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La paradoja crediticia venezolana (morgan stanley)
 

La paradoja crediticia venezolana (morgan stanley)

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    La paradoja crediticia venezolana (morgan stanley) La paradoja crediticia venezolana (morgan stanley) Presentation Transcript

    • Oil Rich and Dollar PoorThe Venezuela Credit ParadoxJune 16, 2011
    • The ParadoxVenezuela Venezuela Basket ($/barrel) 150 100 Higher oil 50 prices… 0 03/03 03/05 03/07 03/09 03/11 Gross External Debt/GDP (%) 60 …are no longer 40 helping Venezuela’s 20 debt position… 0 03/03 03/05 03/07 03/09 03/11 Hard Currency Reserves (US$b) 40 30 …or its hard 20 currency 10 0 reserves 03/03 03/05 03/07 03/09 03/11 Source: Bloomberg, BCV, Morgan Stanley Latam Economics 2
    • The ParadoxPdVSADespite higher oil prices,PdVSA may need to borrow up to an additional $14.4B in 2011 PdVSA Total Debt (US$ billion) 46.5 45 40 Estimated net 14.4 issuance for 35 remainder FY2011* 30 25 20 32.0 Total est. debt 15 as of 31-Mar 2011 10 5 0 2006 2007 2008 2009 2010e 2011e *Estimated funding needs for the remainder of 2011 using our cash-flow based oil price sensitivity model; please see report for more details. Source: PdVSA, Bloomberg, Morgan Stanley Research estimates 3
    • Why?1. Imports are rising along with price of oilThe economy is becoming more import-dependent Venezuela Basket Imports ($/bbl, 4-q rolling) ($b, 4-q rolling) 120 14 100 12 10 80 8 60 6 40 4 20 2 0 0 03/99 03/01 03/03 03/05 03/07 03/09 03/11 Source: BCV, Morgan Stanley Latam Economics 4
    • Why?2. Oil production levels have been declining… PdVSA Production (mmbpd) 3.5 3.0 Official PdVSA figures 2.5 BP Statistical Review International Energy Agency 2.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: PdVSA, BP Statistical Review of World Energy, 2010, IEA 5
    • … and PdVSA has not kept up with its capex goals PdVSA Total Investment (US$ billion) 31.1 30 25 Original Plan 20 16.4 15 13.5 11.9 12.0 10 Actual/Revised 5 0 2009 2010e 2011e Source: PdVSA, local press, Morgan Stanley Research 6
    • Why?3. Increasing share of exports are non-cash-generating Estimated PdVSA 2010 Exports The terms of the ECAs involve PdVSA Energy supplying crude oil Cooperation and products to Agreements 22% countries in Latin America and the Caribbean. Oil-for-loan commitments to China An estimated 30% of 8% 2010 production did Cash-generating not capture upside exports from rising oil 70% prices. Source: Morgan Stanley Research 7
    • Why?4. PdVSA social contributions rising with price of oilPdVSA funds are transferred for government social projects Social Contributions (US$b) 20 R2 = 0.8099 2010 16 2007 2006 2008 12 2005 8 2004 2009 4 0 0 20 40 60 80 100 VNZ Crude Price (US$/bbl) Source: PdVSA, Bloomberg, Morgan Stanley Research; Relationship between Venezuela’s crude oil basket price and PdVSA’s social contributions (US$m) for 2001-10. 8
    • Key Drivers for Venezuela and PdVSA Debt Sensitivity Analysis Price FX Marginal of Oil Devaluation Cost of Capital 700 $85 650 600 8.8 / USD 2014 550 15.25% 4.3 / USD 12.75% Debt / 10.25% Exports 500 $105 current 450 400 350 $125 300 Source: Morgan Stanley Research 9
    • Also… cost of litigation for expropriated assets $27 billion $2.5 billion amount sought by government’s Conoco Phillips estimate of the and ExxonMobil maximum liability 2H 2011 headlines risks from hearings / decisions 10
    • Our ViewShort-term: Buy the belly of the curveZ-Spread1,400 $ 17N PdVSA $ 22 MOST ATTRACTIVE1,300 Venezuela $ 15 $ 17 $ 14 $ 22 $ 16 Sovereign:1,200 $ 18 $ 19$ 23 $ 24 Venz ’241,100 $ 25 $ 34 Venz ’25 $ 13 $ 281,000 $ 27 $ 16 $ 18N $ 20 $ 27 Corporate: 900 $ 11 $ 38 PdVSA’17 (old) 800 $ 14 $ 37 $ 13 700 600 0 1 2 3 4 5 6 7 8 9 Mod. duration Source: Morgan Stanley Research 11
    • Risks are reflected in the current level of spreads 5-year CDS 1200 R2= 0.609 Ven (Adj) We see attractive 1000 risk/reward in the 800 near term 600 Argentina Elevated spreads Ukraine should compensate 400 for higher total external debt/exports Hungary Romania 200 Poland ThailandMexico Peru Israel vs. other EM S Africa Bulgaria China Korea Indonesia Russia Turkey countries Czech Rep. Malaysia Chile Colombia Brazil 0 0 50 100 150 200 250 300 Debt/Exports in 2010 Source: Morgan Stanley Research; total external debt/exports in Venezuela is based on our adjusted estimates for oil exports in 2010. 12
    • Our ViewLong-term: Debt path not sustainable External Debt/Exports (%) 700 600 666 500 542 400 419 300 312 200 237 100 2011 2012 2013 2014 2015 Source: Morgan Stanley Research 13
    • Contact… EM Fixed Income Strategy Paolo Batori, CFA  Vanessa Barrett  Robert Tancsa  Rosa Velasquez  +44 207 677 7971 +44 207 677 9569 +44 207 677 6671 +1 212 761 8278 Latam Economics … or click here Daniel Volberg  +1 212 761 0124 … to download our report 14