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Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Venezuela Macroeconomic Outlook
Exchange rate regime, risk and uncertainties
Miguel Ángel Santos
www.miguelangelsantos.blogspot.com
Twitter: @miguelsantos12
miguel.santos@iesa.edu.ve
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Macroeconomic results by year-end 20091
Exchange rate arrangements, risks and uncertainties3
What is likely to happen?4
What has happened so far in the first quarter?2
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
In 2009 average oil price for the Venezuelan basket nose-dived 34%... Over Jan-April 2010 oil price bounced back to an average of $71.7 per barrel...
Precio Petróleo - Cesta Venezolana(Enero 1998 - Abril 2010)
0
20
40
60
80
100
120
140
En
e 1998
Ju
l 1998
En
e 1999
Ju
l 1999
En
e 2000
Ju
l 2000
En
e 2001
Ju
l 2001
En
e 2002
Ju
l 2002
En
e 2003
Ju
l 2003
En
e 2004
Ju
l 2004
En
e 2005
Ju
l 2005
En
e 2006
Ju
l 2006
En
e 2007
Ju
l 2007
En
e 2008
Ju
l 2008
En
e 2009
Ju
l 2009
En
e 2010
Valor Nominal Valor Real (Base: Dic-07)
1999: 16,2
2000: 26,0
2001: 20,2
2002: 22,2
2003: 25,7
2004: 33,6
2005: 46,0
2006: 56,4
2007: 64,7
2008: 86,5
2009: 57,0
2010: 71,7
Precio Promedio
Cesta Venezolana:
Fuente: Ministerio de Energía y Petróleo
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Exportaciones Petroleras y No Petroleras(Millones de Dólares - 2000-2009)
-
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
100.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Petroleras No Petroleras
Venezuelan exports collapsed 40%:39% oil exports (volume effect) and 44% non-oil exports
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Real oil exports per capita fell 43%, but from a historic stand-point are still at their highest level in the previous 25 years (excluding 2005-2008)
Exportaciones Petroleras(en dólares de 2009)
54,201
92,693
1,913
1,247
3,215
3,960
3,327
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Exp
orta
cion
es P
etro
lera
s (m
illon
es d
e dó
lare
s de
20
09)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Exportaciones P
etroleras per Cápita (dólares de 200
9)
Export. Petroleras (Base 2009) Export. Petroleras per Cápita
Embargo petrolerode países a EEU -
Guerra de Yom Kippur
Salida del Sha de Irán - Inicio de la
Revoluciónde Khomeini
Comienza GuerraIrán-Iraq
Invasión Iraq a Kuwait Guerra del Golfo
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
The economic outcome of 2009 was quite similar to the one registered in the first five years of Chavez, but with significantly higher oil revenues
PIB PIB PC INF VZLA INF USA Devaluación Oil Exports Oil Exp. per Cap.Presidente Período (%) (%) (%) (%) Oficial (%) US$ 2009 US$ 2009Betancourt 1959-1963 6.6% 2.7% 1.6% 1.2% 0.0% 15,696 1,996Leoni 1964-1968 5.4% 1.9% 1.4% 2.6% 7.6% 15,943 1,701Caldera I 1969-1973 5.0% 1.6% 3.0% 5.0% -0.7% 16,397 1,469Pérez I 1974-1978 6.0% 2.3% 8.2% 8.0% 0.0% 36,731 2,807Herrera 1979-1983 -1.2% -3.9% 13.2% 8.9% 0.0% 41,286 2,679Lusinchi 1984-1988 3.4% 0.8% 18.4% 3.5% 33.6% 21,727 1,248Pérez II * 1989-1993 3.0% 0.5% 45.8% 4.1% 59.7% 19,761 992Caldera 1994-1998 1.6% -0.6% 61.3% 2.4% 42.7% 21,521 962Chávez I 1999-2003 -3.3% -5.2% 21.2% 2.4% 25.9% 45% 28,339 1,146Chávez II 2004-2008 10.5% 8.7% 21.1% 3.6% 6.4% 16% 64,234 2,366
Chávez 2009 -3.3% -4.9% 26.9% 2.8% 76.0% 41% 54,201 1,913
Promedios Promedio
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
In 2009 the government faced the oil shortfall with a policy-mix comprising a significant loss of international reserves: US$10.262 million
Reserva Internacionales (BCV + FEM)
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000 en
e-98
ago-9
8
mar-
oct
-99
may-
dic
-00
jul-
01
feb-0
2
sep-0
2
abr-
03
nov-
03
jun
-04
ene-
05
ago-0
5
mar-
oct
-06
may-
dic
-07
jul-
08
feb-0
9
sep-0
9
Abri
l
(MM
US
D)
Fuente: BCV
In 2010 (Jan-Apr) an additional US$4.500 loss in RIN ocurred, due to the transfer of US$5.000 million to FONDEN
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
International reserves and FONDEN funds burnt in order to avoid a larger fall in imports and provide support to the parallel market
Balanza de Pagos 2009
18.124
(10.262)
57.595
4.783
(9.023)
10.592
38.442
(4.939)
(20.000)
Exportaciones
Inversión
Importaciones
Servicios/Otros
Var. ActivosPúblicos
Var. Activos
Privados
Errores
Variación deReservas
US
D M
illo
nes
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
By year-end 2009 it was already obvious that the parallel market was demanding a increasingly (unsustainable) large amount of foreign currency
Fuga de Capitales(Millones de Dólares, 2000-2009)
9.841
3.783
8.797
11.738
7.364
17.002
21.589
24.415
6.118
9.403
-
5.000
10.000
15.000
20.000
25.000
30.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Fuente: BCV, Cálculos Propios
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
The government also increased external debt by 27% (US$12.400 million) …
Deuda Externa
(2008-2009 - Miles de millones de dólares)
29.934.9
16.6
20.0
46.5
58.9
4.0
2008 31/10/2009
Gobierno Central Fondo Chino
PDVSA Total Deuda Externo
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Deuda pública(USD Millones)
28.705 28.455 29.06726.104 25.942
27.702 28.853 28.13830.534
26.598
38.942
46.652
61.626
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Fuente: BCV
Total Promedio2008-2009 32,10% 32,10%
2007-2009 58,25% 25,80%
2001-2009 137,55% 11,42%
1998-2009 116,57% 7,28%
Consolidated public sector debt grew by US$14.974 million, reaching Debt-to-GDP levels of 50%-58% - The major leagues of debt!
