Venezuela Business Forecast Report Q2 2008

Publication Date	February 2008
Publisher	Business Monitor
Product Type	Report
Pages	50
ISBN Number	1744-8883
Product Code	BMI00302

Price

£375.00
approximately: $559 | €447

PDF immediate delivery

Order above formats by FAX

Summary

2008: Cooling It On December 2 2007 President Hugo Chvez had his constitutional reform proposals rejected in a national referendum. Humbled by this defeat, Chvez has vowed to slow down his ideological reform agenda this year and concentrate more on tackling some of the country's macroeconomic and social problems. Economic growth remains very strong, although signs of overheating are becoming more and more visible. The economy remains extremely dependant on international oil prices as oil production continues to decline at a worrying pace. Loose monetary and fiscal policies have driven up prices, and although Venezuela's new finance minister has committed to halving inflation this year, we see this as an unlikely outcome.

Following Chvez's referendum defeat, the risk that Venezuela could take on the characteristics of a communist state has largely abated and it looks increasing likely that the president will step down when his term ends in 2013. Chvez has taken a less confrontational tone with his political opposition, which may be a sign of weakening political power. Indeed, opposition parties received a large boost from the 'no' vote and have signed an accord to coordinate their efforts in this year's regional elections. We see the resurgence of the previously dormant opposition parties as a positive sign for Venezuelan democracy and believe this will lessen the likelihood of the country moving towards a one-party political system.

Venezuela's macroeconomic climate is likely to remain highly unstable over the course of 2008 as demand-supply imbalances continue to widen. The price controls and an overvalued official exchange rate is crushing the non-oil export sector, driving up imports, and stifling production.

Extremely favourable conditions have not been exploited as a way of implementing structural reform, and we see the country struggling to sustain its recent economic performance in the long term. Inflation is running at 22.5%, which makes the inevitable devaluation of the currency much more problematic. The introduction of the bolivar fuerte on January 1 has done nothing to alleviate this problem.

Venezuela's frail institutional framework will remain a key weakness of the country's business environment, which is reflected in the country's low ranking in our proprietary business environment ratings. While Chvez has acknowledged the need to encourage private investment remains very unattractive and we do not expect this to change any time soon. The issue of propetry rights is a major reason for this. Furthermore, the concentration of power at the top levels of government diminishes the effect of checks and balances, thus increasing the scope for arbitrary policy decisions and corruption.

Content

Executive Summary
2008: Cooling It
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Applying The Brakes
With his defeat in the constitutional referendum, President Hugo Chvez has adopted a less hard-line tone with
regards to his socialist revolution.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth Still High, But For How Long?
Venezuelan real GDP growth surprised to the upside in Q307, with high levels of private consumption helping the
economy grow by 8.7% y-o-y. We expect the 2007 real GDP growth figure to come in at 8.5%, before falling to
4.2% by end-2008.
Monetary Policy
Flagging Supply Meets Soaring Demand
The Venezuelan economy is suffering from major inflationary pressures. The government has made progress on
inflation fighting, by relaxing some price controls to encourage domestic production, and raising interest rates.
Balance Of Payments
External Sector Outperforms, But Imbalances Grow
The Venezuelan external sector performed relatively well in Q307. High oil receipts and a reduction in capital
flight combined to increase the net balance to US$3.95bn, marking a US$11.2bn improvement from the
previous quarter.
Exchange Rate
Bolivar Fuerte Comes Into Force
Despite the fanfare surrounding the new Venezuelan currency, we doubt whether it will have a beneficial impact
on the country's inflationary problems. We stick with our long-held view of continued currency weakness in the
parallel exchange market.
Chapter 3: Special Report
Looking Beyond 2008
US: The Rebalancing Act
Unwinding The Imbalances
We believe that a substantial, multi-year shift in the US external accounts is under way. A weak US dollar and
subdued domestic consumption should lead to a narrowing in the US's structural current account deficit.
China: What If We're All Wrong?
Our Core Scenario For China
We are retaining our positive headline growth projections for China across the forecast period to 2012, with our
expectations of the continued success of the urbanisation process and export-driven growth model underpinning
our assumptions.
Japan: Immigration Key To Long-Term Growth
Demographic Woes Portend Long-Term Decline
Immigration remains the only realistic way that Japan can overcome its long-term economic challenges.
Business Monitor International Ltd
venezuela Q2 2008
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Introduction
Latest Developments
The business environment has suffered as a result of President Hugo Chvez' socialist revolution, with
the state becoming increasingly involved in private enterprise.
Institutions
Infrastructure
Market Orientation
Operational Risk
Chapter 5: Key Sectors
Pharmaceuticals & Healthcare
Executive Summary
Venezuela's pharmaceutical market was estimated to be worth US$2.07bn in 2007. We expect the drug
market to average 4% growth to reach a value of US$2.52bn by 2012.
List of Tables
- Table: Bolivarian Republic of Venezuela Cabinet
- Table: Economic Activity
- Table: Monetary Policy
- Table: Balance Of Payments
- Table: Exchange Rate Policy
- Table: BMI Business And Operational Risk Ratings
- Table: BMI Legal Framework Ratings
- Table: Latin America Annual FDI Inflows
- Table: BMI Trade Ratings
- Table: Venezuelan Drug Market Trends

About this Product

Delivery Details

PDF:Immediate delivery

Ask a question about this product?

Need help finding the right product?

Product features / use

Scope	Expert Insight/Opinion
Level	General Industry Strategies
Data	Detailed Market Forecasts
Profiles	Profiles of Key Companies
Features	Contains SWOT Analysis
Extra Info	Consumer Trends Highlighted