cruisers, submarines, and thousands of troops to the Caribbean coast, along with the bombing of Iran’s nuclear facilities, has opened the door to potential military interventions in both Venezuela and Iran. To many experts, Trump is edging dangerously close to breaking his campaign promise of being a “peace president,” one “who would start no new wars.” But that’s a simplistic reading of a much more strategic approach.

• Trump doesn’t need to intervene directly to want regime change. What matters is that the threat appears credible enough to push those regimes toward collapse on their own. That, at least, is the U.S. objective.

Why It Matters. Maduro has been forced to militarize Venezuela’s coastline at enormous cost, deploying millions of militiamen and launching a televised propaganda blitz to stir nationalist support. Iran, after years of indirect and occasionally direct pressure—from both the U.S. and Israel—responded this year by bombing Israel, a militarily superior enemy, in a move seen by many as irrational.

• These are precisely the kinds of reactions the U.S. aims to provoke: erratic, costly, and politically damaging. The goal is to force regimes into mistakes, inflate their defense budgets, and fracture their internal coalitions.
  

• If successful, this can spark growing dissatisfaction among their citizens—especially the economic and military elites that sustain them—undermining the image of their leaders and isolating them over time.
  

• But such reactions only occur when leaders truly believe their survival is at stake.

Between the Lines. Maduro’s legitimacy is at an all-time low after the 2024 elections, and U.S.-modulated oil licenses are creating severe cash flow and capacity problems for an oil-dependent regime. In Iran, Khamenei is grappling with a society that’s increasingly leaning toward religious reform—or even secularism among younger generations. He faces a vulnerable Revolutionary Guard, a defense system perceived as ineffective against direct attacks, and—perhaps most significantly—old age and a looming, unstable succession process.

• Both regimes preside over societies that would likely welcome a regime change—but not if it comes through foreign invasion.

Yes, but. This strategy, while preferable to war, is far from guaranteed. The U.S. has tried and failed with similar approaches in post–Bay of Pigs Cuba, North Korea, Iraq, and North Vietnam, among others. At times, reactions can backfire. In Iran, the once-powerful anti-clerical movement has lost some momentum as nationalist and religious sentiment resurged following Israeli attacks on civilians in Gaza.

• In Venezuela, Maduro’s approval continues to decline—if that’s even possible—but propaganda efforts may succeed in turning anti-invasion sentiment into reluctant support for the regime.
  

• Worse yet, a prolonged U.S. posture without tangible results could undermine its credibility. Without credibility, the threat collapses. Without regime reaction, internal collapse never happens.
  

• Trump may not start a new war. But if he fails to raise the pressure effectively, he risks being the one forced into costly, erratic decisions—damaging his own legitimacy rather than his enemies’.

Once a pillar of national sovereignty, Pemex has become a fiscal time bomb, burdened with over USD 100 billion in debt, unpaid suppliers, and collapsing output.

Panorama. Pemex’s oil production has plummeted from 3.4 million barrels per day in 2004 to just 1.6 million today, while natural gas output remains stagnant. Its refineries are obsolete, unprofitable, and producing high-sulfur fuel that pollutes and drives up costs.

• As a complex financial rescue, Sheinbaum launched a USD 12 billion off-balance-sheet bond issue via a Luxembourg-based vehicle, plus a USD 13 billion state-backed investment fund that seeks to stabilize cash flow and pay suppliers. These measures aim to reduce debt to USD 77.3 billion by 2030 and achieve self-sufficiency by 2027.
  

• The plan seeks to boost hydrocarbon production to 1.8 million barrels per day, invest in green hydrogen, and attract private capital through “mixed contracts”, while retaining a minimum 40 % state ownership.
  

• Despite a brief ratings bump, Pemex remains under intense financial pressure, with USD 101 billion in debt, over USD 20 billion owed to suppliers, and looming repayments of USD 12 billion in 2025 and USD 20 billion in 2026.

