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Venezuela Country Risk Report Q2 2019

Venezuela Country Risk Report Q2 2019

Key View:

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.

Key Risks

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


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Growth To Rebound Amid Economic Reforms
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS EXPORTS
TABLE: TOP 5 GOODS IMPORTS
Fiscal And Debt Outlook
New Government Could Significantly Improve Fiscal Outlook
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURES CATEGORIES
Currency Forecast
Hyperinflation, Currency Depreciation Would End Post-Regime Change
10-Year Forecast
The Venezuelan Economy To 2028
Structural Weaknesses Underpin Poor Long-Term Growth Outlook
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Venezuela Country Risk Q2 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report is solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsPolitical Outlook
Domestic Politics
Venezuela Crisis: Updated Scenarios For The Weeks Ahead
Foreign Policy
Q&A: Foreign Relations Would Shift Significantly After Regime Change
Long-Term Political Outlook
What Comes After A Change In Government?
Operational Risk
TABLE: OPERATIONAL RISK
Conflict Risk
TABLE: MAIN ACTIVE TERRORIST AND INSURGENT GROUPS IN VENEZUELA
TABLE: POLITICAL VIOLENCE RISK
TABLE: MAJOR CONFLICT FLASHPOINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAY RISKS
TABLE: AIR TRANSPORT RISKS
Global Macro Outlook
Damage Control: Looser Policy Shift Ahead
TABLE: GLOBAL FORECASTS (2018-2023)
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: VENEZUELA – MACROECONOMIC DATA & FORECASTS

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