Deuda Ext. / PIB 2008 2009 @ Oficial (2.6) 14% 20% @ Oficial (4.3) 14% 33%
@ Paralelo 35% 50% @ M2/RIN 31% 58%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Internal debt was heavily, growing 61% nominal and 25% in real terms, taking total debt-to-GDP ratios to 57%-64%
Deuda Interna Nominal y Ajustada por Inflación(Millones de VEF nominales, y de 1998)
2.5303.827
7.250
11.000
16.189
24.049
29.802
33.712
36.221 35.991
30.515
49.072
5.811
2.530 3.1855.329
7.198 8.086 9.450 9.825 9.7118.930
7.240
4.655
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 AcumSep09
Fuente: Ministerio de Finanzas
Deuda Total / PIB 2008 2009 @ Oficial (2.6) 19% 23% @ Oficial (4.3) 19% 40%
@ Paralelo 39% 57% @ M2/RIN 35% 64%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Over the course of 2009 CADIVI also reduced its allotments of foreign currency at the official rate by 42%
Entrega Diaria Promedio de Dólares por el BCV (Millones de Dólares)
Ene05 - Dic09
-
50,00
100,00
150,00
200,00
250,00E
ne-0
5
Ab
r-0
5
Ju
l-0
5
Oct-
05
En
e-0
6
Ab
r-0
6
Ju
l-0
6
Oct-
06
En
e-0
7
Ab
r-0
7
Ju
l-0
7
Oct-
07
En
e-0
8
Ab
r-0
8
Ju
l-0
8
Oct-
08
En
e-0
9
Ab
r-0
9
Ju
l-0
9
Oct-
09
Media Movil 6 Meses - BCV
Media Movil 6 Meses - CADIVI
Liquidación de Divisas BCV
Autorización de Divisas CADIVI
Fuente: CADIVI
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Lower foreign currency allotments at the official rates resulted in a 22% decrease in imports (significantly lower than the fall in exports)
Importaciones(Dólares, 1998 - 2009)
13.213
16.86519.211
13.360
10.483
17.021
24.008
33.583
46.031
49.482
38.442
15.105
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
50.000
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Fuente: BCV
First half 2009: -5%Second half 2009:-22%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
GDP dropped by 3.3%, three times more than world average and almost twice the Latin American average (negative) growth rate
Variación Anual PIB (%)(1989 - 2009)
9,73%
-2,35%
3,95%
-0,20%
6,37%
-6,09%
3,24%
8,15%
4,78%
-3,29%
-9,40%
6,47% 6,06%
0,28% 0,17%
2,79%
-8,88% -9,24%
18,29%
10,32%
9,87%
-15,00%
-10,00%
-5,00%
0,00%
5,00%
10,00%
15,00%
20,00%1
98
9
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Fuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
GDP per capita fell 5.07% - By year-end 2009 it was 9.05% above 1998 levels (a compounded annual growth rate of just 0.79%)
Producto Interno Bruto per Capita (Miles de bolívares 1997, 1998-2009)
1.533.471
1.385.946
1.609.146
1.973.6301.809.900
1.661.5421.689.168
1.712.555
1.740.817
1.892.8131.877.691
2.078.963
-
500.000
1.000.000
1.500.000
2.000.000
2.500.000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Fuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
GDP by sector: Mining (-11%), Retail (-8%), Transport (-9%), Manufacturing (-6%), Oil (-7%) and Banking and Insurance (-2%) got the worst of the crisis…
Crecimiento del PIB 2008/2009por actividades económicas
4,78%
5,13%
3,72%
9,50%
2,45%
-4,21%
1,43%
5,68%
4,64%
3,80%
18,17%
-4,63%
2,66%
5,34%
5,59%
4,25%
-3,29%
-7,22%
-2,04%
-11,19%
-6,37%
0,17%
-8,33%
-8,52%
9,82%
-2,37%
-2,04%
3,10%
2,41%
-0,30%
CONSOLIDADO
ACTIVIDAD PETROLERA
ACTIVIDAD NO PETROLERA
Minería
Manufactura
Electricidad y Agua
Construcción
Comercio
Transporte y Almacenamiento
Comunicaciones
Instituciones Financieras y Seguros
Bienes Inm. y Serv.