Economic Outlook. Pemex's collapse is not just Mexico’s largest corporate liability but a systemic threat to its energy security, economic resilience, and geopolitical standing. Years of overreliance on oil rents, populist subsidies, and underinvestment have hollowed out the firm’s productive capacity.

• AMLO’s six-year tenure saw over USD 100 billion funneled into Pemex via subsidies and tax breaks that yielded minimal returns. Now, those liabilities weigh on Sheinbaum. Thus, investor confidence remains shaky without a change in the structural flaws.
  

• Pemex’s output has declined 28 % since 2015, with exports plunging 43 % in 2025 alone. Sheinbaum’s energy reform further eroded investor confidence by reclassifying Pemex as a state-controlled enterprise, reducing independent board seats, and limiting contracts to rigid “mixed contracts”—deterring private capital critical to averting a PDVSA-style collapse.
  

• Suppliers threaten to halt operations, increasing USMCA friction that could open the door to retaliatory tariffs from Washington. Whilst Mexican SMEs—Pemex’s core vendor base—are the hardest hit. In oil-rich states like Campeche and Tabasco, contractor collapse risks triggering local recessions.

Regional Echoes. Mexico’s deepening reliance on U.S. natural gas—which supplies over 60 % of its electricity—has transformed energy policy into a troubling geopolitical fault line. With domestic output lagging and storage capacity covering barely two days, the country is exposed to price shocks, supply freezes, and strategic pressure over any negotiation.

• Over 2.3 trillion cubic feet of U.S. gas were imported in 2024 alone, raising fears that Donald Trump could weaponize this dependency, with nationwide outages just hours away in the event of disruption.
  

• Internally, Mexico’s energy sovereignty is unraveling: fuel theft, cartel infiltration, and opaque contracts have turned Pemex into a criminally exploited liability—compromising governance and fueling U.S. tensions, while risking tariffs or intervention under Trump’s presidency.
  

• Mexico’s weakened stance in North American energy talks erodes its USMCA bargaining power, while a fragile Pemex inflates electricity costs and undermines nearshoring appeal.

Between the lines. Mexico’s energy infrastructure has morphed from victim to vehicle of organized crime. What began as crude pipeline theft under huachicol has become a billion-dollar smuggling network, enabled by tax loopholes and complicit officials. Cartels now launder stolen fuel through legal gas stations, exploit industrial lubricant exemptions, and flood U.S. markets with illicit diesel—embedding criminal operations deep into Pemex’s supply chain and national power grid.

• U.S. intelligence links the Sinaloa and CJNG cartels to Pemex pipeline theft and cross-border fuel smuggling operations valued at up to USD 21 billion annually—nearly 27% of Mexico’s fuel consumption or 290,000 barrels per day.
  

• Much of this volume is laundered through legal gas stations, with over 22 000 informal outlets operating nationwide, almost double the number of licensed stations. In 2023 alone, Pemex reported daily losses exceeding 17 000 barrels to theft, amounting to USD 1.1 billion in damages.
  

• A legacy of AMLO’s permissive approach, the collusion between Pemex insiders, local officials, and cartel-linked entrepreneurs risks triggering U.S. retaliation, from tariffs and sanctions to mounting pressure on Sheinbaum to act.

What’s Next. Pemex is no ordinary SOE—it anchors Mexico’s energy system, tax base and industrial strategy. Its collapse would reverberate across public services, investment flows, and regional influence. Sheinbaum now walks a narrow line between ideological loyalty and fiscal reality.

• Unless Sheinbaum advances bold changes, Pemex risks sinking the broader energy agenda.
  

• Although the President is revisiting fracking in the Burgos Basin to reduce gas imports, internal opposition from Morena’s left threatens progress and deters investor confidence.

In the face of the U.S.’ across-the-board 10 % tariff, MERCOSUR surges as a possible market to the EU in an aggressively changing international geoeconomic arena. The positive closure of the agreement would link the European market to a bloc of approximately 300 million consumers and the 5th biggest economy in the world.

