[LINK] "Supermajority or Not, in Venezuela It's Still About Oil Prices"

[rfmcdonald]

Bloomberg's Nathan Crooks writes about how, whatever the political regime, Venezuela depends on oil excessively.

Just when it looked like change was coming to Venezuela, along came OPEC to spoil the party.

Celebrations were still taking place in Caracas in the aftermath of elections Sunday that saw opposition lawmakers win a majority in congress for the first time in 16 years, but optimism over the prospect of a challenge to President Nicolas Maduro’s government has started to fizzle out as Brent crude fell below $40 a barrel for the first time since 2009.

With oil accounting for 95 percent of Venezuela’s foreign-currency earnings, the drop in crude prices is threatening to push the country’s fragile economy deeper into recession.

Venezuela’s economy is expected to contract 10 percent this year by the International Monetary Fund, while economists polled by Bloomberg see consumer prices rising about 124 percent. While the result of Sunday’s National Assembly election is the “best possible outcome,” optimism is fading as low oil prices start to stress the country’s near-term cashflow, Siobhan Morden, the head of Latin America fixed-income strategy at Nomura Holdings Inc., said Tuesday in a note.

“Fiscal accounts are completely dependent on oil,” said Francisco Monaldi, a fellow in Latin American energy policy at the Baker Institute at Rice University in Houston, adding that the break-even point for many new oil-related investments is about $30 a barrel.