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New Market Report: Venezuela Freight Transport Report 2014

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2013-12-29 18:25:28 - Fast Market Research recommends "Venezuela Freight Transport Report 2014" from Business Monitor International, now available

As an important oil-exporting economy Venezuela retains substantial resilience despite recent economic mismanagement and heightened political risk. BMI's view is therefore that the economy will continue to see positive but disappointingly low GDP numbers. After 5.6% GDP growth in 2012, we estimate the pace fell to 2.0% in 2013, and are forecasting that it will reduce further to 1.5% in 2014. On the political front President Nicolas Maduro, elected in early 2013, will continue to follow the left-wing and nationalist policies of his predecessor, the late Hugo Chavez. But Maduro lacks Chavez' leadership skills and political instincts, and so will be more exposed to in-fighting within the ruling Partido Socialista Unido de Venezuela (PSUV); he may not be able to

command as much army support as his predecessor.

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Growth drivers will be oil revenue and the trade surplus (both somewhat reduced), government social spending and private consumption. Private consumption represents around 60% of Venezuelan GDP. Its rate of growth will however be undermined by high inflation, which has touched 45%, a 16-year high.

Chaotic price freezes and foreign exchange controls have meanwhile led to widespread shortages and misallocation of resources. We believe another big devaluation of the local currency will be unavoidable in 2014. Investment, meanwhile, which has been significant in recent years, will fall because the government will prioritise current spending for political reasons, and because the private sector will be put off by political risk and high levels of uncertainty. The contribution from net exports to growth has also dwindled.

Oil production has been falling while imports have surged by an annual average of 15.8% over the last decade as the country becomes increasingly reliant on basic goods produced abroad. The weak bolivar and currency controls are now slowing import growth.

Our view on the country's freight transport sector continues to be bearish, due to concerns about lack of sustainable import demand, and slowing oil exports. In particular, the chronic mismanagement of the country's port facilities since they were nationalised in 2009 has damaged their international reputation and their profit-making abilities. We do not expect any significant recouping of lost throughput levels over the medium term. Over a longer period, investments from China could see the facilities begin to regain some lost ground.

Regarding transport modes, air freight will lead the way, followed by shipping (Venezuela lacks reliable data on its small railfreight and large road haulage volumes).

Headline Industry Data

* Air freight volume carried in 2014 will expand by 6.3% to 6.46mn tonnes-km, with average annual growth of 4.8% to 2018.
* 2014 Puerto Cabello tonnage throughput growth forecast at 1.7%. Slow growth - broadly in line with GDP - is expected to continue over the medium term, averaging 2.6% to 2018.
* 2014 port of La Guaira tonnage throughput to grow by 3.0%, and forecast to average 3.6% over our forecast period.

Key Industry Trends

Political Factors Hit The Logistics Sector: Venezuela's logistics and distribution systems have been in and out of one type of crisis or another for much of 2013. To some extent the causes have been external to the logistics system itself - for example tight foreign currency restrictions have held back imports; also a combination of strong inflationary pressures and price controls have caused recurring scarcities of key commodities and consumer goods. Deficiencies in the freight transport system, parts of which have been starved of investment for years, have also contributed to bottlenecks. The government's response to supply and distribution difficulties was to try to put the economy on what it described as a war footing, creating a body known as the Superior Organ for the Popular Defence of the Economy. One of the administration's recurring themes is that its political opponents have been conducting acts of economic sabotage. The Superior Organ, under the command of an army general, created a special group charged with ensuring food distribution and transport to ensure "the correct supply of products" to the population.

Ageing Road Infrastructure Is A Key Issue: Venezuela's road infrastructure is showing the strain after years of underinvestment. In October 2013 the collapse of the Boca de Uchire road bridge, which links Miranda and Anzoategui states on route 9, was reported to have interrupted a travel route used by up to 45,000 vehicles and 300,000 people a day. The bridge went down on 8 October, slumping into a U-shape. A total of 11 vehicles were crossing it at the time, including three freight lorries; apart from a motorcyclist who suffered light injuries no one was hurt. Land transport minister Haiman el Troudi said heavy cranes and steel components were being sent to the area to replace the fallen bridge. The collapsed bridge was in fact itself a provisional structure that had been used for over 50 years.

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Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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