How it works. MERCOSUR changes the geoeconomic balance of power through the possibility of restructuring of value chains given the international tariff tension context.

• The agreement establishes big progressive tariff cuts on both sides over a 10-year period—the EU on 92% of Mercosur exports and Mercosur on 91% of EU exports.
  

• If voting is done through qualified majority voting (the most common voting method), then, to close the agreement, 15 countries—that represent 65 % of EU population or more—should vote in favor. To veto it, a minority block of at least 4 countries—that represent 35 % of the EU or more—should vote against the deal.
  

• The voting in the EU is multileveled, and application of the agreement is not homogeneous due to internal state-level ratifications, which complicates interstate negotiation.

Between the lines. France and Poland have the clear intention of blocking the agreement with Mercosur, against the economic incentives of industrial giants in automobile sectors or wine production like Germany or Spain.

• France and Poland intend to shield powerful farm sectors from Mercosur competition and force hard, enforceable safeguards—especially environmental and ‘emergency brake’ measures—before opening their markets.
  

• Other countries that have not pronounced themselves on the agreement require an economic trade-off decision between industrial and agricultural markets.
  

• The obvious objective of negotiation is Italy—13 % of the EU population—which needs to decide between an aggressive expansion of its wine market and high risks for its agricultural production complex.

What’s Next. Preferential access to the EU gives South America a stable, rules-based outlet just as the U.S. swings through broad tariff moves, hedging against U.S. demand volatility.

• By locking EU demand and investment around critical inputs in important value chains (for example, copper and lithium) that influence electronics and (indirectly) semiconductors. Mercosur can climb into higher-value nodes of production.
  

• The deal concentrates a strategic “rent” in the lithium triangle and the copper belt, making the region a geoeconomic pivot that Washington will counter via friend-shoring if elections take countries towards right-leaning countries.

In conclusion. The EU–MERCOSUR deal is a regulatory-geoeconomic wager: if Brussels ensures the deal and MERCOSUR tightens intrabloc governance, South America converts preferential EU access into strategic rents in lithium, copper, and upgraded agro-industry. The MERCOSUR should be watchful of the France/Poland-led resistance (with Italy as a pivotal swing) due to the possibility of stalling the process amid multilayer veto points.

What We’re Watching 🔎 . . .

Brazil's Vale reopens key mine, plans to invest $12 billion in Minas Gerais [link]

Roberto Samora, Reuters 

Brazilian mining company Vale has reactivated the Capanema iron mine in Ouro Preto, Minas Gerais, after 22 years of inactivity, as part of a USD 12.36 billion investment plan to be carried out in the state through 2030. The reopening marks a new phase in local mining, focused on sustainability, as the processing will be water-free—avoiding the generation of tailings and the construction of dams.

This shift is a response to the environmental disasters of 2015 and 2019, when dam collapses caused hundreds of deaths in the region. Additionally, the investment includes the modernization of five operational complexes, improvements in geotechnical management, connectivity, and fleet renewal.

Unlocking Ecuador’s Migrant Paradox [link]

Dany Bahar and Marcela Escobari, Americas Quarterly Financial Times

Ecuador is at a crossroads, marked by violence, economic stagnation, and internal migration. However, the 450 000 Venezuelans residing in the country could become a key to revitalization—if proper integration policies are adopted. Although often associated with crime and fiscal pressure, studies show they commit fewer crimes than locals and are frequently victims of criminal networks.

Moreover, this is a young, skilled population with a high level of education—capable of offsetting the aging of Ecuador’s labor force. Nevertheless, many remain underemployed due to legal barriers. Restarting the regularization process launched by Lasso and halted under Noboa could boost the economy and reduce crime. In fact, according to the IMF, full integration of Venezuelans could add up to 0.25 percentage points to Ecuador’s annual GDP.