VENEZUELA THIS WEEK

Monday, July 31, 2017

THE RED LINE

Electoral authorities announced a turnout of 8.1 million voters yesterday, a
number that opposition leaders claim is grossly inflated. Our exit poll points
to a much lower estimate of 3.6 million voters. Fraud allegations are likely to
lead to a hardening of the oppositions stance and greater likelihood of
economic sanctions.
WHAT TO WATCH
THIS WEEK
ELECTORAL RESULTS TAINTED BY FRAUD Turnout in yesterdays event was
ALLEGATIONS 41.5% of registered voters:
Lucena.
We estimate 3.6mn persons participated in yesterdays vote, less than
Our exit poll estimates a lower
half the figure announced by electoral authorities. The opposition 18.5% participation rate.
denounced fraud and may decide to boycott regional elections as a
result. Opposition alleges fraud, calls
new demonstrations.
PAGE #3
US set to unveil economic
sanctions, could bar exports of
light crude.
MADUROS APPROVAL THE GREAT
RATING FALLS TO 17.4% REINVERSION Opposition mayors arrested,
sentenced.
Maduros approval ratings fell to the Venezuela and PDVSAs yield
Candidates to register for
lowest levels of a Venezuelan curves have once again become regional elections.
president since the 1990s, driven by strongly inverted, driven by
poor economic performance and growing political tensions and Parallel rate fell to 10,390;
DICOM depreciates.
solidarity with protests. fears of US economic sanctions.
Reserves stay above $10bn.

PAGE #10 PAGE #13

MACROECONOMIC
FORECAST TABLES
PAGE #17

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 VENEZUELA THIS WEEK
WHAT TO WATCH THIS WEEK
8.1 million persons, or 41.5% of registered
voters, participated in yesterdays election to the
Constitutional Convention, which was boycotted
by the opposition, according to Electoral Council
(CNE) President Tibisay Lucena. The opposition
charged fraud, alleging that the turnout
numbers were inflated. Our exit poll estimated
a much smaller turnout of 3.6 million persons.
The opposition called for new demonstrations
today, including a concentration at 5:00 PM to
honor those who died yesterday. Ten persons
were killed yesterday, according to the
Prosecutor Generals Office. Opposition leaders
claim this number is higher, at least 14.
The United States may impose economic
sanctions on Venezuela as early as today. Vice-
President Michael Pence reiterated President
Trumps pledge to follow through with strong
and swift economic actions if the Convention
vote was held. According to the Wall Street
Journal, authorities have shelved for now the
idea of banning Venezuelan oil imports and will
rather impose a restriction on the sale of lighter
US crude to Venezuela.
The United States, Colombia, Peru, Panama,
Argentina, Brazil, Costa Rica, Mexico, Spain,
Chile, Paraguay, the European Parliament and
Canada have stated that they wont recognize
the results of yesterdays Constitutional
Convention elections. Representatives of other
countries, such as Honduras, Guatemala,
Norway, Great Britain and Switzerland had
previously called for the cancellation of the
elections, and expressed concern about its
legality.
The first official US response to Sunday's ballot in
Venezuela came from U.S. Ambassador to the
United Nations Nikki Haley, who said in a
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Monday, July 31, 2017
message on Twitter that "Maduro's sham
election is another step toward dictatorship."
"We won't accept an illegit govt. The Venezuelan
ppl & democracy will prevail."
Last Friday, Alfredo Ramos, Major of Iribarren
(Lara State), was arrested and subsequently
sentenced to 15 months of prison, removed
from his post, and barred from running for public
office for the duration of his sentence. He was
charged with failing to prevent street
obstructions in his town. Mayor Gustavo
Marcano was similarly sentenced earlier this
week, and Mayors Ramon Muchacho and Carlos
Garca Odon have hearings scheduled for
Wednesday and Thursday on the same charges.
Ramos and Marcano join a list of six other
opposition majors removed from their posts in
recent years.
The parallel rate fell to 10,390 VEF/USD, losing
32% of its value in the most recent month.
Monetary aggregates have also begun to rise
sharply, with the monetary base and M2
growing respectively by 40% and 33% during the
last four weeks.
Results from the tenth DICOM auction will be
published on Tuesday afternoon. The FX band
will remain at the 2,310-2,970 VEF/USD range.
The Central Bank allocated $32.3mn in the
previous auction, in which the exchange rate
depreciated 1.8% to 2,810 VEF/USD.
International reserves recovered from their lows
reached in previous weeks, rising and staying
above the $10bn mark for all of last week.
Delta airlines announced that it is stopping
service to Venezuela. Iberia and France
cancelled flights during the weekend of the
Constitutional Convention elections.
 VENEZUELA THIS WEEK
A CLOSER LOOK
Electoral results tainted by fraud allegations
Venezuela held elections for the National
Constitutional Convention today, in an event that was
boycotted by the countrys opposition. The Convention
will have the power to redraft the countrys constitution
as well as to dissolve existing branches of government.
The opposition had refused to participate in the
election, alleging that the rules were heavily slanted in
favor of the government and that the convening of the
convention violated the countrys current Constitution.
Speaking shortly before midnight, National Electoral
Council (CNE) President Tibisay Lucena announced that
8.1 million persons, or 41.5% of registered voters, had
participated. Candidates from pro-government slates
had defeated independent chavistas in nearly every
state, according to the first official bulletin. One of the
members of the CNE board, Luis Emilio Rondn, sat out
the reading of the results, alleging that he refused to
participate in the process given its unconstitutionality.
Opposition leaders charged that the vote count was
fraudulent. Speaking at a press briefing, Miranda
governor Henrique Capriles stated that participation
had been less than 15%. National Assembly President
Julio Borges wrote on his Twitter account that Lucenas
announcement was almost triple the actual turnout.
Table 1: Estimated participation
Estimate
Total eligible voters
Estimated proportion voting
Estimated number of voters
Source: Torino Capital, Innovarium, based on survey of voting centers
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Monday, July 31, 2017
In order to count with an independent estimate of the
vote, Torino Capital partnered with Venezuela public
opinion company Innovarium to assess participation in
the event. We surveyed 110 voting centers distributed
across 23 states and the Capital District. Observers
carried out a full count of voters showing up to vote in
each voting center.
Our results indicate that 3.6mn Venezuelans, or 18.5%
of registered voters, voted in the election. Our survey is
based on a clustered statistical sample, with a cluster-
adjusted standard deviation of 1.3 percentage points.
Therefore, we conclude with a 95% margin of
confidence that turnout was between 3.1mn and 4.1
mn votes (see Table 1).
Because the opposition did not field candidates in the
event, turnout should be read as a proxy for the
governments capacity to mobilize its supporters. In a
parallel event held two Sundays ago, we estimated that
the countrys opposition was able to mobilize 7.6
million voters to reject the Constitutional Convention, a
result that coincided with organizers announcement.
Lower Bound Upper Bound
19,477,387
18.5% 16.0% 21.0%
3,600,058 3,113,807 4,086,309
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Monday, July 31, 2017

