Venezuela is rich in natural resources and attracts a number of our clients. In particular, it has huge oil and gas reserves (it has the largest proven oil reserves in the world) and is one of the main suppliers to the US. Venezuela has a long tradition of democracy, although the rise to power of Hugo Chávez in 1998 ushered in a new era of tensions between the government and the private sector. This dynamic which has only been exacerbated under the helm of President Nicolás Maduro, given low economic growth and the government’s heavy-handed approach to stemming political dissent and regulating the private sector.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 20 of Venezuela’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you ahead of the curve, so you can do business with ease in Venezuela.

Country Risk

Venezuela Country Risk

Venezuela Operational Risk Coverage (9)

Venezuela Operational Risk

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BMI View: Venezuela is a high-risk country for private sector investment, exhibiting a hazardous business environment. We believe that crime presents the most significant overall threat to companies, followed closely by trade and investment risk. We also highlight a number of fundamental logistical concerns, while government intervention in the labour market undermines strengths in the labour force. Overall, Venezuela is awarded a score of 36.1 in the BMI Operational Risk Index, ranking 27th out of 28 countries in Latin America.

Venezuela presents significant risks to investors in terms of its security environment. The country has one of the highest violent crime rates in the world, and organised criminal groups...

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Venezuela Crime & Security

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BMI View:  Although the terror threat in Venezuela is low, high rates of violent crime and the implications of anti-American foreign policy pose substantial operational risk to investors, undermining its Crime and Security performance. In particular, foreign workers are exposed to kidnapping risks and inadequate protection from the country's police force which often necessitates hiring private protection. Venezuela performs poorly in BMI's overall Crime and Security Index, scoring 24.2 out of 100. The country ranks 154th out of 170 countries globally, and 27 thout of 28 countries in Latin America, marginally ahead of its regional ally, Ecuador.

Crime is endemic in Venezuela and poses a critical threat to foreign operators. The capital Caracas is the third-most dangerous city in the world with an estimated 10 homicides per day. Foreign...

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Venezuela Labour Market

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Venezuela has consistently delivered strong social welfare programmes which have improved public services and the availability of labour. However, the country performs very poorly with regards to labour costs, which significantly increase operational risk to private companies and are a serious concern for investors. These strengths and weaknesses are factored in the BMI Labour Market Risk Index, in which Venezuela scores an overall 52.9 out of 100, ranking it 11th out of 28 countries in Latin America, in between Ecuador and Panama. Meanwhile Chile, which has very liberal labour laws, is a regional outperformer with a score of 64.6.

Labour Availability in Venezuela is good, due to high rates of urbanisation, and strong public spending in health and primary education. As a result, the workforce is located in close proximity to commercial areas, transport hubs, and effective public services. This is good for business...

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Venezuela Logistics

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BMI View: Venezuela's transport infrastructure is in poor condition, utilities supply is struggling under growing demand and trade bureaucracy creates major bottlenecks in international trade. The country does however offer some strong comparative advantages for investors, including the lowest energy costs in the world, but these fail to significantly mitigate logistics risk. Overall, Venezuela has a weak supply chain which carries inherent threats to business operations. This contributes to the BMI Logistics Risk Index, which places Venezuela 26th out of 28 countries in Latin America, with a score of 38.1 out of 100....

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Venezuela Trade & Investment

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Poor economic openness, severe government intervention, and weak rule of law present high risks to investors in Venezuela. Overall trade is restricted, while markets are tightly controlled and government owned to a large extent, which distorts the competitive landscape. Furthermore, successful private businesses have been nationalised and compensation is often insufficient or delayed. Given that the legal system is subject to government influence, investors are forced to seek compensation through international organisations which are unable to influence the Venezuelan government. Therefore, the fundamental risks far outweigh the few consolatory advantages available to investors.

As a result, Venezuela scores 26.9 out of 100 for Trade and Investment Risks in our Operational Risk Index. This puts it in 27th place out of 28 countries in Latin America, ahead of last placed Haiti (19.0), while Panama is the regional outperformer scoring 61.4. This...

