carib
rerum cognoscere causas
Nomura:
Too little Too late. The challenge for President Maduro is surviving the aftermath.
There is so much skepticism that it’s almost annoying to have to review these measures in detail. The damage is so extensive that any measures, even if orthodox like an FX devaluation and tax hikes, are only piecemeal. The economy needs a complete transformation and an overhaul of regulation/interventionism that would allow for a reboot to domestic production sufficient to resolve the scarcity shock. It’s also clear that Chavismo remains reluctant to alter the kleptocratic public consumption model with the collapse in oil and non-oil production unable to finance the still bloated public sector. There are still only broad initiatives with no details on how the new Petro/USD linked currency will function or how officials will unwind gasoline subsidies. The implementation risk is high. It’s clear that President Maduro is becoming increasingly desperate on cashflow constraints with higher social and political risks on the maxi FX devaluation. Perhaps more important than the announcements is whether President Maduro can survive the aftermath. The inactive bond curve has been unresponsive to the announcements but we reaffirm preference of the discounted PdVSA over the sovereign curve and a neutral weighting on the increasing optionality of regime change.
Too little Too late. The challenge for President Maduro is surviving the aftermath.
There is so much skepticism that it’s almost annoying to have to review these measures in detail. The damage is so extensive that any measures, even if orthodox like an FX devaluation and tax hikes, are only piecemeal. The economy needs a complete transformation and an overhaul of regulation/interventionism that would allow for a reboot to domestic production sufficient to resolve the scarcity shock. It’s also clear that Chavismo remains reluctant to alter the kleptocratic public consumption model with the collapse in oil and non-oil production unable to finance the still bloated public sector. There are still only broad initiatives with no details on how the new Petro/USD linked currency will function or how officials will unwind gasoline subsidies. The implementation risk is high. It’s clear that President Maduro is becoming increasingly desperate on cashflow constraints with higher social and political risks on the maxi FX devaluation. Perhaps more important than the announcements is whether President Maduro can survive the aftermath. The inactive bond curve has been unresponsive to the announcements but we reaffirm preference of the discounted PdVSA over the sovereign curve and a neutral weighting on the increasing optionality of regime change.
