VENEZUELA

Lack of Production
Economic Accumulated Deficit
In different sectors

December 2018
Economic Numbers
The crisis in Venezuela is the greater than the Region has had and one of the
most significative in the world.
GDP l per Minimun Extreme Un
GDP Oil Export GDP YoY Inflation
cápita Salary Poverty employment
Year USD Millions en USD USD Billions % % USD % %

2010 294,282.00 10,316.00 45.10 -1.50 28.20 130.89 8.64 8.51

2011 334,069.00 11,541.00 68.80 4.20 26.10 163.66 7.01 8.20

2012 331,457.00 11,287.00 67.70 5.60 21.10 117.47 9.80 7.82

2013 234,401.00 7,869.00 66.90 1.30 43.50 46.45 11.50 7.47

2014 212,347.00 7,029.00 59.70 -3.90 57.30 28.22 23.60 6.70

2015 242,596.00 7,922.00 29.20 -6.20 111.80 11.58 49.90 7.40

2016 236,116.00 7,609.00 21.80 -16.50 254.40 7.68 51.51 20.64

2017 210,085.00 6,684.00 9.00 -14.00 2616.00 1.83 61.20 27.10

2018
(April) 100,845.00 3,168.00 - -15.00 13864.00 - - 33.35
Source:
Central Bank of Venezuela
Economic Survey of Latin America and the Caribbean ▪ 2018
Economic Numbers
Loss of GDP

The loss of GDP of Venezuela accumulate numbers over 65% on

the last 8 years.
Last 4 Last 8
Years Years
2010 2013 2017 2018 (Apr) Reduction Reduction
USD
GDP
Millions
294,282.00 234,401.00 210,085.00 100,845.00 -56.98% -65.73%

GDP
nominal USD
per cápita
10,316.00 7,869.00 6,684.00 3,168.00 -59.74% -69.29%
Minimun
USD
Salary
130.89 46.45 1.83 8.90 -80.84% -93.20%
Economic Numbers
Unemployment and Salaries

In the last 3 years unemployment has increased by 400%, and the

basic salary of people has been reduced by more than 95%.

Unemployment Rate Basic Salary USD

250
30
26.4 205.71
25 200

20 20.64 150 162.06 163.66

18.19 150
15 15.99 137.44 117.47
100 107.86
14.01 12.24
10
7.4 46.45
8.2 6.7 50
5
7.681.83 9.00
0 0 11.58

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2010
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

2011
2012
2013
2014
2015
2016
2017
Summary
Accumulated fall from 2014 to 2018 of industrial sectors

• The sectors of greatest decrease were

construction, commerce, financial
institutions and insurance and transport,
which presented interannual variations of
47.2%, 36.9%, 32.8% and 25.8%,
respectively. The only sectors that reflect
decrease of less than 10% are electricity
and water, mining and government services
with 7.2%, 3% and 2.1%, respectively.

• In general, the non-oil sector of the

economy contracted 18.6% and
accumulates a decrease of 25.6% in the
period 2014-2018, with which the creation
of jobs in the formal sector has suffered a
major blow, because if companies are
producing less, they do not need to hire
new workers.
Food Sector
Food Production Industry

In basic food production, its different products have also been affected. Many of them
are part of the basic consumption of families, generating conflicts, scarcity and hunger
in the population. Food Consumption
(Production) Last 4 Years Last 8 Years
Kilograms per Capita 2010 2013 2017 Reduction Reduction
Powder Milk 6.91 5.58 4.94 -11.47% -28.51%
Liquid Milk 14.11 14.4 3.84 -73.33% -72.79%
Cornmeal 27.14 21.68 18.63 -14.07% -31.36%
Wheat flour 17.31 14.42 7.84 -45.63% -54.71%
Spaghetti Pasta 17.05 13.82 8.11 -41.32% -52.43%
Rice 20.47 19.5 14.92 -23.49% -27.11%
Salt 2.32 2.01 0.55 -72.64% -76.29%
Sugar 14.33 13.14 7.06 -46.27% -50.73%
Coffee 3.51 3.54 1.86 -47.46% -47.01%
Canned sardine 2.79 2.62 1.89 -27.86% -32.26%
Chicken Meat 28.5 27.33 15.72 -42.48% -44.84%
Meat 17.68 16.68 13.57 -18.65% -23.25%
Fish 10.88 10.36 9.45 -8.78% -13.14%
Source: National Surveys on Consumption Monitoring (ENSC) of the National Institute of Statistics, 2015
Surveys on Living Conditions (ENCOVI), Andrés Bello Catholic University, the Central University of Venezuela and the Simón Bolívar University, 2017
National Statistics Institute - Institute of Economic and Social Research Universidad Catolica Andres Bello
 2016
2012
2008
2004
2000
0
20000000
Food Sector

