Industry Trend Analysis - Brain Drain Will Weigh On Long-Term Growth - APR 2018

BMI View: Continued economic turmoil will negatively impact the Venezuelan oil sector through 2022. A lack of skilled leadership and available resources will undermine operations across the supply chain, deteriorating the country's production and trade balances over the next five years.

The tightening grip of the ruling Partido Socialista Unido de Venezuela (PSUV) will exacerbate troubles plaguing the country's vital oil sector. The opposition Mesa de la Unidad Democratica (MUD) coalition's decision to not participate in the general elections on April 22 will enable the PSUV to win control of every significant elected office in the country, ushering the political crisis into a new, more volatile phase ( see 'MUD's Election Boycott Clears Way For PSUV', February 22).

Given the PSUV's distaste for policy reform, we maintain that Venezuela will remain in a state of economic crisis in 2018. Declining crude exports remain the country's only source of revenue due to a lack of manufacturing activity outside the sector combined with a steep deterioration of tax receipts. While oil prices have appreciated in recent months, the bull-run has begun to lose steam, having struggled to maintain a break above the USD70.0/bbl mark.

Prices Correcting and Consolidating
Front Month Brent USD/bbl
Source: Bloomberg

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