NEW YORK — Prospects of government change in Venezuela are increasingly low, and according to Credit Suisse, investors, companies and nations around the world should take note: the ruling party, PSUV, will stay in power for a good part of the foreseeable future.

“Chavismo has created a political system in which, despite its lack of popular support, its de-facto rule is likely to persist for years to come,” the investment bank said in a report to clients prepared by Alberto J. Rojas, an economist covering the South American nation.

“The historical Venezuelan opposition parties—and its leaders— seem to be losing the support of many given their inability to secure a change in the country,” Rojas wrote in a report dated January 11, analyzing the economic and political conditions that are anchoring the power grip of the ruling party, Partido Socialista Unido de Venezuela or PSUV, nationwide and keeping president Nicolas Maduro in the leading seat, despite U.S.-led economic sanctions and international political isolation.

“Our central scenario is that Chavismo will remain in power, and only an unexpected and significant change in the social and political framework would change our view,” Rojas said in the seven-page report.

The conclusion take very few by surprise. Early in December The Wall Street Journal reported that support has waned for the some parts of opposition, both abroad and inside Venezuela. Of the nearly 60 countries that had recognized Juan Guaidó as president in 2019, only the U.S. and a handful continue to do so, the newspaper said, adding that last year the European Union stopped calling Guaidó the “interim president” and now considers him “a privileged interlocutor” for negotiations with the regime presiding from the Miraflores palace.

Opposition

On Sunday the opposition won the gubernatorial election in the state of Barinas, representing a symbolic victory for the opposition, which now controls four of the country’s 23 governorships, the same number as in 2017, Reuters reported. To have any chance of replicating the victory more widely, the opposition must refocus itself on winning power at the ballot box after years of boycotts, unify its leadership across the country and prepare for an upcoming presidential election in 2024, analysts told the news agency.

Earlier this month, Venezuela’s opposition-led National Assembly extended for another year the interim government of Guaidó, but limited his powers amid criticism of his management of overseas assets and his failure to oust the government, Bloomberg News reported. The political leader has squandered most of his political capital since emerging in early 2019 as a series of scandals exposed a lack of transparency and accountability over members of his government, in cases ranging from the management of humanitarian aid, to the operations of Citgo Petroleum, in the U.S., and Monomeros Colombo Venezolanos, in Colombia, both subsidiaries of the state-owned Petroleos de Venezuela S.A.

“Venezuela’s status-quo does not have any reason to change. There needs to be some sort of catalyst that leads to a new political leadership or a new way of thinking from the opposition,” the Credit Suisse report said. “The ruling PSUV’s plan is clear: have elections, create an unleveled playing field during the process, promote distrust and hence abstention from the electorate, and use all the resources at its disposal to get more votes than their adversaries and remain in control.”

In short, “Chavismo will keep implementing un-democratic practices to continue ruling the country,” the report said.

No Hope for Bondholders

The bank considers that “holders of Venezuela’s foreign debt should be clear that the probability of recovering any money back in the near term is extremely low.”

Venezuela’s international reserves are below USD6 billion (excluding the IMF’s SDR allocation), while the total hard currency bond debt (including past due coupon payments) is roughly USD100 billion, according to the investment bank. “Additionally, Venezuela has lost 20% of its population and its economy is barely a quarter of what it was in the early 2010s, making prospects for debt recovery rather remote,” the report said.

Credit Suisse is forecasting Venezuela’s gross domestic product will expand 4.5% this year and it’s projecting a real GDP growth of 8.5% for last year. An improving oil production paired with “a deepening of dollarization, increasing imports, improving tax revenues, rising mobility, are all among the other factors that support our vision of economic growth in the country.”

Venezuela’s economy has been contracting uninterruptedly since 2014: real GDP is estimated to have declined 77% during 2014-20, and is expected to fall further during 2021-22, according to Goldman Sachs. Venezuela is set to “remain trapped in a seemingly never-ending economic depression and hyperinflationary spiral,” analysts Alberto Ramos, Sergio Armella and Daniel Moreno wrote in a research note to investors in November. The International Monetary Fund sees an economic contraction slowing to -5% in 2021.

Credit Suisse projects Venezuela’s inflation will slow down its frantic pace to 150% this year after consumers faced a 686% increase in prices in 2021, according to figures published by the nation’s central bank on January 8. The still staggering numbers represent a sizable reduction when compared with the 2,959% inflation endured in 2020. At the same time, almost 96% of the population lives in poverty, analysts Moises Naim and Francisco Toro, reported in a recent article in Foreign Affairs.


* Marianela Palacios Ramsbott contributed to this article from Caracas, Venezuela.

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Also relevant:
* Russia Suggests Military Deployment to Venezuela, Cuba if Tensions With U.S. Remain High: WSJ
* Venezuela’s Opposition Wins Barinas Gubernatorial Election: Reuters
* Only a Great-Power Bargain Can Solve Venezuela’s Crisis: Financial Times
* U.S. Secretary of State Blinken Says Venezuela Held ‘Flawed’ Elections on November 21
* International Criminal Court to Open Venezuela Probe in Blow to Maduro: Bloomberg
* Credit Suisse Raises Venezuela’s 2021 GDP Growth Forecast to 5.5% as Country May Be Headed Into a Political ‘New Phase’



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