While turnout was lower than that of the opposition
event, one must be careful in comparing both figures.
The opposition allowed all adult Venezuelans to vote
and opened voting centers abroad, which were not
open in this election. According to the oppositions
official results, 693 thousand persons voted abroad,
while 6.983 million votes were actually cast in the
country. On the other hand, the opposition counted
with only limited organizational and economic
resources for the non-binding referendum, which had
been convened in a span of less than two weeks. It is
thus possible that the MUD opposition coalition would
be able to draw larger numbers in a coming
referendum.
Nevertheless, the turnout figures suggest that the
government is down, but not out, in terms of electoral
competitiveness. Were we to assume, for example, that
participation in both events in the country is a good
estimate of attendance in a national election, the
opposition would win such a contest with 66.0% of the
vote to the governments 34.0%. This certainly indicates
some loss from the 40.9% of the vote garnered by the
government in the 2015 parliamentary elections, yet
still reflects the support of a sizable minority of
Venezuelans.
Furthermore, the government was also able to garner
high participation levels exceeding in some cases 50%
- in many rural and poor urban neighborhoods,
according to our estimates, suggesting that it remains
electorally dominant in many areas of the country.
Table 2 presents our results by polling center.

Table 2: Estimated participation by polling center

Estate Voting center Estimated proportion voting

CAPITAL DISTRICT COMMUNAL COUNCIL LOS MANANTIALES 46.5%
CAPITAL DISTRICT SCHOOL NIO DIOS DE SAN JOS 27.4%
CAPITAL DISTRICT MUNICIPAL CENTER CMAI 20.2%
CAPITAL DISTRICT VELODROMO TEO CAPRILES SALON CHICO CARRASQUEL 21.6%
CAPITAL DISTRICT SCHOOL AGRAMONTE 8.7%
CAPITAL DISTRICT SCHOOL REPBLICA DE VENEZUELA 9.0%
CAPITAL DISTRICT SCHOOL VENEZUELA 35.3%
CAPITAL DISTRICT ELIAS TORO NATIONAL BASIC SCHOOL 6.8%
AMAZONAS VALLE VERDE 30.4%
AMAZONAS CENTER SABANA DE TIGRE 49.1%
ANZOATEGUI SCHOOL MAYARES NUMERO 2118 - 2184 71.2%
ANZOATEGUI ESCUELA BASICA DOCTOR ARMANDO ARMAS MOGNA 24.8%
ANZOATEGUI ESCUELA EDUCATIVA RAZETTI II 14.0%
ANZOATEGUI I.U.T.I.R.L.A. 10.2%
ANZOATEGUI BOYACA SCHOOL GROUP 17.0%
APURE CEIBA PRIMARY SCHOOL 61.8%
APURE BOLIVARIAN PRIMARY SCHOOL MARIA NICASIA GAMARRA 20.0%