Serv. Com, Soc. y Pers
Produc. Servicios del Gobierno General
Resto 1/
2008 2009
Fuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
In manufacturing in particular, there are certain sub-sectors production falling at astonishing rates 19%-39%! (still without adjusting for public-private differences)
Indice de Producción Manufacturera(Volumen)
1.4%
4.1%
-3.8%
13.8%
12.1%
5.3%
14.1%
4.8%
-1.4%
-2.9%
4.1%
-10.5%
-5.7%
5.6%
-6.2%
-10.1%
8.3%
-11.9%
-2.7%
-6.0%
-19.7%
-19.0%
-24.9%
4.5%
-9.1%
-5.0%
-19.4%
-37.4%
-38.7%
-18.3%
-16.3%
0.7%
-3.3%
-11.2%
-50% -40% -30% -20% -10% 0% 10% 20%
General
Alimentos, bebidas y tabaco
Prod. Textiles
Prendas de vestir, adobo y teñido de pieles
Curtido y adobo de cueros, talabartería y calzado
Madera, Corcho, etc.
Papel y derivados
Edición, impresión y reproducción de grabaciones
Sustancias y productos químicos
Productos de caucho y plástico
Productos minerales no metálico
Metale Comunes
Productos de Metal
Maquinaria y equipo
Maquinaria y aparatos eléctricos
vehiculos automotores
Muebles, industria y manufactura 08/09
07/08
Fuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
When public vs. Private GDP evolution is considered, it appears a clear trend of institutional change in the ownership of production
Crecimiento PIB Público y Privado(IT2000 - IVT2009)
-0,3
1%
-6,9
9%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%1
Q 0
0
3Q
00
1Q
01
3Q
01
1Q
02
3Q
02
1Q
03
3Q
03
1Q
04
3Q
04
1Q
05
3Q
05
1Q
06
3Q
06
1Q
07
3Q
07
1Q
08
3Q
08
1Q
09
3Q
09
Publico Privado
Fuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Indice de volumen de ventas (1997=100)
-16,31%
34,69%
10,51%
-11,09%
34,10%
29,39%
27,11%
-22,02%
7,97%
5,38%
0
50
100
150
200
250
300
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%General
Comercio al por mayor
Comercio al por menor
Crec. Indice General
Fuente: BCV
According to the Central Bank, sales volume at retail level fell 11% in 2009
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
As imports plummeted 22%, the rate of growth in consumption camedown (%2.2%) and aligned with the rate of growth in GDP (-3.3%)
Consumo Total(Miles de Bolívares 1997, 1998-2009)
-
10.000.000
20.000.000
30.000.000
40.000.000
50.000.000
60.000.000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Fuente: BCV
Público Privado Total 2008-2009 2,3% -3,2% -2,2% 2007-2008 6,7% 7,1% 7,0% 2006-2007 6,1% 18,7% 16,2%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Consumption per capita fell 4.0% - By year-end 2009 it was 49.1% above 1998 levels (a compounded annual growth rate of 3.66%!)
Consumo Total per capita(Miles de Bolívares 1997, 1998-2009)
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1.800.000
2.000.000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Fuente: BCV
Per Capita 2008-2009 -4,0% 2007-2008 13,1% 2006-2007 6,6%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Consumption is another variable were institutional differences have become significant: Public: +2.3%, Private: -3,2%
Consumo(Var % Anual)
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Consumo Privado Consumo Público Consumo TotalFuente: BCV
2,3%
-3,2%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
The downward trend in consumption is better seen at a quarterly level: In 4Q 2009 private consumption fell by 6.7%
Consumo(Var % Anual)
-10,00%
-5,00%
0,00%
5,00%
10,00%
15,00%
20,00%
25,00%IV
-03
I-0
4
II-0
4
III-
04
IV-0
4
I-0
5
II-0
5
III-
05
IV-0
5
I-0
6
II-0
6
III-
06
IV-0
6
I-0
7
II-0
7
III-
07
IV-0
7
I-0
8
II-0
8
III-
08
IV-0
8
I-0
9
II-0
9
III-
09
IV-0
9
Consumo Privado Consumo Público Consumo TotalFuente: BCV
Público Privado Total Per Capita 2005-2006 12,9% 16,3% 15,5% 14,3%2006-2007 6,2% 17,6% 15,1% 15,1%2007-2008 6,5% 4,8% 5,1% 1,9%2008-2009 2,1% -6,7% -5,0% -6,7%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Real average salaries have been falling steadily since the first quarter 2008, either for public or private employees (public slope is steeper!)