24,252,916
Venezuela Population Grow

28,893,588
32,221,815
While the Populations grow…

40000000
Food Production Industry

1997
2000
2003
2006
decreases

2009**
Milk Production

2012**
food production

2015**
1997
1997 1999 1997
1999 2001 1999
2001 2003 2001
2003 2005 2003
2005 2005
2007
2007 2007
2009**
2009** 2009**
Sugar Cane

2011**
2011** 2011**
2013** 2013**
2013**
-24%
Tuna Production -62%

2015** 2015**
2015**
Sorghum Production -84%

1997 1997
1997 1999 1999
1999 2001 2001
2001 2003 2003
2003 2005 2005
2005
2007 2007
2007
2009** 2009**
200…
2011** 2011**
Pork Production

201…
Meat Production

2013** 2013**
201…
2015** 2015**
201…
Caraota Production -46%

-11%
Transport Sector
Vehicles and auto motor Industry

The crisis in the auto motor industry is visualized with a fall of production from
more than 400,000 vehicles yearly to less than 3,000 in 2016 and it continue
reducing.
Local Production - Number of Vehicles

Last 4 Last 8
2017 Years Years
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (Apr) Reduction Reduction

Source: Economic Survey of Latin America and the Caribbean ▪ 2018

343,351 491,899 271,622 136,517 125,202 120,691 130,553 98,878 19,258 14,967 2,644 550 -97.33% -97.89%

Assemblers General Motors and Ford closed their plants in Valencia and sent
2,600 workers on vacation. The Fiat reduced its production.
Health Sector
Pharmaceutical Industry

Venezuela has a lot of Laboratories that produced medicines.

All of them has been affected with the economical crisis, so they have been
reduced its production over 40% in comparison with the previous years, but
more than 65% of their production capacity.

Medicine Local Production

Annual Production
Capacity 2014 Production 2018 Production Last 4 Years
Medicine units Medicine units Medicine units Reduction

70,000,000 40,000,000 24,000,000 -40.00%

Source:
Pharmaceutical Federation of Venezuela (Fefarven)
Chamber of the Pharmaceutical Industry, 2018
Financial Sector 350,000,000
300,000,000
Banesco
stock-in-trade
250,000,000
The facts are: 200,000,000
Official
• Loss of local money value 150,000,000
100,000,000
Exchange Rate

• Loss of the population's ability for saving

(Bs/USD)
50,000,000
BlackMarket
• Annually Saving Rate of 10% vs Inflation Rate of more than 100,000% -
Rate (Bs/USD)

• Lack of liquidity and means of payment

• Increase and insolvency of the Banking Debt
• Lack of creditworthiness
• On September 27, 2018 Banesco increased its capital to Bs.S 490,412,500 ... the equivalent of
less than 1 million dollars.

As result, public and commercial banks have lost their capacity to support industrial sectors
and trade to strengthen the economy.
Bolivars
Banesco stock-in-trade Bolivars Sovereign
Dec 31,2010 Dec 31,2012 Dec 31,2015 Dec 22,2017 Jul,2018 Sep27,2018
Bolivars 1,250,000,000 1,250,000,000 1,250,000,000 81,250,000,000 2,491,250,000,000 490,412,500
USD (Official rate) 290,697,674 208,333,333 25,000,000 24,203,158 8,304,167 3,269,417

Official Exchange Rate

(Bs/USD) 4.30 6.00 50.00 3,357.00 300,000.00 150.00
Source: Banesco. It is the largest
USD (Blackmarket rate) 133,689,840 71,715,433 1,500,006 723,713 1,987,143 817,354
private bank in Venezuela
BlackMarket Rate (Bs/USD) 9.35 17.43 833.33 112,268.29 1,253,684.21 600.00
1 Bolivars Sovereign = 100,000 Bolivars
Construction Sector
Cement Industry

The Government nationalized the cement production industry, basic raw

material for construction. During the last years the production has fallen
dramatically and the Government has seen the need to import cement.
Last 8
Annual Production Years
of tons 2,007 2,015 Reduction
Cement for
Construction 10,200,000 4,182,000 -59.00%
Source:
An investigation carried out by Transparencia Venezuela on State-Owned Enterprises, october 2017
Construcion Chamber of Venezuela, 2018
Construction Sector
Iron an Steel Industry
Sidor as the main Iron and Steel Industry Complex has been reduce its production
affecting the construction sector with the shortage of the main construction materials.
Last 4 Last 8
Iron Industry Tons of Productions Years Years
Capacity 2,008 2,010 2,011 2,014 2,016 Reduction Reduction

Aluminum Alcasa 170,000 120,000 100,000 28,798 15,000 -85.00% -87.50%

Aluminum
Venalum 247,826 127,367 109,536 171,000 34.26% -31.00%
Aluminum
Bauxilum 1,950,000 1,600,000 212,000 -86.75% -89.13%
Iron 25,000,000 10,700,000 11,000,000 2.80%
Steel 3,800,000 1,537,313 2,400,000 1,030,000 310,000 -57.08% -72.37%
Steel rods 3.000 Tons 29Tons
Oil pipes 65 Tons 0 Tons
Employees 5000 19,029
Profit Bs 1.584 Millions Bs. -9.260 Millions