ARAGUA HOUSE OF THE CHILDREN MAESTRO JOSE VICENTE GONZALEZ 43.4%
ARAGUA SCHOOL DOCTOR LUIS RAZETTI 19.9%
ARAGUA NATIONAL SCHOOL SAN CASIMIRO 23.6%
ARAGUA SCHOOL LUISA CACERES DE ARISMENDI 16.0%
ARAGUA ESTATE SCHOOL TRINO CELIS RIOS 14.3%
ARAGUA NATIONAL SCHOOL. BOLIVARIANA SANTA CRUZ 17.6%
BARINAS SCHOOL LOS PANCHES 67.6%

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BARINAS SCHOOL BOLIVARIANA FRANCISCA DE REIMI 11.9%

BARINAS SCHOOL MOROMOY 45.4%
BARINAS SCHOOL ENRIQUE IGNACIO GUTIERREZ 7.6%
BOLIVAR SIMONCITO GUAYANA INITIAL EDUCATION CENTER 45.1%
BOLIVAR NUESTRO ETERNO LIDER 33.5%
BOLIVAR SCHOOL 215 Y 265 LOS PIJIGUAOS 17.5%
BOLIVAR BOLIVARIAN SCHOOL EL RINCON 23.1%
BOLIVAR SCHOOL AGUA SALADA 9.8%
CARABOBO AUTOCROSS VOTING CENTER 72.0%
CARABOBO SCHOOL SIERVO DE DIOS 34.9%
CARABOBO SCHOOL ROSA OLIVEROS DE MAZA 17.2%
CARABOBO SCHOOL 94-118 15.0%
CARABOBO BOLIVARIAN SCHOOL LA ESTACION 25.3%
CARABOBO BOLIVARIAN SCHOOL BARBULA II 7.2%
CARABOBO BOLIVARIAN SCHOOL ALFREDO PIETRI 14.5%
CARABOBO SCHOOL BELLA VISTA 10.6%
COJEDES SCHOOL CHAPARRAL 44.6%
COJEDES SCHOOL EL ESTERO 20.1%
DELTA AMACURO SCHOOL ROMULO GALLEGOS 27.5%
DELTA AMACURO SCHOOL NUMERO 26 22.0%
FALCON BOLIVARIAN SCHOOL MOTURO 82.2%
FALCON BOLIVARIAN SCHOOL EL ALTO DE LA ALEGRIA 14.0%
FALCON PARAGUANA REFINING CENTER 24.6%
GUARICO SCHOOL NUMBER 0080 DIVIDIVE 58.1%
GUARICO SCHOOL LA CUMANA 9.8%
GUARICO BOLIVARIAN SCHOOL PUEBLO NUEVO 19.2%
GUARICO SCHOOL LUIS BARRIOS CRUZ 7.0%
LARA SCHOOLSAN CRISTOBAL 33.4%
LARA BOLIVARIAN SCHOOL AGUAS CALIENTES 26.3%
LARA COMMUNITY HOUSE BARRIO LIBERTADOR 23.7%
LARA BOLIVARIAN SCHOOL URBANO YEPEZ 16.2%
LARA BOLIVARIAN SCHOOL CARLOS SAMPAYO 9.2%
LARA KINDERGARTEN EL TOCUYO 23.6%
LARA SCHOOL DOCTOR ALBERTO CARNEVALI 18.7%
MERIDA BOLIVARIAN SCHOOL SANTA CRUZ DEL QUEMADO 32.0%
MERIDA SCHOOL NUMBER 1039 EL CONEJO 31.4%
MERIDA SCHOOL HIPOLITO GONZALEZ B 12.1%
MERIDA SCHOOL SAN PIO X 11.4%
MIRANDA HOUSE OF CULTURE 42.0%
MIRANDA VOTING CENTER COMANDANTE ETERNO HUGO CHAVEZ 41.7%
MIRANDA JESS OBRERO UNIVERSITY INSTITUTE 28.7%
MIRANDA SCHOOL PABLO CALZADILLA 36.0%
MIRANDA PROTECTION SERVICE FOR CHILDREN AND ADOLESCENTS 17.6%
MIRANDA SCHOOL MAESTRO VICENTE EMILIO SOJO 12.2%
MIRANDA SCHOOL BASICA ANDRES BELLO 10.4%
MIRANDA SCHOOL MADRE MATILDE 8.9%
MIRANDA SCHOOL CRUZ DEL VALLE RODRIGUEZ 9.1%
MIRANDA SCHOOL CARMEN ROSALES GOMEZ 10.1%
MIRANDA SCHOOL CONSUELO HERNANDEZ 17.3%