Indice de Salarios Reales(1998=100)
0,7
0,8
0,9
1,0
1,1
1,2
1,3
1998-I
1998-I
II
1999-I
1999-I
II
2000-I
2000-I
II
2001-I
2001-I
II
2002-I
2002-I
II
2003-I
2003-I
II
2004-I
2004-I
II
2005-I
2005-I
II
2006-I
2006-I
II
2007-I
2007-I
II
2008-I
2008-I
II
2009-I
2009-I
II
Indic
e
General Privado Público
Fuente: BVC
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
2009 in brief: I don’t think we are in Kansas anymore
� In spite of the large amount of foreign currency burnt either in international reserves (US$10.262 MM), increased net external debt (14.974 MM), the parallel market depreciated 41% on average (against 2008)
� As it became impossible to sustain the level of imports (-22%), the decrease in consumption per capita (4.1%) aligned with production per capita (-5.1%), with average inflation on the range of 27-35%
� Institutional differences either at GDP or consumption level became quite important, with the private sector getting the worst out of the adjustment (particularly manufacturing)
� Capital outflows (US$24.415 MM) registered are the largest since Luis Herrera Campins government (19798-1983)
� The government induced a depreciation of the average exchange rate by forcing 42% of official dollars previously allocated out of CADIVI (anticipating somehow the effects of the devaluation occurred in January 2010)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Macroeconomic results by year-end 20091
Exchange rate arrangements, risks and uncertainties3
What is likely to happen?4
What has happened so far in the first quarter?2
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Between Jan-Apr 2010 there were both large devaluation (+/- 65%) of the official rate and depreciation (32%) of the parallel market rate
Tasa de Cambio Oficial y Paralela(Ene 2000 - Abril 2010)
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
9,00
10,00
en
e-0
0
jul-
00
en
e-0
1
jul-
01
en
e-0
2
jul-
02
en
e-0
3
jul-
03
en
e-0
4
jul-
04
en
e-0
5
jul-
05
en
e-0
6
jul-
06
en
e-0
7
jul-
07
en
e-0
8
jul-
08
en
e-0
9
jul-
09
en
e-1
0
Oficial No Oficial M2/RINFuente: BCV
7,09
4,30
8,67
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Still the BSF at the official rate remains highly overvalued, with the parallel market rate (7.1) close to equilibrium
Tasa de Cambio(Ene 2000 - Abr 2010)
4,30
7,09
7,63
6,88
8,41
0
1
2
3
4
5
6
7
8
9
ene-
00
may-0
0se
p-0
0en
e-0
1m
ay-0
1se
p-0
1
ene-
02
may-0
2se
p-0
2en
e-0
3
may-0
3se
p-0
3en
e-0
4m
ay-0
4se
p-0
4
ene-
05
may-0
5se
p-0
5en
e-0
6
may-0
6se
p-0
6en
e-0
7m
ay-0
7se
p-0
7
ene-
08
may-0
8se
p-0
8en
e-0
9
may-0
9se
p-0
9en
e-1
0
Oficial Mercado Paralelo PPP IPC (1990=100) M2/RIN PPP - IPM (1990=100)
Fuente: BCV, Cálculos Propios
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Still the BSF at the official rate remains highly overvalued, with the parallel market rate (7.1) close to equilibrium
Tasa de Cambio Real Enero 1990 - Abril 2010(IPC - Ene 1990 = Jul 1994 = May 1996 =100%)
56,4%
93,0%
30%
50%
70%
90%
110%
130%
150%
en
e-9
0
dic
-90
nov-9
1
oct-
92
sep
-93
ago-9
4
jul-
95
jun
-96
may-9
7
ab
r-98
mar-
99
feb
-00
en
e-0
1
dic
-01
nov-0
2
oct-
03
sep
-04
ago-0
5
jul-
06
jun
-07
may-0
8
ab
r-09
mar-
10
RER Oficial RER 100% RER Paralelo
RER = 100%
Fuente: BCV, Cálculos Propios
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Depreciation and acceleration of inflation occurred even though liquidity has grown at moderate levels, either in 2009 (22%) or in Jan-April 2010 (+2.0%)
Liquidez - M2(MMM VEF)
0
50
100
150
200
250
300
ene-
02
abr-
02
jul-
02
oct
-02
ene-
03
abr-
03
jul-
03
oct
-03
ene-
04
abr-
04
jul-
04
oct
-04
ene-
05
abr-
05
jul-
05
oct
-05
ene-
06
abr-
06
jul-
06
oct
-06
ene-
07
abr-
07
jul-
07
oct
-07
ene-
08
abr-
08
jul-
08
oct
-08
ene-
09
abr-
09
jul-
09
oct
-09
ene-
10
abr-
10
Monedas y Billetes Depositos Cuasidinero Liquidez
Tasas de Crecimiento M2:
2003: 58%2004: 48%2005: 52%2006: 70%2007: 29%2008: 25%2009: 22%2010: 2,0%
238,4
23,8
73,1
141,5
Fuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Inflation resume at an accelerated pace in April: 5,1% variation at consumer price index and 11,0% in food and beverages!
