Macroeconomics: Better Than Feared
- Economic data confirm a global slowdown. However, they do not signal an upcoming recession or hard-landing
- US Economics, particularly labor markets-related, look better than feared. Swiss unemployment halted past months’ increases and China endorsed steady but slower growth
Theme Of The Week: Venezuela
What are the interests in Venezuela?
- Oil and gas: Venezuela holds the leadership in oil reserves (303bn barrels) but produces less than 1mbpd. Compare it with Saudi Arabia (9mbpd) and Iran (3.5mbpd)
- Political: The US has limited footprint in Latin America and PDVSA exports 80% of oil production to China
- Security: Control over immigration illegal substances traffic
What are the challenges?
- Decaying infrastructure: It is estimated that at least additional $100bn investments are needed to restore proper production
- Economic convenience: The break-even price of oil is $45-65, most likely in the high-end of the range for the heavy Venezuelan oil
- Political stability: Companies need guarantees before investing
What are the economic and market impacts?
- Short-term: Limited given the challenges mentioned
- Medium & Long-term: Potential market relevant impacts due to higher production on inflation (lower, hence impact on interest rates), exports (particularly a potential blockage of exports to China), and oil profits (as investing oil companies will rip the benefits of exported oil)
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