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 VENEZUELA THIS WEEK
Monday, July 31, 2017

MONAGAS SCHOOL JOSEFINA DE FIERRO 28.4%

MONAGAS VOTING CENTER V REPUBLICA 38.4%
MONAGAS KINDERGARTEN CARMEN VERONICA CUELLO 27.1%
MONAGAS SCHOOL ANDRS ELOY BLANCO 11.8%
PORTUGUESA SCHOOL NUMERO 9 LAS PANELAS 38.5%
PORTUGUESA SCHOOL NUMERO 512 EL MAMON 26.0%
PORTUGUESA SCHOOL SANTA FE 16.8%
SUCRE BOLIVARIAN SCHOOL RO GRANDE ABAJO 49.3%
SUCRE SCHOOL CHAGUARAMAS DE LOERO 18.1%
SUCRE SCHOOLPEDRO ELAS MARCANO 14.2%
TACHIRA SCHOOL S/N S/N NER 532 CENTRO POBLADO 32.2%
TACHIRA BOLIVARIAN SCHOOL SALADO NEGRO NER 141 17.5%
TACHIRA SCHOOL FRANCISCO DE BORJA Y MORA 7.8%
TACHIRA SCHOOL BOLIVARIANA JUDITH VIVAS DE SUAREZ 9.0%
TRUJILLO SCHOOL NMERO 520 LA AMARILLA 50.7%
TRUJILLO EDUCATIONAL CENTER CRISTOBAL MENDOZA 25.7%
TRUJILLO SCHOOLTRES DE FEBRERO 13.4%
VARGAS SCHOOLSIMON RODRIGUEZ 23.1%
VARGAS SCHOOL DOCTOR RAFAEL VEGAS 5.8%
YARACUY BOLIVARIAN SCHOOL LAS ANIMAS NER 231 44.9%
YARACUY BOLIVARIAN SCHOOL TIERRA FRIA 19.8%
YARACUY BOLIVARIAN SCHOOL LA VIRGEN 9.6%
ZULIA SCHOOL LAS CORIANAS 28.1%
ZULIA SAN AGUSTIN 39.9%
ZULIA SCHOOL ALTO VIENTO 21.1%
ZULIA TOROMO INDIAN TECHNICAL SCHOOL 34.5%
ZULIA SCHOOL MAESTRO JUAN COLMENARES GARCIA 35.6%
ZULIA SCHOOL 4 DE FEBRERO 25.0%
ZULIA SCHOOL SAN MARTIN DE PORRAS 17.5%
ZULIA SCHOOLBOLIVARIANA ZIPAYARE 12.1%
ZULIA NATIONAL SCHOOL GROUP ALEJANDRO FUENMAYOR 14.0%
ZULIA SCHOOL EULADIMIRA GUANIPA 7.8%
ZULIA SCHOOL MADRE LAURA 87.0%
ZULIA SCHOOL GABRIELA MISTRAL 12.6%
NVA.ESPARTA SCHOOL BACHILLER CRUZ JOSE MARVAL 12.6%
NVA.ESPARTA SCHOOL DOA MENCA DE LEONI 10.7%
Source: Torino Capital, Innovarium, based on survey of voting centers

The results thus suggest that the government maintains
an important loyal core of supporters that it can
mobilize in both electoral and non-electoral scenarios.
For example, it is not difficult to design electoral rules
that allow a political movement with more than a third
of the vote to obtain a large enough minority of seats in
a legislative chamber so as to block decisions requiring
a supermajority. Moreover, if the opposition were to
reach power, it is hard to envision that an incoming
administration would be able to attain minimal levels of
governability in the absence of cohabitation
agreements if such a large minority of voters are
opposed to the incoming government.