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Venezuela Industry Coverage (20)

Agribusiness

Venezuela Agribusiness

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BMI View: The operating environment for the agribusiness sector has deteriorated significantly over recent years due to the poor macroeconomic climate, shortage of foreign currency and therefore agricultural inputs and government mismanagement. Venezuela's economy will be under extreme downward pressure in 2015 amidst the drop in international prices. The growing headwinds to the economy will weigh on agriculture production and consumption in the coming years, and we will see most commodities see modest if not declining growth out to 2019. Producers of agricultural goods will struggle as rising production costs and controlled prices at farm level reduce margins.

Agribusiness Market Value
BMI Market Value By Commodity (2005-2019)
...

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Autos

Venezuela Autos

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Vehicle sales in Venezuela declined 76%, to 23,707 units, in 2014 as the increasingly poor economic outlook impacts the sector. Inflation is running very high, eroding consumers' purchasing power and appetite for big ticket purchases, such as new cars. High interest rates curtail demand for vehicle loans, and the ongoing weakness in the Venezuelan bolivar (and further weakness in the unofficial exchange rate) increasingly makes vehicle imports more expensive in local currency terms.

Vehicle production in Argentina declined 72.5% in 2014, to 19,759 units, as the domestic market contracted and the country's business environment deteriorated. This is broadly in line with our full year forecast, as we expected these dynamics to hamper the sector.

As downside risks to global oil prices mounted at the end of 2014, we highlighted how sustained low oil prices would have far reaching negative impacts on the...

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Commercial Banking

Venezuela Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Venezuela Consumer Electronics

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BMI View: The exchange rate reforms enacted in February 2015 are effectively a devaluation, and will have a negative impact on consumer electronics market growth in 2015. Additional economic challenges in 2015 include inflation forecast at almost 75% and GDP to contract by 3.6% in real terms. Meanwhile, the push by the government to implement the 'fair price' law in H114, which restricted vendor margins to 30%, means vendors face continued political as well as economic risk factors. The law adds to a hostile business environment and exacerbates existing challenges for vendors including currency weakness, and economic, political and security risks that are weighing on purchasing power and consumer confidence. As the economy is stabilised in the latter years of our forecast period...

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Defence & Security

Venezuela Defence & Security

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BMI View: The Venezuelan defence sector is set to continue to be the largest in Latin America in terms of expenditure, which we project at USD3.5bn in 2015. However, in terms of production Venezuela will remain an insignificant player in the world arms market. Although falling oil prices are set to lead to budget cuts, we believe that military spending will be maintained.

Venezuela relies on oil export receipts to fund government spending, and rapidly falling oil prices in the final months of 2014 heighten the existing risks from economic mismanagement and political instability. While we estimate a decline in GDP growth of 2.5% in 2014, and believe a recessionary environment will prevail in 2015, we do not believe that the government will default in the coming year at least. Moreover, the defence budget will continue to rise despite inevitable budget cuts. We forecast defence spending to reach...

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Food & Drink

Venezuela Food & Drink

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BMI View: In view of the substantial headwinds facing the Venezuelan economy, we have downgraded the country's real GDP to -3.6% in 2015 and -1.5% in 2016. Despite enormous natural resource wealth, the economy's outlook will continue to be dimmed by poor macroeconomic governance, high inflation, low oil prices and significant political uncertainty. Furthermore, we expect household consumption to continue to be constrained by high inflation, which has substantially eroded purchasing power (we forecast headline CPI price growth rising to 77.0% year-on-year in 2015), as well as government price controls, which create market inefficiencies that significantly reduce productivity (and, by extension, incomes).

Headline Industry Data (US dollar terms):

  • Per capita food consumption...

