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Venezuela: Venezuela Pharmaceuticals and Healthcare Report

2011/08/16

venezuela Pharmaceuticals and Healthcare Report

 

President Hugo Chavez's distortive economic policies are increasingly damaging Venezuela's attractiveness to pharmaceutical firms. The government's latest measure, which extends price controls to medicines not previously subject to the regulations, will cause a significant reduction in revenues for companies operating in the country and potentially lead to fewer pharmaceutical suppliers and further drug shortages. The key risks on the downside include further measures in a similar vein and the expropriation of pharmaceutical business, with the nationalisation of some companies in other industries already in play.

Business Environment Rating: Venezuela is ranked as the 12th most attractive market out of 17 markets surveyed in the Americas. Scoring 39.5 out of 100, below the regional average score of 49.0, Venezuela stands above only Nicaragua, Honduras, El Salvador, Belize and Guatemala. Venezuela’s attractiveness suffers due to a difficult intellectual property (IP) environment, an unfavourable political regime that regularly speaks out against private enterprise and strict price controls that have recently been extended beyond non-essential medicines, despite promising demographic and epidemiological profiles.

Additionally, while we view the Venezuelan government's recent decision to devalue the currency as positive for the country's fiscal revenues, it will also negatively impact pharmaceutical market growth in US dollar terms. Venezuela will remain one of the least promising regional investment destinations, with an increasingly marginalised role.

Key Trends & Developments

In June 2011, the Venezuelan government announced a series of initiatives intended to strengthen the country’s healthcare infrastructure and expand access for residents in the state of Aragua. This comprises a VEF51.00mn (US$11.8mn) expenditure for the rehabilitation of healthcare infrastructure, including the remodelling of clinics and 28 hospitals.

In June 2011, it was revealed that the Venezuelan government is constructing a pharmaceutical warehouse in the municipality of Jose Angel Lamas, in the state of Aragua. The 48,000 square metre facility, the first of five medical warehouses to be built in the country, is the product of an international agreement signed between China and Venezuela valued at just under US$864mn. Once completed, the depot will have the capacity to supply five surrounding states with prescription and over the counter (OTC) drugs.

We expect Venezuela to post real GDP growth at 1.9% in 2011 and 2.4% in 2012, up from the 1.4% contraction of 2010. While this implies that the economy is beginning to recover from its deep recession, huge structural imbalances within the economy to remain, and we believe that this recovery will be driven in large part by rising oil prices.

We expect the issue of crime to dominate campaigning in Venezuela in the run up to the presidential election in 2012, as the country's economic problems are beginning to take a back seat to social issues in the frame of domestic politics. Due to the structural nature of crime, a dramatic reduction of Venezuela's sky-high homicide rate is unlikely to be made anytime soon.

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