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VIOLENCE MARS VOTING
Despite a strong military display across the country, the
Constitutional Convention elections were not spared of
violence. Several dead, injured and arrested
overshadowed yesterdays vote, with the government
and opposition trading accusations and denying blame
for what appeared to be the most violent day of
protests so far.
Nevertheless, the voting process proceeded as
scheduled in most localities. By 10 am, 94% of polling
stations had been installed, and 93% of those were
operational, according to CNE board member Socorro
Hernndez. A contingency polling center installed in the
El Poliedro amphitheater was guarded with a 500-meter
security perimeter. Voters from opposition-controlled
municipalities and parishes, such as Chacao, Baruta,
Sucre and some areas of Libertador (Caracas) were
transferred to El Poliedro, which showed high
attendance from early hours in the morning. Our team
also verified that many workers from government-
controlled institutions were transported to that
location.
Last Friday, CNE President Tibisay Lucena had
authorized citizens to vote at any polling center located
within their municipality, and not just in that in which
they are registered. Being able to vote at any polling
station inside the voters municipality weakens the
technical control that guarantees the principle of one
voter, one vote, wrote dissident CNE board member
Emilio Rondn in his Twitter account. Voting in multiple
sites had also been possible in the opposition-organized
Consultative Referendum two weeks ago, and had been
one of the main bases for government accusations of
irregularities in that process.
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Monday, July 31, 2017
President Nicols Maduro voted early at 6:00 am in a
school located in the western sector of Catia. Emperor
Donald Trump wanted to forbid the people from
exercising their right to vote, their political right of
activating the constituent power. And I said: rain or
shine, July 30 we will have elections and a
Constitutional Convention, he stated.
Just hours before president Maduro initiated the
election process, three persons were reported dead in
two different states, according to opposition
representatives. Henry Ramos Allup, former president
of the National Assembly, informed that Ricardo
Campos, a member of his party Accin Democrtica
(AD), was killed in Cuman city (western Venezuela).
The Prosecutors office charged two local police officer
with his murder. Two other persons were killed in
Mrida state during late night demonstrations.
A candidate for the ANC was also murdered Saturday
night at his home in Ciudad Bolvar. This would be the
second candidate killed. According to the Prosecutors
offices version, Jos Flix Pineda Marcano was inside
his house accompanied by friends and family, when two
men carrying weapons broke in, stole their belongings
and separated Pineda from the group. He was shot and
died on site, while the rest were kept locked in one of
the rooms.
Violence extended to Caracas, where residents from El
Paraso neighborhood (west) reported early morning
confrontation between protesters and security forces.
Pictures showed streets and residential areas filled with
teargas. Local reporters on site were threatened by
security officers to stop recording the events.
Electoral authorities tried to place limitations on
reporting the event. It released a manual for the
coverage of the elections, which asked reporters not to
 VENEZUELA THIS WEEK
record or photographs voters faces and not to enter
polling stations, unless an official or public personality
was scheduled to make a statement inside the premises.
Although Tibisay Lucena did allow for the press to enter
El Poliedro, access was denied to some media
representatives by military officers guarding the venue.
Guards tried to confiscate the belongings of some of our
pollsters.
Meanwhile, the opposition tried to demonstrate against
the Constitutional Convention vote, with a concentration
eastern Caracas and lock-ins (multiple street
obstructions) across the country. However, the
government forbade street gatherings since Friday and
throughout the elections weekend, and moved quickly
to dissolve them. Opposition supporters were unable to
concentrate at the designated spot in Francisco Fajardos
highway in Caracas, while several lock-ins were
dispersed by security forces.
Reports of violence started to come in before noon.
Security forces the National Guard and National Police
dispersed protesters with teargas and rubber bullets,
forcing them to retreat. There were reports of property
damage and forced entrance on residential buildings by
security officers.
According to the Prosecutors office, 10 persons had
been killed as of the time of writing. Four of these cases
are being processed by Fundamental Rights Prosecutors
which suggest the involvement of security forces ,
other four cases by Common Offense Prosecutors, and
two by prosecutors assigned to General Family
Protection, as two of the victims were teenagers of 13
and 17 years old. The Prosecutors office also reported
58 arrests, similar to the number registered by Foro
Penal, a human rights NGO (60).
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Monday, July 31, 2017
Defense Minister Vladimir Padrino Lpez claimed that
opposition supporters violently besieged 200 polling
centers, despite these having been designated special
security areas. He also denied responsibility of the Armed
Forces for any of the deaths that occurred yesterday.
The opposition called for new demonstrations
tomorrow, including a major one at 5:00 pm to pray for
the fallen of yesterdays protests. Opposition leader
Leopoldo Lpez, currently under house arrest, urged the
international community not to recognize the
Constitutional Convention, writing on Twitter: I make a
call upon the worlds democrats: what corresponds is to
disown these fraudulent ANC, as the people of Venezuela
have done.
LAST DITCH ATTEMPT FOR
AGREEMENT FLOUNDERS
Talks were held throughout last week between
government and opposition leaders in an attempt to
reach a last-minute agreement. Although the
government had raised the possibility of delaying the
election and President Maduro had even said that he
was willing to give time for the opposition to register its
own candidates talks ended up focusing on the
possibility of imposing some limitations on the powers of
the Constitutional Convention and appeared to collapse
on Friday, according to several news sources.
Head mediator Jos Luis Rodrguez Zapatero released a
statement on Saturday calling on both groups to
cooperate in order to reach an agreement. He laid out a
possible agenda for the agreement, which added the
element of new rules and guarantees so that the
Constitutional Convention commit unequivocally with
the respect for the principles of the Republic,
constitutional powers and universal suffrage as the
exclusive source of legitimacy in power. This opens up
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Monday, July 31, 2017

