Venezuela Business Projection Industry Update Quarter 3 2012

  • April 2014
  • -
  • Business Monitor International
  • -
  • 44 pages

Includes 3 FREE quarterly updates

Core Views
Venezuela faces major political and economic uncertainty in the run-up to and immediate aftermath of the October 2012 presidential elections. Rampant monetary stimulus and a relatively weak foreign reserve position mean a devaluation following the election is highly likely. Inflation will remain elevated, at the highest level in Latin America, and the operating environment will remain very precarious for foreign multinationals in the country.

Major Projection Changes
We have moderately revised up our 2012 real Gross Domestic Product growth projection to 2.5%, from 2.3% previously, as high oil prices will very likely allow the government to drive domestic demand a head of the October presidential ballot. Strong oil prices have encouraged us to revise up our 2012 current account surplus projection to 7.4% of Gross Domestic Product, from 6.4% previously, although we believe that capital flight will keep downside pressure on the country's reserve levels.

Key Risks To Outlook
Upside Risks: Higher than expected oil prices and more aggressive monetary stimulus could see real Gross Domestic Product growth exceed our moderate 2.5% projection in 2012. Downside Risks: Huge uncertainty surrounding policy trajectory beyond the election poses a significant downside risk to our growth projection .

Table Of Contents

Executive Summary 5

Core Views
...5

Major Projection Changes
5

Key Risks To Outlook
....5
Chapter 1: Political Outlook.. 7
Industry SWOT Analysis 7
BMI Political Risk Ratings.. 7
Domestic Politics 8
Chávez's Shadow Obstructs Change8
Rising crime in Venezuela, combined with a potential deterioration in President Hugo Chávez's health, has increased the probability of
an opposition victory at the ballot box. However, we believe Chávez is still the favourite for October's vote, and even if the opposition
were to win the elections, a shift to more orthodox economic policies remains very unlikely given the massive political resistance in
place.
TABLE: POLITICAL OVERVIEW....8
Long-Term Political Outlook... 9
Massive Challenges To Overcome....9
The Venezuelan political landscape will very likely remain polarised over the next 10 years, with potential for pent-up tensions to
lead to unrest. Although President Hugo Chávez's worsening health, combined with policy-induced distortions in the economy that
have manifested themselves in worsening living conditions, could open the door to a change of regime in 2012, the transition to more
orthodox economic policy will not be easy.
Chapter 2: Economic Outlook.. 13
Industry SWOT Analysis ... 13
BMI Economic Risk Ratings.. 13
Economic Activity .. 14
Massive Growth Challenge Beyond The Election...14
Despite a relatively solid real Gross Domestic Product growth reading in 2011, we believe Venezuela's current economic trajectory will not be sustained
beyond the October 2012 presidential election. While the electoral result could significantly alter Venezuela's longer-term growth
prospects, the immediate challenges for whoever wins in October implies growth will slow in 2013.
TABLE: ECONOMIC ACTIVITY....14
Balance Of Payments... 16
External Account Adjustment Coming.16
We projection Venezuela to record another sizeable current account surplus in 2012, although ongoing capital flight will keep the financial
account firmly in deficit. While this situation is sustainable until the October 2012 general election, failure to attract more investment and
address the country's productive deficiencies will very likely prompt a devaluation at some point following the election.
TABLE: CURRENT ACCOUNT16
Monetary Policy.. 18
Lower Inflation Won't Last.18
The recent drop in Venezuela's rate of inflation will not last, with our projections implying another spike in consumer prices by end-2012.
Although we question the inflationary impact of a likely exchange rate devaluation following the October 2012 general election, we
believe the country will fail to register single-digit inflation over the next few years without structural economic reform.
TABLE: MONETARY POLICY.18
Regional Monetary Policy 20
Living On The Edge..20
This year will be of pivotal importance for Argentina and Venezuela, with potential knock-on effects for the entire region. Both countries
are on a highly unsustainable macroeconomic trajectory, which could lead to an economic and political implosion.
TABLE: LATIN AMERICA REAL Gross Domestic Product, % CHG Y-O-Y...20
TABLE: LATIN AMERICA CONSUMER PRICE INDEX, % Y-O-Y, AVE.21
Regional: Sovereign Risk Ratings . 23
Gap Getting Wider....23
In our last sovereign risk ratings, we argued that there were more credit downgrades in the pipeline, and since September there has
been a discernible shift in this direction by some of the major ratings agencies, particularly in the Caribbean region. At the same time,
we have seen several Latin American sovereign countries benefit from higher commodity prices, while for others high prices have
allowed governments to persist with distortive economic policies. The net result has been a wider discrepancy between those at the top
and those at the bottom of our ratings, throwing up one or two potential relative value plays in the process.
TABLE: LATIN AMERICA SOVEREIGN RISK RATINGS-EVOLUTION OF ABILITY TO PAY. 23
TABLE: LATIN AMERICA SOVEREIGN RISK RATINGS-EVOLUTION OF WILLINGNESS TO PAY 24
Chapter 3: 10-Year Projection 27
The Venezuelan Economy To 2021. 27
Growth Outlook Beyond Chávez ....27
Although the Venezuelan economy is likely to experience a tough time over the next few years, we believe there is significant economic
growth potential over the long term. In our view, a more moderate and industry -friendly government which is willing to make the
necessary structural reforms is needed to unlock this potential.
TABLE: LONG-TERM MACROECONOMIC FORECASTS..27
Chapter 4: Business Environment 29
Industry SWOT Analysis ... 29
BMI Business Environment Risk Ratings 29