Indices de Precios AnualizadoAréa Metropolitana de Caracas
(Ene- 02 - Abr - 10)
29,08%
31,69%
32,74%
10%
20%
30%
40%
50%
60%
70%
80%
en
e-0
2
may-
sep
-02
en
e-0
3
may-
sep
-03
en
e-0
4
may-
sep
-04
en
e-0
5
may-
sep
-05
en
e-0
6
may-
sep
-06
en
e-0
7
may-
sep
-07
en
e-0
8
may-
sep
-08
en
e-0
9
may-
sep
-09
en
e-1
0
IPC IPM Nucleo Alimentos
Fuente: BCV
41,06%
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Price variations by sector display a large volatility (4% - 52%)
dic-07 dic-08 dic-09 ene-10 feb-10 mar-10 abr-10INDICE GENERAL 22,55% 31,86% 26,81% 26,81% 26,94% 28,06% 31,69%Alimentos y bebidas no alcohólicas 30,91% 46,67% 20,38% 19,80% 21,00% 25,72% 41,29%Bebidas alcohólicas y tabacos 78,13% 28,30% 47,56% 52,73% 57,89% 53,80% 51,26%Vestido y calzado 18,90% 18,73% 21,90% 22,39% 22,51% 22,15% 20,60%Alquiler de vivienda 5,64% 7,22% 16,17% 16,98% 16,74% 16,05% 16,74%Servicios de la vivienda excepto teléfono 1,90% 5,50% 3,85% 3,54% 4,37% 4,47% 4,26%Equipamiento del hogar 22,31% 34,62% 39,06% 38,11% 30,40% 39,01% 38,46%Salud 28,32% 36,95% 34,09% 31,80% 30,40% 27,52% 27,15%Transporte 17,77% 29,88% 30,62% 30,75% 31,39% 31,01% 30,64%Comunicaciones -5,70% 7,29% 9,65% 11,62% 10,84% 10,51% 6,99%Esparcimiento y cultura 16,82% 25,07% 26,90% 27,39% 29,15% 31,33% 32,35%Servicio de educación 7,25% 28,58% 29,22% 31,74% 31,22% 27,64% 25,88%Restaurantes y hoteles 42,76% 49,76% 33,54% 31,60% 32,24% 32,50% 33,80%Bienes y servicios diversos 25,02% 37,76% 50,84% 52,02% 52,61% 48,65% 42,60%
VARIACION ANUALIZADA
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
What had happened with CADIVI in 1Q 2010?
� Official figures have not been published yet� A press release was issued stating that over the first quarter 2010:
Vs. 1Q 2009� Total foreign exchange assigned at official rates fell 12%� Foreign exchange approved for imports grew 11%� Foreign exchange approved for travelling fell by 85%� Total amount approved to travel agencies to pay commitments in
foreign exchange grew 39%� Assignment of foreign exchange for remittances fell 39%
� There is a portfolio re-composition/rebalancing within CADIVI � Increased assignments for imports even at a scenario with a large GDP fall,
signals the intention of the government to avoid a large fall in consumption per capita
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
What else have happened in 1Q 2010? A summary
� Even though the official figures have not been published yet, there are talks of yet
another large fall in GDP volume (6%-8%)
� It is hard to measure the specific impact of the energy crises, but the fact is that it
has been (and will be) a strong (negative) influence on GDP in the years to come
� Consumption may have fall a little less (3%-5%) due to increased imports
� Inflation sky-rocketed in April, with some delay as related to the devaluation
implemented in January (controlled prices were allowed to “adjust” in April)
� Government spending (measured by liquidity) has kept the low pace characteristic
of first quarters: +2.0% (in nominal terms!)
� Large depreciation of the BSF in the parallel exchange rate market (32%) has
occurred in spite of no-liquidity growth (lower demand for BSF?)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Macroeconomic results by year-end 20091
Exchange rate arrangements, risks and uncertainties3
What is likely to happen?4
What has happened so far in the first quarter?2
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Exchange rate arrangement: What is going on? The specifics
� On May 11 new modifications to the exchange rate regime were introduced
� According to the text of the law the buying and selling of foreign currency, either in cash or through financial instruments, is going to be an exclusive responsibility of the Central Bank
� Large penalties were incorporated such as:
� Buying/selling between US$10,000 and US$20,000 in the course of a year without the approval of the Central Bank will be penalized with a fine equivalent to twice the amount of the transactions – plus the amount of US$ bought/sold has to be rendered at the Central Bank
� Buying/selling more than US$20,000 in the course of a year without the approval of the Central Bank will be penalized same as previous one + 2-6 years in prison
With Venezuelan oil price averaging 72$ per barrel… What is going on?
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
3,40
0,6
2,82
86,5
89.128
20082006 2007 2009
Oil Exports (US$ million, BCV) 57.972 62.640 54.201
Average Oil Price Venezuela
(US$ per barrel, MENPET)
56,4 64,7 57,0
Implicit Volume Exports (MBD) 2,82 2,65 2,60
Domestic Consumption (MBD) 0,6 0,6 0,6
Total Oil Production (MBD) 3,42 3,25 3,20 ?