the possibility that we will see post-election negotiations
on trying to impose limits on the powers of the
Convention (Box 1).
However, political debate in coming days is likely to be
dominated by fraud allegations. The perception that the
CNE altered the vote count is likely to lead some
opposition leaders to argue for the need to boycott
coming elections. In fact, President Maduro challenged
the opposition to register in the regional elections in a
speech broadcast after the CNE announcement. Maduro
also stated that the Constitutional Convention would
take control of the Prosecutor Generals office and that
it could initiate trials against opposition lawmakers

BOX 1: Jose Luis Rodrguez Zapateros statement on the Venezuelan crisis

Throughout the last few weeks I have held several meetings, both with Government and Opposition representatives, seeking
democratic coexistence and peace for Venezuela.
After last months events, after the loss of more than one hundred lives, after all talks we have held Im convinced that
only negotiation and agreement can end the serious crisis that Venezuela faces; a peaceful and negotiated solution which
the vast majority of Venezuelans desire.
During these conversations, I have identified the main topics in which an agreement has to be reached. I believe that, with
some willingness to reach-out to the other and a commitment to flexibility, the stances held by both Government and
Opposition would allow for the concretion of an agreement.
The topics pending definition are:
Establishing a precise timetable for local, regional and presidential elections;
Installing a Truth Commission tasked with taking immediate and extensive actions to address the liberation of prisoners;
Negotiating, in an also urgent manner, the procedure to end the contempt of the National Assembly;
Establishing new rules to guarantee that the Constitutional Assembly will respect Venezuelas Republican principles, the
authority of established political institutions, and universal suffrage as the sole source of political legitimacy;
Mutually agreeing on the implementation of economic and social policies, appealing also for external support to enact
them.
All of these agreements presuppose a call for peace, a repudiation of all forms of violence, and respect for the democratic
rights of all Venezuelan citizens.
Given that any agreement must be a reflection of the Peoples sovereignty; only Venezuelans, their leaders and citizen
representatives can decide on the foundations upon which it can be negotiated.
This negotiation process must be held with the participation of the Government, Opposition, and friendly countries, and
processes must be established to guarantee compliance with the agreements.
Today and tomorrow, Venezuela will go through historical hours; peace must reign during these. This is the commitment
delivered to me by the different political actors.
The right to abstain -to reject a given electoral consultation- is as fundamental as the right to vote; but the exercise of a right
is only legitimate if it is peaceful.
There is no possible coexistence under stark antagonisms; even less under violence and the excessive use of public force.
Sanctions, and their predictable consequences, would only make matters worse; likewise, unilateral proposals can never
satisfy the requirements of conflict resolution.