Environment Overview Outlook. 30
Institutions .... 30
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS..30
TABLE: BMI LEGAL FRAMEWORK RATING..31
Infrastructure 32
TABLE: LABOUR FORCE QUALITY.32
TABLE: LATIN AMERICA, ANNUAL FDI INFLOWS.33
TABLE: TRADE AND INVESTMENT RATINGS....34
Operational Risk 35
TABLE: TOP EXPORT DESTINATIONS35
Chapter 5: Key Segments ... 37
Defence and Security . 37
TABLE: MILITARY PERSONNEL, from 2003 to 2009 ('000, UNLESS OTHERWISE STATED).. 39
TABLE: DEFENCE EXPENDITURE, from 2008 to 2016 ...40
Freight Transport .... 41
TABLE: MARITIME FREIGHT - THROUGHPUT, from 2007 to 2016 ('000 TONNES)..42
TABLE: AIR FREIGHT...42
Other Key Segments ... 44
TABLE: AUTOS SECTOR KEY INDICATORS44
TABLE: FOOD and DRINK SECTOR KEY INDICATORS.44
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS....44
TABLE: OIL and GAS SECTOR KEY INDICATORS....45
TABLE: PHARMA SECTOR KEY INDICATORS..45
TABLE: TELECOMS SECTOR KEY INDICATORS...45
Chapter 6: BMI World Assumptions. 47
World Outlook.... 47
World Economy Continues To Muddle Through ...47
TABLE: GLOBAL ASSUMPTIONS....47
TABLE: DEVELOPED STATES REAL Gross Domestic Product GROWTH FORECAST.48
TABLE: REAL Gross Domestic Product GROWTH CONSENSUS FORECASTS...48
TABLE: EMERGING MARKETS REAL Gross Domestic Product GROWTH FORECAST49

View This Report »

Find all the market research you need - instantly, in one place.

+1.2 Million Research Documents & Statistics +200,000 Trusted Public Sources 350 Industries With Global Coverage

24/7 Customer Support

Talk to Louis

+1 718 618 4302

Purchase Reports From Reputable Market Research Publishers

Global Maternity Apparel Market

Global Maternity Apparel Market

  • $ 4 500
  • Industry report
  • April 2014
  • by Global Industry Analysts

This report analyzes the worldwide markets for Maternity Apparel in US$ Million. The report provides separate comprehensive analytics for the US, Canada, Japan Europe, Asia-Pacific, Middle East, and Latin ...

Cracker Barrel Old Country Store, Inc. Company Profile- Business Description, Strategies, SWOT and Financial Analysis

Cracker Barrel Old Country Store, Inc. Company Profile- Business Description, Strategies, SWOT and Financial Analysis

  • $ 200
  • Industry report
  • April 2014
  • by OGAnalysis

“Cracker Barrel Old Country Store, Inc. Company Profile” is a comprehensive report on Cracker Barrel Old Country Store, Inc.. The report provides complete information on the operations, organization ...

Bord Gais Eireann Company Profile- Business Description, Strategies and SWOT Analysis

Bord Gais Eireann Company Profile- Business Description, Strategies and SWOT Analysis

  • $ 150
  • Industry report
  • April 2014
  • by OGAnalysis

“Bord Gais Eireann Company Profile” is a comprehensive report from OGAnalysis on Bord Gais Eireann operations. The report provides complete information on the operations of the company across the value ...

The Teoco: Service Assurance

March 2014 $ 999

Worldwide Cost Of Living 2014

February 2014 $ 995

ReportLinker is an award-winning market research solution that finds, filters and organizes the latest industry data so you get all the market research you need - quickly, in one place.