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Freight Transport

Venezuela Freight Transport

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Low Cargo Growth Expected in 2015

BMI envisages very low cargo volume growth in 2015, due to a standstill economy and a number of industry-specific problems. The freight transport sector faces ongoing concerns about the lack of sustainable import demand and slowing oil exports. Chronic mismanagement of the country's port facilities since they were nationalised in 2009 has damaged their international reputation and their profit-making capabilities. We do not expect any significant recouping of lost throughput levels over the medium term. Over a longer period, investments from China could see the facilities begin to regain some lost ground. Regarding other transport modes, airfreight sector remains restricted by currency controls. Venezuela lacks reliable data on its small rail freight and large road haulage volumes, but cargo growth on both will be kept to low single percentage digits.

BMI...

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Information Technology

Venezuela Information Technology

Infrastructure

Venezuela Infrastructure

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BMI View : Declining global oil prices, high levels of national debt and substantial inflation have all contributed to a further downgrading of our forecasts for Venezuela's ailing construction sector. Few new projects are coming to the pipeline and existing construction projects are often subject to extensive delays and rising debts as costs of key supplies increase. Venezuela continues to present an unattractive foreign investment environment, and there is little scope for future growth unless fundamental economic and political reforms are enacted.

2014 saw Venezuela's construction sector shrink by an estimated 9.1% and our expectations for 2015 are little better, with a contraction of 5.4% forecast due to the narrowing project pipeline and scarcity of funding. We do not expect to see the construction sector exit recession until 2018, at the earliest, when growth will...

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Insurance

Venezuela Insurance

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BMI View: The recession in Venezuela that began in 2014 will deepen in 2015 amid an extremely poor business environment and much lower oil prices. Meanwhile, soaring inflation will weigh heavily on consumer spending as purchasing power continues to be eroded. This poses serious risk to both segments of the insurance sector, as an increasingly severe economic downturn will constrain the purchase of insurance policies and the acquisition of goods requiring insurance.

Venezuela's economy will be under extreme downward pressure over the coming quarters due to a confluence of factors, including a poor business environment, high inflation, and lower oil prices. Private sector productivity has slowed...

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Medical Devices

Venezuela Medical Devices

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BMI Industry View: The Venezuelan medical device market is hyper-inflated but ranks sixth in the Americas region. Our forecasts indicate that the market will register a negative 2013-2018 CAGR in US dollar terms due to maxi-devaluations of the bolivar, which should bring down per capita consumption. The market is reliant on tightly controlled imports, which have performed negatively since 2011, with import shortages impacting health services provided by the public and...

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Mining

Venezuela Mining

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BMI View: Mining sectors across Central America and the Caribbean will see varying growth prospects in 2019. The region has significant untapped mineral potential, yet a range of business environments and operational challenges will lead to uneven growth. Overall, the mining sectors of Colombia and Panama will see the strongest longer-term growth, while Guatemala, and to a lesser extent Honduras, will underperform.

Colombia and Panama will outperform other countries in Central America and the Caribbean in terms...

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Oil & Gas

Venezuela Oil & Gas

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BMI View: We maintain a cautious outlook for Venezuela's oil and gas sector despite vast below-ground potential and ambitious production plans by state-owned PdVSA. We expect Venezuela to continue to underperform given the large scope of operational challenges, such as political interference, chronic underinvestment, an unattractive operating environment and a...

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Petrochemicals

Venezuela Petrochemicals

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BMI View: Progress on the expansion of the Venezuelan petrochemicals industry has been slow and undermined by the government's policy in upstream sectors that provide feedstock and its general indifference to improving the investment climate.

Venezuela will be unable to move towards self-sufficiency under the current business environment in which the government has assumed a high degree of managerial control and intervention in the economy. There were high hopes that strong projected growth in oil and gas output would support investment in the petrochemicals industry, but these have largely been destroyed and expansion programmes are largely limited to fertilisers.

Polymer shortages in recent years have had a detrimental impact on the Venezuelan market. Beset with operational problems and lacking...