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I thus call upon the abandonment of the antagonistic accumulation of strengths in favor of a new dynamic of serious
commitment to negotiation. The principal responsibility is that of the Government, and to them I appeal for new conciliatory
gestures; but any actions in this regard would be fruitless without the Oppositions will and determination.
I wish to thank the evident disposition to reach a peaceful and democratic resolution, which I have observed during the
talks.
Through this statement, and with utmost respect for the Venezuelan political process, I call upon all Venezuelan leaders to
give a positive answer to the Venezuelan citizens desire for peace, democracy and coexistence.

Maduros approval rating falls to 17.4%

President Maduros approval rating
continued to decline in July, according to the
latest Omnibus survey carried out by
Venezuelan polling firm Datanlisis. Only
17.4% of Venezuelans approve of the way that
Maduro is carrying out his job, in contrast to
79.6% that disapproved him. This is the lowest
recorded level for Maduro since he was elected
to the Presidency and the lowest for a
Venezuelan president since the 1990s;
Maduros previous low (18.1%) had been
reached in November of last year. In fact,
Source: Torino Capital, Datanlisis
Maduro appears to have lost all the ground that
he had recovered between November and
April, when his approval rating had risen to
24.1%. The survey of household interviews was
carried out between July 8 and 19 and had a
sample size of 1,000 respondents and a margin
of error of 3.04%.

Continued poor economic performance

appears to be the key driver of Maduros
unpopularity. 90.6% of Venezuelans evaluate
the economic situation as negative, as opposed Source: Torino Capital, Datanlisis
to only 9.2% that see it as positive numbers
cost of living (14.3%) and personal insecurity (11.5).
that have not changed much over the past two years
Repression and abuse of force, for example, comes in
(Chart 2). The top three problems facing the country
fifth (5.0%), after a generic economic crisis response
cited by respondents are food shortages (28.7%), high
(7.0%).

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Nevertheless, the prolonged protest cycle also seems to
have contributed to the recent worsening in his
numbers. The survey seems to show that the
oppositions interpretation and storyline of the current
political standoff has been adopted by the majority of
Venezuelans. 58.7% of respondents indicate that they
support the oppositions protests (even if only 17.5%
claim to have participated in them). Most respondents
attribute violence in the protests to pro-government
paramilitary gangs (27.9%), the National Guard (23.3%)
or government infiltrators (11.9%);
much smaller shares blame
protesters or the opposition. 65.2%
of respondents claim that security
forces have carried out unjustified
repression.
opposition should participate in the Constitutional
Convention (a significant decline from June, when the
figure was at 39.2%), while 25.1% claimed to be willing or
very willing to vote in the elections for the Convention
that were held yesterday. If we use that number as a
(very optimistic) estimate of participation, it would
indicate that the government could potentially have
mobilized up to 4.9 million voters in yesterdays vote.
This evidence also sheds doubt on the official turnout
figures.

At a broader level, most Venezuelan

also appear to share the view that the
countrys democracy has been
eroded under chavismo. 69.4% of
respondents believe that there is no
freedom of speech in Venezuela,
while 76.9% claim that human rights
are not respected. 71.8% want
freedom for political prisoners, 85.6%
support a humanitarian channel for Source: Torino Capital, Datanlisis
food and medicine imports and 76%
believe that state institutions should respect the Opposition political leaders have seen a major recovery
decisions of the National Assembly. However, as we that parallels the drop in Maduros popularity. Approval
pointed out in last weeks report (Venezuela This Week: ratings for opposition leaders range from 54.2%
Sanctioning Venezuela), 55.3% oppose the oppositions (Leopoldo Lpez) to 41.2% (Freddy Guevara) and have
attempts to block the governments access to consistently risen over the last three months. Leopoldo
international financing and 63.3% oppose US economic Lpez and Julio Borges appear to have been the biggest
sanctions against the countrys oil exports. gainers over this period. In an open question about a
hypothetical presidential election, Leopoldo Lpez is
Not surprisingly, there is broad rejection of the initiative clearly ahead (26.1%), followed by Lara governor Henri
of the Constitutional Convention called by the Falcn (14.3%) and former Presidential candidate
government. Only 20.4% of respondents support holding Henrique Capriles (10.3%).
the Convention; 72.7% oppose it. 28.9% believe that the

