Macro Monday 57 - Venezuela Update ( 5 charts)Macro Monday 57 - Venezuela Update
I'll have more charts for you over the coming week but feel this is an important event that could help shape South America's economic trajectory over the coming 5 - 10 years
Last week I shared the country that has the largest oil reserves in the world, Venezuela.
I noted that Venezuela stands at a critical juncture, with the potential for a historic return to democracy by way of national election on 28th July 2024.
Unfortunately, the authoritarian socialist incumbent President Nicolás Maduro appears to have "claimed" victory in the election, amidst many observations of election fraud and interference.
At present the people of Venezuela have taken to the streets in protest, are toppling Maduro's statues and demanding him to leave office. Only an hour ago reports of counter forces apparently breached a barricade to Maduro's home.
Many world leaders have called out Maduro on what they see as a false election victory. The international pressure is mounting on Maduro's régime. The world recognizes the violation of the peoples choice.
The election might look like its a major loss for the people of Venezuela, however it appears to have invoked an incredible revolutionary type response from the people, it has captured the worlds attention, and the attention of the likes of Elon Musk and Javier Milei (Argentinian President) both calling for Maduro's exit. In response Maduro has called out Elon Musk, whom he calls his "arch-enemy" since his post earlier today. Clearly threatened, pressure is mounting on Maduro internally and from the International community.
The election results could be the tipping point for the Venezuelans , it appears that change is in the air in and a new dawn is approaching with the world backing the Venezuelans who have clearly had enough.
Lets hope for as peaceful a transition as possible. If successful, the country with the largest oil reserve in the world, that was once twice as rich as China, 4th ranked world economy (1st in Latin America), can return to its former glory.
If such an event were to unfold, Venezuela, IMO, could lead South America out of a developing economy to a booming one within the decade.
Charts in South America
Please see South America and all its compressing pennant formations and ascending triangles. Few cup and handles too at present Peru is a clear leader with Argentina, however it does not hold the worlds largest oil reserve like Venezuela which appears to be about to make major political change.
Chile - AMEX:ECH
Brazil - AMEX:EWZ
iShares Latin America ETF - AMEX:ILF
MSCI Peru NTR Index (USD) - ICEEUR:MPU1!
Argentina - AMEX:ARGT
PUKA
IBC trade ideas
Macro Monday 56~Venezuela - Democracy Beacons Economic Reform Macro Monday 56
Venezuela - Democracy Beacons Economic Reform
As one of the core members of OPEC, Venezuela holds the distinction of having the largest oil reserves in the world with over 304 billion barrels beneath its surface. This is marginally more than the Saudi Arabia oil reserves.
If you ever wondered where the largest oil reserves in the whole world where, they are located on the Orinoco Oil Belt in Central Venezuela.
Unfortunately Venezuela has suffered from political and economic factors that hasn’t allowed the country and its people to benefit from this large natural resource. A national election on the 28th July 2024 has the potential to change everything and allow Venezuelans to form a democratic government. This has the promise of leading the country into a new positive social and economic epoch.
Venezuela’s oil production plummeted by c.75% over the past ten years, largely due to political missteps. The current administrations illegal expropriations of foreign oil and gas assets were a major red flag for potential investors. Additionally, Venezuela’s poor governance, mismanagement, and U.S. sanctions have contributed to a drastic decline in oil output. In September 2023, Venezuela produced only 735,000 barrels per day, making it the 10th-largest producer in OPEC despite it being the largest global oil reserve. The situation highlights the some challenges faced by petrostates that heavily rely on oil exports and their governance over it.
Path to Democracy calls for International Support
Venezuela stands at a critical juncture, with the potential for a historic return to democracy by way of national election on 28th July 2024.
The opposition has rallied behind a leading candidate, Edmundo González of the Democratic Unity Platform (PUD) for the upcoming national election. He has taken the place of the former disqualified Maria Corina Machado (unfairly ousted by the incumbent). The incumbent President Nicolás Maduro remains a significant obstacle and still gains support from a Chavista Base.
The Chavista Base refers to the loyal supporters of Chavismo, a left-wing populist political ideology associated with the late Venezuelan President Hugo Chávez. These supporters are committed to strong socialist ideas, programs, and government style that characterized Chávez’s rule from 1999 to 2013. Despite international pressure, sanctions and disapproval, this group remains fiercely loyal to the Chavista movement and its successor, President Nicolás Maduro. The opposition Edmundo González, has been leading the polls by over 20 - 40 points and thus the people of Venezuela are calling out for change having suffered under the socialist regime.
Maduro's regime has arguably eroded democracy and has been the cause of significant economic pitfalls, and social unrest. To support Venezuelans’ fight for democracy, the United States may offer a legal off-ramp for Maduro and his allies, ensuring they won’t face prosecution if they recognize electoral defeat. This approach has worked in other countries like South Africa and Chile, after which both countries could move forward constructively and relatively peacefully. This approach could allow for a peaceful transition to democracy in Venezuela. A democratic Venezuela would benefit U.S. foreign policy, limit migration to the U.S, and reduce the influence of Russia and China in the South Americas via pacts like the BRICS. Previous efforts to achieve the off-ramp approach in Venezuela have failed, however the opposition leader González is ahead in most polls and the election is days away. With some international pressure/support, this could be a major moment for Venezuela, opening up the country and its resources to operate under a free market, allowing for competitive growth, innovation freedom, consumer sovereignty and free flowing export economy.
Exports
Venezuela is historically highly dependent on its petroleum oil exports. Crude oil, in particular, has been the primary driver of its export revenue. In recent years, Venezuela’s top exports include:
1. Mineral fuels including oil: This category represents 26.1% of total exports.
2. Iron and steel: Comprising 21% of exports.
3. Organic chemicals: Accounting for 9.9% of exports.
4. Aluminum: Representing 8.4% of exports.
5. Fish: Contributing 7.5% to export value.
These products collectively account for 88.1% of Venezuela’s global shipments. Notably, mineral fuels (especially crude oil) have experienced significant growth in recent years. China, Turkey, Spain, the U.S., and Brazil are among Venezuela’s main export partners.
Blooming Tourism Sector
In 2023 Venezuela experienced a remarkable resurgence in international tourism. The country welcomed 1.25 million foreign visitors, marking a 90% increase compared to the previous year when 656,000 people arrived. While specific revenue figures for 2023 are not readily available, this surge in tourist arrivals indicates a positive trend for the Venezuelan tourism sector.
I thought id mention just just a few attractions:
1.Angel Falls: Located in Canaima National Park, Angel Falls is the highest waterfall in the world, dropping 979 meters. Best seen during the rainy season (May to November) when water flow is abundant.
2.Los Roques Archipelago: This chain of islands, 160 kilometres north of the central coast, offers sun-drenched beaches, turquoise waters, and coral reefs. It’s a paradise for beach lovers and nature enthusiasts.
The Chart
Caracas Stock Exchange- BME:IBC
Summary
I cannot recommend taking an entry on the above chart and regardless, it would be incredibly difficult to do so with sanctions in place and the political turmoil that is yet to be resolved. However, a major date is approaching for the national election this coming Sunday 28th July 2024 , and it could be the beginning of a monumental positive shift for the future of Venezuela’s economy. We can only watch from afar and not forget that this country boasts thee largest oil reserves in the world, has a blooming tourism scene with some of the most unique tourist attractions, and a varied export economy. Somewhere in the future there will likely be great opportunity in Venezuela, however for the moment we await the shifting winds of democracy to catch the Venezuelan sails. Lets see what happens this Sunday.
PUKA
