Venezuela Country Risk Report Q2 2019
Venezuela's economic and political crisis will stretch into a sixth year in 2019. Declining oil production, hyperinflation and a poor business environment will keep the economy in a deep depression.
Hyperinflation and a general loss of confidence will keep severe depreciatory pressures on the bolívar, ensuring that the parallel market value of the currency remains weak, despite a recent devaluation and re-denomination of the currency.
Political risk remains extremely elevated due to severe shortages of essential goods, failing public services and the emergence of opposition leader Juan Guaidó, who has been recognised as the legitimate president of Venezuela by much of the international community. Guaidó has called for regime change and has organised widespread public protests, which we expect to continue as long as President Nicolás Maduro and the Partido Socialista Unido de Venezuela (PSUV) remain in power.
The country defaulted in November 2017 and has since accumulated more than USD10.0bn in arrears. Creditor action is a real possibility in 2019, namely the acceleration of principal payments and attempts to seize Venezuela's external assets, including oil shipments.
The chances of a military uprising against the regime remain substantial, given the collapse in living conditions in the country and Guaidó's emergence as a viable alternative to Maduro. A thwarted coup in May 2018 and an assassination attempt against Maduro in August 2018 underline this threat.
Maduro may remain in power past 2019, relying on a combination of purges, patronage, internal surveillance and mass outmigration from the country. This would have a decidedly negative impact on the country's economy, given the PSUV's track record of economic mismanagement.
While unlikely, the threat of a foreign intervention by the US remains on the table. Venezuela Country Risk
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