Some possible explanations: “It was all a big lie” (Bernie Madoff)
According to international sources (OPEP) the Venezuelan total production volume has been around 2.2 – 2.6 MBD
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
22.826
89.128
66.302
86,5
2,1
(0,6)
2,7
0,3
2,4
20082006 2007 2008
Total Production (OPEP - MBD) 2,7 2,4 2,3
Oil-derived Products not reported by OPEP volumes
0,3 0,3 0,3
Total Production: OPEP + Derived 3,0 2,7 2,6
Domestic Consumption (MBD) (0,6) (0,6) (0,6)
Available to Export (MBD) 2,4 2,1 2,0
Average Oil Price Venezuela
(US$ per barrel, MENPET)
56,4 64,7 57,0
Maximum Oil Exports (MM US$) 49.406 49.593 41.610
Oil Exports (US$ MM, BCV) 57.972 62.640 54.201
Over-estimation of oil exports (MM US$)
8.566 13.047 12.591
The reserve account: How over-estimated are the Venezuelan oil exports?
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
It is not a good time either to issue debt in foreign currency (the Venezuelan premium is at 9.87%, though this has not deter them in the past!)
Desempeño de la Prima por Riesgo de Latinoamerica
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
d-08
e-09
f-09
m-0
9
a-09
m-0
9
j-09
j-09
a-09
s-09
o-09
n-09
d-09
e-10
f-10
m-1
0
a-10
Puntos Básicos
Argentina Brasil Colombia Venezuela Chile Latam Mexico
Latin America
987 points
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Insurance against a Venezuelan default (Credit default swaps, 5 years) is the most expensive in Latin America (9.83%)
983 points
CDS LATAM (5 Years)
0
500
1000
1500
2000
2500
3000
3500
4000
4500Jan
-09
Feb-0
9
Mar-
09
Apr-
09
May-0
9
Ju
n-0
9
Ju
l-09
Au
g-0
9
Sep-0
9
Oct-
09
Nov-0
9
Dec-0
9
Jan
-10
Feb-1
0
Mar-
10
Apr-
10
May-1
0
Pu
nto
s B
ásic
os
Venezuela Chile Brasil Colombia Argentina
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
It seems early to take a position on how it is going to work: In a typical Venezuelan fashion, it can be anything! Option A
The socialist-police way:
� The Central Bank becomes the CADIVI of the parallel market
� A third rate is created within the exchange control system, with restricted access
� A fourth exchange rate, in a parallel (black-illegal) market will arise, with a large risk-premium over the previous one, proportional to the penalties
� An “exchange police” will prosecute and arrest people trading in the black-market, in order to signal the “seriousness of the threat”, but in the medium term the market will stabilize and survive (information era)
Consequences/Risks:
� BSF in the black-market will suffer a large depreciation to compensate for risk
� Illegal-black market would be very tight due to US and global practices against money-laundering
� Prices may be set at black-market rate, fueling inflation
� One control will lead to another…
Uncertainty:
� How much access to foreign currency at the “permuta” BCV rate? Criteria?
� What would be that rate? Black-market?
� People not allowed into BCV-permuta: Lose value of BSF assets or run the risk of going into prison? (Corralito)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
It seems early to take a position on how it is going to work: In a typical Venezuelan fashion, it can be anything! Option B
The practical way:
� The Central Bank administers a third rate (2.60 and 4.30 remain), that will be flexible, available to anyone who wishes to buy-sell foreign currency
� It implies rising the exchange-control on that rate, and the Central Bank will have to defend the rate (using international reserves) and assume any exchange rate movement (depreciation/appreciation) with no chance of blaming others
� Market will gain in “transparency”and may lose operational risk premium in the short-term
Consequences/Risks:
� BSF may appreciate in the short-term
� This is equivalent to rising the exchange-rate control, discouraging the demand of US$ through threats (there always exist the possibility of the government inquiring why are you buying “so much”foreign currency and where is it going?)
Uncertainty:
� For how long could this work?
� Any appreciation is unlikely to be sustained because the arrangement is not changing drivers of supply-and-demand
� How much reserves is the Central Bank willing to burn to defend this rate?
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
A few things that appear to be clear…
� Any arrangement considered will not change the drivers of demand (negative interest rates, threats and uncertainty as related to private property) and supply (the suppliers of foreign currency are either the oil sector of further debt)
� The proposed reform implies more control, and that is highly unlikely to produce an appreciation of the exchange rate…
� In any case, any sudden appreciation of the BSF due to increased “openness” (seems unlikely) will be short-lived, and the government will have in the short to medium-term to move back to changing supply-and-demand drivers (seems too late for Chávez to reinvent himself) or move to the socialist-police control of the market
� It is unlikely that they move the permuta-market to the Central Bank with the intention of increasing the supply of foreign currency, but you never know…
� The Central Bank does not seem to have much fuel to support demand of foreign currency and avoid losing face because of depreciation… And it does not seem too willing to accept depreciation of a BCV-administered exchange rate…
� Public expenditure in an electoral year will have an effect on liquidity… And then?