The new administration of the production companies of the steel industry created a
significant reduction in production with an increase in production costs and a loss in
results. Source:
An investigation carried out by Transparencia Venezuela on State-Owned Enterprises, october 2017
Construcion Chamber of Venezuela, 2018
Construction Sector
At the end of the first half of 2018
• The construction in Venezuela has a work stoppage of 95%.
• 320 unfinished projects, with an investment of around US$ 44 billions dollars.
USD
As example: ODEBRECHT PROJECTS STOPPED Millions
Only the Odebrecht Projects Third bridge over the Orinoco River (Mercosur Bridge) 2,800
accumulated an investment of Line 5 of the Caracas Metro 3,992

more than USD 29 Billions, with Second bridge over Lake Maracaibo (Cacique Nigale) 3,400
Manuel Piar Hydroelectric Plant (Tocoma) 5,996
an average disbursement of
Remodeling of Maiquetía Airport 3,931
60%, about USD 18 Billions Cabletren Bolivariano de Petare 440
The expert say Government Train Caracas-Guarenas-Guatire 3,931
need USD 5 Billions more (over Line 2 of Los Teques Metro 3,600
Metrocable La Dolorita 300
the Investment) to finish them.
Socialist integral agrarian project José Inácio de Abreu 640
The oncological and toxicological hospital of Barinas
Source: TOTAL INVESTMENT 29,030
An investigation carried out by Transparencia Venezuela on State-Owned Enterprises, october 2017
Construcion Chamber of Venezuela, 2018
Commerce and industry Sector
According to BCV figures for 1997 there were 12,700 companies in the country,
for the year 2007 which was the last date of the industrial census, there were
5,700 and according to the estimates of Conindustria, at the moment the figure
is below 4,000, which indicates that have closed more than 8,700 companies.
Private companies and Industries

14000
12000
10000
8000
6000
4000
2000
0
1997 2007 2017
Summary
Lag of the Government's economic policies Fall of the Production Venezuela in 2018
The economic sector has suffered the loss of
Affected industrial sectors in 2018 70% of the industrial fabric. Before the
(Related to its contribution to the economy) government of President Chavez (1998), 12,700
industries operated in the country. To date
there are less 4,000. The remaining companies
Food are operating at 20% of their productive
Automotive
capacity. So, There have a shortage of goods
and services of approximately 80%. During the
Building second quarter of 2018 the production costs of
Technology the companies increased by 4,900%.
(-)
Auto parts The crisis in the industrial sector is due to:
Pharmacy • Political uncertainty and Legal uncertainty.
• Difficulty accessing raw materials and
Iron & steel
supplies, purchases abroad.
Textil • Growth of labor costs.
• Problems in import processes.
Petrochemistry
• Difficulty of access to foreign currency.
• Excessive price control.
• Mobilization and distribution controls
OIL Sector
Venezuela Oil Production
Oil Barrel per Day
2,015 Agu, 2017 Dec, 2017 Jul, 2018 Oct, 2018
Venezuela Oil
Production (OPEC) 2,654,000 2,100,000 1,621,000 1,570,000 1,197,000

Oil production in Venezuela continues to decline and PDVSA is not able to maintain
stable production in the middle of the country's economic, political and social crisis.

A reduction of -54.90% In the last 3 Years

Thousand of Oil Barrel per day

OPEC Numbers 1,197,000 Barrels/day

2018
October
Information from Government to OPEC Information from Other
ures
Telecom Sector
• In this crisis scenario, the telecommunications sector is very affected.
• Government policies of control over services rates have created a recession
and lack of investment into the sector, with a decrease in the quality of
services and a low level in the supply of products and services.
• According to experts, since 4 years ago, communications operators have been
accumulating losses. It is estimated that for a minimum reasonable operation
of a telephony company in Venezuela, it needed at least 2 dollars per user as
monthly fee, and at this time, the subscribers are paying between USD 0.25
and 0.50 monthly per telecommunication service.
• The telecommunications sector takes more than three years to make
significant investments that point to a deterioration and delay in the
technological offer of its platforms.
Conclusion
Economy and Production
• 2019 will continue to be a year of economic difficulties for the country.
• Inflation and the economic crisis it causes will continue.
Policies
• Government economic policies will be very precarious, not very aggressive.
• The Government's efforts point to a recovery, in which the government's control over the
economy is maintained. Thus, effective results of these policies will be very difficult to obtain.
Telecom Sector
• However, there will be opportunities and investments from allied countries, very specific, but
that will require technology services, especially telecommunications, so it is expected that the
sector may rebound a bit.
• Although the Government allows service rates to increase, they will always be below inflation
and will only allow investment in maintenance and support of the current platform.
• The operators will have to open new and reinvent business lines in order to raise and maintain
their income.
The End