Recently published research from Business Monitor International, "Venezuela Power Report Q4 2012", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 02/05/2013 -- Imbalances between supply and demand in Venezuela's National Electricity System (SEN) continue to plague the country's electricity market, with electricity shortages and power rationing also hindering its economic performance. Yet, in spite of repeated promises by the government, delays and problems with funding continue to represent an obstacle to capacity development and improvements to the transmission and distribution (T&D) system, effectively capping short-term potential. While government-financed investments in the run-up to the October 2012 elections could provide some moderate respite, political and economic uncertainty remains a highly pertinent risk.
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Venezuela continues to rely largely on a combination of imported energy and programmed power cuts to cope with demand as the system displays its inadequacy. Whilst outgoing Electricity Minister Ali Rodriguez Araque claimed that between 1999 and 2011 the government had invested US$7.65bn to develop the national electricity system and that this year 4,000MW will be added to the national electricity system, outages in the country remain commonplace. Delays in project implementation are also widespread, losses during power transmission are a concern, and theft is a considerable issue, with 30% of electricity illegally stolen, according to government calculations.
A bleak short-term picture is further obfuscated by Venezuela's poor business environment. Low levels of transparency, and liberalisation, coupled with high corruption and a volatile political picture hinder investment, making Venezuela the undisputed underperformer of BMI's new Power Risk/Reward Ratings. Although government-financed investments in the run-up to the October 2012 elections could provide some respite, we highlight that politically motivated interventions are likely to have a populist flavour, thus lacking coherence and long-term vision. From this perspective, government claims that improvements to the transmission grid would be in place by July 2012 have borne little fruit. With regard to the medium and long term, we note that upside and downside risks are both at play, influenced by a number of interrelated variables. Most notably:
- Following a very strong Q212 real GDP growth reading of 5.4% year-on-year (y-o-y) - bringing average real GDP growth in H112 to 5.6% y-o-y - our Country Risk analysts have revised up BMI's real GDP growth forecast from 3.5% to 4.7% for 2012. A large part of the growth was driven by pre-electoral spending. Yet despite our improved growth outlook, high inflation, a lack of investment on the productive sectors of the economy, political risks, and an upcoming local currency devaluation are likely to lead to slower growth after the elections.
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