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Pharmaceuticals & Healthcare

Venezuela Pharmaceuticals & Healthcare

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BMI View: Venezuela's pursuit of autonomy in pharmaceutical production and its overall pharmaceutical market will continue to diminish its appeal for foreign drugmakers. As the country deals with one of the worst performing currencies in the world, multinational pharmaceutical companies will be further deterred from continued activity in Venezuela throughout 2015, despite the country's continued attempts to manage its severe drug supply and weakening health system. Venezuela's recent trade agreements with other regional neighbours in Q414 will aid in the Ministry of Health's work to improve the health sector, though Venezuela's volatile currency and shifting political landscape will prevent further multinational investment in 2015.

Headline Expenditure Projections

  • Pharmaceuticals: VEB97bn (USD15bn...

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Power

Venezuela Power

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BMI View: Venezuela's power market will continue to suffer from severe infrastructure inefficiencies and unreliable electricity supply over our 10-year forecast period to 2024, as lower oil export revenues - due to falling oil prices - will constrain public investment in the power sector. Given the high dependence of the market on public spending, a cut in the 2015 budget for Venezuela's power ministry supports our view and increases the risk of power shortages for the country's downstream oil sector. The development of Venezuela's power sector will therefore remain reliant on Chinese financing. Venezuela's constrained government spending ability and unattractive investment climate, coupled with China's interest in Venezuelan hydrocarbon resources, will drive...

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Real Estate

Venezuela Real Estate

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BMI View: Venezuela's hostile business environment and troubled economy has seriously held back growth in the commercial real estate sector. Both tenants and landlords are being negatively affected by the uncertainty that surrounds the market and this is deterring much needed investment in the sector. Despite this the country's economy is still developing and, as such, possesses a number of opportunities that we believe will generate strong growth for the country's real estate sector in the long run.

All three of Venezuela's real estate sub-sectors are suffering from chronic shortages of supply due to a severely limited construction pipeline. There have been few indications that this situation will change significantly over 2015 and 2016, meaning that demand will remain high for the limited space that is available.

Government policies that...

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Retail

Venezuela Retail

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BMI View: As a result of high inflation and a chronic shortage of basic goods in Venezuela the economic outlook remains unstable at the beginning of our period which has seen us forecast negative year-on-year growth rates of total household spending in 2015 and 2016. Moreover, the tough regulatory environment looks set to remain a barrier to entry for international investors within the retail sector until 2019. However, the burgeoning middle-class will stimulate growth in the sector which will see a more positive outlook for retailers by the end of our period.

Our projections have been downgraded for growth rates across all sub-sectors of the retail sector and we expect all sub-sectors of the retail sector to experience negative growth, in USD terms, until 2017. High inflation is a key driver behind this trend, with inflation hitting 64% in Q3 2014, and remaining high...

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Shipping

Venezuela Shipping

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BMI View: The situation within the wider Venezuelan economy is set to have a detrimental effect on our shipping forecasts for the country over at least the short term. Following another significant downgrade to our oil price forecasts, we have downwardly adjusted our expectations for Venezuelan growth in 2015 and 2016. We now expect that the recession that began in 2014 will become even more pronounced in 2015, and negative growth will persist into 2016.

Both Colombia and Venezuela are poised to face rising pressure on their export growth due to falling oil prices and sluggish crude production growth. However, Venezuela is especially vulnerable given the government's unwillingness to address the structural drivers underpinning the hydrocarbon sector's underperformance.

Growth in the Venezuelan shipping sphere is to go backwards in...

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Telecommunications

Venezuela Telecommunications

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BMI View : Despite three companies being awarded LTE spectrum in December, we remain bearish towards its impact on mobile broadband growth. Uncertainty regarding the political situation along with the deteriorating economy has lowered confidence and caused Venezuelans to leave their higher-value subscriptions for more basic ones. This situation is unlikely to change in the near future. Furthermore, the growth of mobile broadband has not been very strong. The government's heavy influence over the telecoms market, with state-owned firms playing major roles, could have negative consequences over the short-to-medium term.

Key Data

  • Mobile subscriptions registered a slight decline in Q314, according to data from the telecoms regulator Conatel, with subscriptions reaching 31.530mn by the end of September 2014. This...

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