Da BofA
67% of respondents would oppose a default
Results from the Datanalisis November Omnibus survey show that Venezuelans are strongly opposed to defaulting on the country's external debt. 67.2% of Venezuelans believe that the country should continue paying its external debt, as opposed to 14.3% that believe it should stop paying. Support for paying the debt is higher among pro-government voters (70.3%) than in the population as a whole. 55.6% of Venezuelans (62.3% of government supporters) believe that paying external debt is ethically justified, as opposed to 27.3% who believe it is not. When asked whether the government had to choose between paying the debt and buying food or if it could take decisions that could enable it to pay for both, 68.4% of respondents (74.1% of government supporters) stated that it could take decisions that would allow it to pay for both, as opposed to 14.2% that said it had to choose between one or the other. Only 26.7% of respondents say that they would view favorably a leader that proposed a default as part of a strategy to improve the economy. The survey, which was conducted between November 4 and 20, covered 1,294 households and had a margin of error of 2.7%
Greater support for adjustments than for default
The 14.6% of voters that say they would support a default is lower than the 20.1% that would support increasing the process of regulated products, the 26.6% that would support increasing gasoline prices, and the 27.7% that would support lifting exchange controls, though higher than the 8.8% that would support an outright devaluation. This suggests that it may be easier for the government to drum up political support for economic adjustments than for a default on the country's external debt. Importantly, support for adjustment measures is higher among government backers: 26.6% of them would support raising the price of regulated products, 41.1% would support a gasoline price hike, 31.0% would support lifting exchange controls, and 17.1% would support a devaluation.
Government seeking to shore support unlikely to default
As oil prices decline, investors should ask what their relative standing is in the order of priorities of authorities. If there is a key defining characteristic of economic polices during the Maduro administration, it has been the avoidance of decisions with short-term political cost even when the government is aware of its long-term benefits.We argued that Venezuela had at its disposal a number of policy measures that it could take and which would generate the needed adjustment at a limited political cost. The fact that these measures are less unpopular than default, combined with the limited cash-flow gains from default due to the threat of attachment of assets and oil receivables, supports our contention that authorities will likely choose to make key policy adjustments rather than default on the country's external debt.
Opposition leads strongly in parliamentary elections
The survey also shows that pro-opposition candidates would garner a large majority of the popular vote in the upcoming 2015 parliamentary elections. 38.9% of voters would support opposition candidates as opposed to 21.0% that would vote for pro-government candidates and 12.9% that would support independent candidates. The presidential approval rating, usually a good predictor of the share of the vote obtained by the pro-government party, fell 5.7 ppt to 24.5%, and 71.1% of respondents believe that the president should leave office before the end of his term. This suggests that unless the government is able to generate a significant improvement in economic conditions during the coming year, it could lose its parliamentary majority and face a recall referendum in early 2016.
Strong incentives for adjustment remain in place
We continue to believe that the evolution of public opinion creates strong incentives for the government to adopt policy adjustments over the course of the coming year. We argue that given the current level of distortions, these adjustments are unlikely to have the standard contractionary effects but will rather likely lead to a rapid economic recovery. It is by now clear that the government's economic strategy has not allowed it to maintain a sufficiently high level of approval so as to survive an electoral challenge next year. Therefore, the government seems to have little to gain - and a lot to lose - electorally from maintaining the current policy status quo. Nevertheless, current signals from policymakers - confirmed by president Maduro's statement in a TV interview yesterday that he would not immediately raise gasoline prices - suggests that the authorities have yet to take the decision to undertake the full-fledged price adjustment. We thus maintain our call that for a large FX and relative price adjustment to occur late in 1H15, with macroeconomic instability continuing until then.
da new entry nonché piccolo investitore vorrei chiedervi allo stato attuale che ne pensate della 2015 7% in scadenza a marzo, ho aspettato finora pensando non si potesse arrivare a un default così presto, però i prezzi dell'ultimo mese non mi stanno dando ragione, ok gli speculatori ma il dilemma è vendere ora scapitando un 20% o aspettare marzo e beccarsi un cut magari del 50% Voi che ne pensate? Grazie a chi vorrà rispondermi
Ma Citgo quanto pesa sul giro d'affari di PDVSA? Mi rende perplessa questa cosa