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Macroeconomic results by year-end 20091
Exchange rate arrangements, risks and uncertainties3
What is likely to happen?4
What has happened so far in the first quarter?2
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
The analyst forecast implies an average basket for Venezuelan oil of US$73-77 per barrel for the rest of 2010…
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Even in the case of a decrease in oil volumes, the price-effect (72-74 against 57) will prevail, producing (theoretically) US$70,000 MM in exports (+20%)
Producto Interno Bruto(Var % Anual)
0,3%
-3,8%
2,3%
-0,9%
-14,2%
-1,9%
13,7%
-1,5% -2,0%
-4,2%
2,5%
-7,2%-6,9%
4,2% 4,0%
-6,0%-7,4%
16,1%
12,2%10,9%
9,6%
5,1%
-2,0%
-0,1%
-20,00%
-15,00%
-10,00%
-5,00%
0,00%
5,00%
10,00%
15,00%
20,00%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PIB Petrolero PIB No Petrolero PIB TotalFuente: BCV
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Forecast: The Venezuelan Consensus
Compañía 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011AGV -3,80 0,50 - - - - 8,00 8,50 0,00 -1,10 42,40 28,20 15,50 15,00Banco Federal -1,00 0,50 - - - - 12,00 13,00 - - 38,00 42,00 17,00 20,00Banco Mercantil -2,40 0,80 -0,80 2,60 -12,00 -3,90 9,20 9,90 -0,50 -1,70 25,10 24,20 14,80 15,70Banesco Banco Universal 0,90 1,00 1,60 2,40 1,80 3,00 8,60 - - - 38,60 25,80 15,20 15,00BBVA Banco Provincial -2,50 0,60 0,10 1,60 -1,30 1,00 9,50 10,20 -4,10 -5,50 32,80 28,10 13,50 13,50Ecoanalítica -1,30 2,50 -2,60 2,80 0,00 4,20 9,00 8,90 - - 33,50 31,70 14,00 15,00Santander Investment 3,90 0,40 6,60 0,50 1,30 0,40 8,40 8,20 - - 25,10 21,60 - -BofA Merrill Lynch -1,00 2,40 -0,60 4,40 -0,30 0,60 9,40 9,50 -0,30 -2,20 32,90 23,00 - -Citigroup Global Markets Inc. -1,70 0,50 1,70 -1,10 -7,80 -1,50 5,70 5,80 0,40 0,10 36,00 32,00 16,20 20,00Credit Suisse -2,00 0,00 - - -6,80 -0,80 7,50 7,50 - - 31,20 38,70 - -Deutsche Bank 0,20 1,80 - - - - 8,00 8,00 -2,50 -2,30 33,00 29,00 - -Goldman Sachs 0,70 2,40 - - - - - - -3,80 -4,00 29,80 24,00 11,00 10,00HSBC -2,30 1,90 -3,80 1,80 -10,20 4,80 8,90 8,60 - - 37,10 30,00 - -JPMorgan -1,50 2,50 1,00 3,60 - - - - -1,50 -3,50 35,00 40,00 15,00 15,00Morgan Stanley 0,30 3,50 - - - - - - -3,20 -2,00 45,00 38,50 20,00 20,00Multus Consulting -3,70 - -4,30 - -13,00 - 8,20 - - - 40,30 - 14,00 -RBC Capital Markets 1,50 3,00 - - - - - - -4,20 -3,50 22,00 20,00 16,00 20,00RG BS&E -4,20 - - - - - - - - - 33,00 - - -Scotiabank Group -0,50 - - - - - - - - - 30,00 - - -UBS -3,00 -5,00 - - - - 8,00 - -4,60 -1,00 35,00 50,00 - -
Media -1,17 1,14 -0,11 2,07 -4,83 0,87 8,60 8,92 -2,21 -2,43 33,79 30,99 15,18 16,29
Inflación (%) Tasas de Interés (%)Var% PIBVar% Consumo
PrivadoVar% Formaciòn
Bruta de Capital Fijo%Desempleo
Balance del Gobierno Central (%PIB)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Forecast: The Venezuelan Consensus
Compañía 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011AGV 4,3 4,3 25,5 20,5 36,10 29,80 73,50 73,10 37,40 43,30 28,50 23,30Banco Federal 4,3 5,2 - - - - - - - - 36,90 37,50Banco Mercantil 4,3 4,3 26,2 31 36,40 39,80 70,50 73,70 34,10 33,90 35,80 35,10Banesco Banco Universal 4,30 - 20,40 - 32,90 - 75,20 - 42,30 - 36,20 -BBVA Banco Provincial 4,3 4,3 14,9 20,2 24,10 29,20 66,80 73,70 42,70 44,50 21,60 21,20Ecoanalítica 4,3 4,3 21,5 13,4 25,30 19,40 64,30 63,00 39,00 43,60 33,30 27,30Santander Investment 4,3 4,3 8,7 10,8 15,40 19,10 64,10 67,00 48,70 47,90 - -BofA Merrill Lynch 4,3 4,3 19,1 18,5 - - - - - - 26,90 28,30
Citigroup Global Markets Inc. 4,3 4,3 17,2 16,5 27,70 27,10 68,30 68,20 40,60 41,10 35,40 35,00
Credit Suisse 4,3 4,3 22,6 20,5 - - - - - - 30,00 25,00Deutsche Bank 4,3 5 6,2 7,3 - - - - - - 35,00 35,00Goldman Sachs 4,3 5 9,6 6,3 20,20 16,70 65,80 67,30 45,70 50,60 29,00 27,50HSBC 4,3 4,3 24,1 28,7 28,90 34,30 65,40 73,20 36,50 38,90 35,40 40,00JPMorgan 4,3 5,5 24,7 25,1 34,40 36,30 77,50 84,90 43,10 48,60 - -Morgan Stanley 4,3 4,3 33,5 29,1 40,70 40,20 - - - - 28,00 28,00Multus Consulting 4,3 - 22,9 - 29,90 - 64,00 - 34,10 - 32,00 -RBC Capital Markets 4,3 4,3 14,4 20,5 - - - - - - - -RG BS&E 4,3 - 10,5 - 15,90 - 56,20 - 40,40 - 37,50 -Scotiabank Group - - - - - - - - - - - -UBS - - 14,2 - - - - - - - - -
Media 4,30 4,53 18,68 19,17 28,30 29,19 67,63 71,57 40,38 43,60 32,10 30,27
Reservas Internacionales (USD MMM)
Importaciones (USD MMM)
Tipo de Cambio (VEF/USD)
Cuenta Corriente (USD MMM)
Balanza Comercial (USD MMM)
Exportaciones (USD MMM)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Forecast Concern: Why are we having so much trouble with oil at 72?
