Aug 29, 2022 · 39m · capital-allocators
Rodrigo Bitar – Empty Rooms: Investing in Venezuela (Capital Allocators, EP.268)
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Host Ted Seides speaks with Rodrigo Bitar, co-founder of 3B1 Partners, to explore the contrarian opportunity of private equity investing in Venezuela's recovering, dollarized economy. Bitar outlines how local partnerships, resilient market-leading businesses, and deep valuation discounts create an uncorrelated, high-upside frontier investment thesis.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 26.7% of the talking time here. How this is scored →
Ted as informed peer 4.9 Guest teaching 4.0 Guest disagreement 0.6 Ted pushing back 0.8
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 30:34 Reframing the core investment thesis premise
Bitar directly rejects the host's premise that the thesis hinges on regime change or moral transformation, insisting it solely requires sanctions adjustment.
Hardest push from Ted ▶ 20:10 Challenging seller motivation at trough valuationsTed directly pushes back on the logic of private business owners agreeing to sell stakes at the exact bottom of an economic cycle when green shoots are emerging.
Biggest teaching moment ▶ 14:15 Masterclass on Venezuelan oil reserves and US refining compatibilityBitar educates Seides on global reserve statistics, heavy crude refinery configurations along the US Gulf Coast, and recent OFAC carve-outs for European operators.
Ted holds their own ▶ 30:16 Pressing on political regime risk and human rights constraintsTed presses Bitar on the fundamental disconnect between institutional ESG/human rights requirements and investing in an authoritarian sanctioned jurisdiction.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Rodrigo Bitar's Background and Career Foundations | 4 | 2 | 0 | 0 | Seides guides his former business school classmate through his early upbringing in Chile, Venezuela, and New York. Bitar speaks warmly and collaboratively without friction. | |
| Latin American Family Groups and Partnering with Cisneros | 4 | 3 | 0 | 0 | Ted probes into Latin American family conglomerate dynamics and the Cisneros partnership. Bitar provides detailed cultural and corporate context on how regional capital is concentrated. | |
| US Sanctions Framework and Venezuelan Oil Potential | 5 | 6 | 1 | 1 | Seides asks about sanctions compliance and the impact of the Russia-Ukraine war on Venezuelan crude. Bitar systematically educates on OFAC boundaries, global reserve percentages, and refining compatibility. | |
| Economic Survival, Hyperinflation, and Dollarization | 5 | 5 | 1 | 0 | Seides asks how businesses survive an 85 percent GDP contraction and handle currency collapse. Bitar details operational survival mechanics, de facto dollarization, and hyperinflation deceleration. | |
| 3B1's Private Market Strategy and Selection Criteria | 6 | 4 | 1 | 2 | Seides pushes with a sharp question on why surviving owners would sell at the bottom of the cycle. Bitar responds constructively, explaining minority buyouts and growth equity needs without friction. | |
| Sponsor Message: Ridgeline AI-Native Investment Technology | 5 | 4 | 0 | 0 | Following the mid-roll sponsor break, Seides asks about due diligence and specific deal terms in Venezuela. Bitar breaks down a proprietary pharmaceutical transaction bought at low single-digit EBITDA multiples. | |
| Macro Risks, Election Scenarios, and Uncorrelated Returns | 6 | 5 | 2 | 3 | Seides pushes on whether the investment thesis relies on regime change and human rights progress. Bitar politely corrects the misconception, clarifying their thesis depends on sanction softening rather than political change. | |
| Operational Realities and Rebuilding Venezuela's Future | 4 | 3 | 0 | 0 | Seides wraps the operational discussion by asking about surprises and disappointments before transitioning to closing questions. Bitar shares optimistic reflections on the speed of recovery and local talent. |
Statements from this episode (17)
Bitar: In the 1970s Venezuela Was Wealthy with Strong Democratic Traditions
“We also lived in Venezuela, where it was at that moment in time, one of the wealthiest countries in the region, and it had one of the longest democratic traditions in the region.”
Bitar: Economic Power in Latin America Concentrates in Family Business Groups
“Capital markets are not what you have here in the U.S., and so the core of savings and economic power actually lies in families mostly.”
Bitar: Venezuela's 85% GDP Contraction Is Largest Non-War Drop Ever
“So the economy contracted since 2012 until 2020, like 85%. That is the biggest drop in economic activity in any country that is not in a war.”
Bitar: Venezuela Holds World's Largest Oil Reserves at 20%
“Venezuela has the largest oil reserves in the world. It has more oil than Saudi Arabia. It's got like, 20% of the global share of oil. Saudi Arabia has 17.”
Bitar: OFAC Authorized European Operators to Export Venezuelan Oil
“OFAC just authorized two European oil operators who operate in Venezuela, ENI and Repsol, to begin exporting back to Europe that had been sanctioned earlier. And they allowed Chevron, the US company who's operating in Venezuela, to have a dialogue with the gov…”
Bitar: US Dollars Account for Over 60% of Venezuelan Transactions
“The government eventually made the dollar legal tender, and currently over 60, 70% of transactions in Venezuela are done in dollars.”
Bitar: 40% of Venezuelan Banking Sector Assets Are in US Dollars
“Actually the assets in the banking sector, 40% of the assets in the banking sector are dollars.”
Bitar: 3B1 Portfolio Revenue Grew 60% in 2021
“On average, our portfolio grew like 60% in revenue last year, 40% again this first quarter, and you see that's basically the beginning of the normalization of economic activity.”
Bitar: Venezuelan Public Equities Trade Under $5,000 Daily Volume
“So you could gain exposure to some of the companies in the public markets, but the volume is probably less than 5000 dollars a day, so you can't build a position.”
Bitar: 3B1 Avoids Turnarounds in Venezuela to Isolate Macro Upside
“Because we want the least micro risk that we can, because what we want is the exposure to the macro risk. So we don't want any turnaround situations. We don't want any company in crisis. We don't want a company without management.”
Bitar: Venezuelan Per Capita Medicine Consumption Dropped 80%
“When you look at the per capita consumption of medicines in Venezuela, they've dropped like 80%.”
Bitar: Venezuelan Private Equity Deals Trade at 3.5x to 5x EBITDA
“The transactions that we're looking at, I would say they range between three and a half to five times EBITDA, three and a half to four and a half times EBITDA.”
Bitar: Venezuela Will See Big Economic Recovery Once Sanctions Soften
“I mean, we believe the biggest probability event is softening of sanctions and better behavior democratically, and independent of who wins the election, you're gonna have a big economic recovery after the sanctions are softened.”
Bitar: Venezuelan Valuation Multiples Are One-Third of Global Levels
“It's most likely to go up, then go down, particularly because it's beginning to normalize, and multiples are a third of what you have elsewhere in the world.”
Bitar: Venezuelan Operating Margins Have Historically Outpaced Latin America
“Venezuela was traditionally one of the most profitable markets in Latin America in every industry. When we were working in telecoms, margins in telecoms company was like, 40%. The rest of the region was 25. Food was the same, and we still see it to date.”
Bitar: Venezuelan Dollarization Catalyzed Recovery Faster Than Projections
“Actually, in all our projections, when we began buying assets in 2020, was for like two or three years of more economic hardship. And it really, the dollarization was an impressive catalyst to create increased performance.”
Bitar: Latin American Founders Often Lack US-Style Global Scale Ambition
“Normally we're like, we don't have the, in a positive sense, the ambition that you guys have, like to do things that are at a global scale. So when we began doing business a long time ago, we would think maybe smaller than we should, and just having the capaci…”