Venezuela Country Risk Report Q4 2018
Venezuela's economic and political crisis will stretch into a fifth year in 2018. Declining oil production, hyperinflation and a poor business environment will keep the economy in a deep recession.
The administration of President Nicolás Maduro will stoke further inflation through expansionary fiscal policy and drive escalating unrest as it isolates the political opposition. A raft of economic reforms will do little to halt the crisis, and in some cases will make matters worse.
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 will remain extremely elevated due to severe shortages of essential goods and failing public services, which underpin regular unrest, and the insti-tutional crisis between the opposition-controlled legislature and PSUV-controlled executive and judiciary. The installation of the supra-legislative constituent assembly has exacerbated this issue, as has Maduro's re-election victory in May 2018 in a vote the opposition viewed as illegitimate.
The country defaulted in November 2017, and has since accumulated more than USD6.1bn in arrears. Creditor action is a real possibility in 2018, 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. A thwarted coup in May and as-sassination attempt against Maduro in August underlines this threat.
Maduro is increasingly likely to remain in power past 2018, relying on a combination of purges, patronage, a fractured opposition 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.
The US has threatened to impose sanctions on the Venezuelan oil sector, potentially cutting Venezuela off from its largest export market.
Learn how to effectively navigate the market research process to help guide your organization on the journey to success.Download eBook