� Venezuela is experiencing a lot more trouble than what US$72 per barrel would imply
� With the information available (not considering the Bernie Madoff effect), GDP forecast would be negative 2%-3%, with consumption falling a bit less than that (without investment there is no room for long-term growth)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
1996 1998 2000 2002 2003 2004 2005 2006 2007 2008
Voice and accountability 85 91 114 128 145 145 144 148 145 146
Political Stability; no violence 142 126 131 164 175 183 180 184 184 184
Government Effectiveness 156 125 147 174 174 174 161 170 177 176
Regulatory Quality 113 114 131 135 168 168 183 188 197 198
Rule of law 119 135 147 170 184 184 191 199 204 204
Control of corruption 113 154 130 165 178 178 173 199 187 189
Number of countries in the study 194 199 200 201 201 208 208 209 209 209
Ranking (1 is the best)
Country risk (mín = 0; máx =100) 2009 Economist Intelligence Unit 76 158
Competitivess 2009-2010 World Economic Forum 113 133
Hiring workers 2010 World Bank 181 183
Investment protection 2010 World Bank 178 209
Competitiveness 2009 IMD 57 57
Political stability 2009-2010 Economist Intelligence Unit 136 165
Economic freedom 2009 Heritage Foundation / Wall St. Journal 174 179
# of countries in
the studyPeriod Insttution Ranking
What have the government’s policies done to put the country on a sustainable path towards growth, quality-employment and stability?
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Country 2001 2002 2003 2004 2005 2006 2007 2008
Argentina 2.005 2.776 878 3.449 3.954 3.099 4.969 7.502
Brazil 24.715 14.108 9.894 8.339 12.550 -9.380 27.518 24.601
Chile 2.590 2.207 2.701 5.610 4.801 4.556 9.568 9.896
Colombia 2.526 1.277 783 2.873 5.590 5.558 8.136 8.346
Costa Rica 451 625 548 733 904 1.371 1.634 2.015
El Salvador 289 496 123 366 398 268 1.408 719
Mexico 23.045 22.158 15.184 19.249 15.503 13.670 19.272 21.795
Panama 467 99 818 1.019 918 2.498 1.907 2.402
Peru 1.070 2.156 1.275 1.599 2.579 3.467 5.425 4.079
Dominican Republic 1.079 917 613 909 1.123 1.528 1.579 2.885
Trinidad and Tobago 685 684 583 973 599 513 830 1.638
Uruguay 291 180 401 315 811 1.495 1.139 2.049
Venezuela 3.479 -244 722 864 1.422 -2.666 978 -923
Latin America 66.122 50.504 37.806 49.725 54.741 30.874 88.960 92.849
Venezuela* 3.901 2.980 2.230 2.934 3.230 1.821 5.248 5.478
Source: UN Economic Commission for Latin America and the Caribbean (ECLAC)
The results: Net foreign investment has been significantly lower than the size of our economy would imply (even more: is negative!)
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
Forecast Concern: Why are we having so much trouble with oil at 72?
� Venezuela is experiencing a lot more trouble than what US$72 per barrel would imply
� With the information available (not considering the Bernie Madoff effect), GDP forecast would be negative 2%-3%, with consumption falling a bit less than that (without investment there is no room for long-term growth)
� Liquidity will expand 30%-35% (2% up to April), fueling an inflation rate of 35%-40%
� Salaries (10%+15%) will lag inflation, affecting purchasing power of Venezuelan workers (social conflict?)
� Most forecasts rely on the assumption that common-sense prevails (not for long!) and the BCV-permuta market remains open to anyone who whishes to buy or sale
� Forecast also rely on the supply of energy: Any large energy break-down may have effects that is hard to quantify / impossible to forecast
� As the government steeps-up spending, the restriction will move from demand to supply: The production response will depend on the status of labor conflicts (pending a possible reduction of labor hours per week) and foreign currency available to import
� There seems to be a lot more downside than upside in this forecast
Venezuela Macroeconomic Outlook, May 2010 - © Miguel Ángel Santos
GRACIAS!
www.miguelangelsantos.blogspot.com
Twitter: @miguelsantos12
miguel.santos@iesa.edu.ve
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