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Source: Torino Capital, Datanlisis
It is somewhat puzzling that against this backdrop the
opposition chose to boycott the vote to the
Constitutional Convention, which it would have easily
won according to our estimates (see Electoral results
tainted by fraud allegations). One of the key questions
for next week is if the opposition will decide to
participate in the December 10 regional elections. On
the one hand, participating in these elections counts
with significant popular support 67.8% of opposition
supporters agree with participating in them, against
20.7% who are opposed, according to the survey. On
the other hand, hard-line groups may find it difficult to
justify participating in an electoral process organized by
state institutions which they no longer recognize as
legitimate or even legal.
All in all, the results show a government party that is
electorally very weak and seems unlikely to be able to
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Monday, July 31, 2017
muster more than one-fifth of voters support in any
election. It is possible that the poor results for the
government (and comparatively strong results for the
opposition) in this survey reflect the timing of the
survey (July 8-19, just as the opposition was organizing
its drive for the symbolic vote in which we estimate
7.6mn voters rejected the Constitutional Convention).
The key danger for the government is that as its support
drifts lower, it may no longer be enough to permit it to
maintain its hold on power even with the institutions of
an authoritarian state. In other words, even non-
democratic governments require some level of political
support for their grasp on power to be stable, and it is
unclear whether the governments current numbers are
still above that threshold.
 VENEZUELA THIS WEEK
The great reinversion
Over the past six months, PDVSA and Venezuela
yield curves have once again become inverted,
displaying a strong negative slope. This has come
together with a steady increase in the default
probabilities implicit in Credit Default Swaps. Typically,
yield curves have positive slopes, as issuers pay higher
costs for long-term financing. Highly distress debtors,
in contrast, sometimes develop inverted slopes, as
markets become fearful of a short-term credit event. In
the case of a default, it is often assumed that all bonds
will receive their recovery value; this drives the price of
near-term bonds down significantly, pushing up their
yields.
The probability of a Venezuela default within the next
five years rose to 95.6% last Friday, while that for a
PDVSA default reached 97.8%. These levels are
considerably higher than those observed in recent
months, when they hovered around the high eighties
for Venezuela and low nineties for PDVSA (see Chart 5).
A similar increase has occurred with the 1-year default
Source: Torino Capital
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Monday, July 31, 2017
probabilities, which are now at 62.8% for the sovereign
and 67.5% for PDVSA.
Despite their recent increase, these numbers are not
the highest observed. Default probabilities were
considerably higher in January of 2016, when
Venezuelan oil prices fell to the low $20s. But they do
show a significant deterioration from the levels of six
months ago. The bulk of the increase in perceived
default probabilities, in fact, appears to have happened
over the past four months.
Oil prices are at best a minor contributor to the
deterioration. Venezuelas oil basket closed last week
at $44.4, only a couple of dollars below its 12-month
peak of $46.9 reached in February. The continued
decline in oil production, though, could have helped
lead to downward revisions in perceptions about the
countrys capacity to pay, as production has fallen by 94
barrels to 2156tbd over the past six months, according
to data reported by the country to OPEC.
Inverted yield curves sometimes steepen ahead of large
amortization payments, as the market focuses on
assessing the debtors capacity to
service those obligations. This
however, does not seem to explain
what happened with Venezuela an
PDVSAs curves. In fact, default
probabilities reached their lowest
levels in the past two years around
March, despite the looming April
amortization payment on the PDVSA
5.25% 2017 bond. Despite a
relatively light payment schedule in
the summer months, the steepening
of the curves and increase in default
 VENEZUELA THIS WEEK
Monday, July 31, 2017

probabilities has been consistent over the past

few months.

In fact, the absolute value of the Venezuela

yield curve is at its highest in the last 12-
months despite the fact that the next principal
payment is more than one year away. In the
first half of the year, these slopes has fallen to
levels at which the estimates were not
statistically significant. For example, in March
of this year, an additional year in modified
duration led to a less than 200 basis point
decline in sovereign yield. By last week that
number had risen to more than 600 basis
points (Charts 6 and 7).
Source: Torino Capital
The timing of the deterioration is strongly
associated with the onset of the countrys
political crisis. The publication by the Supreme
Court of two controversial decisions restricting
parliamentary immunity and virtually
eliminating the powers of the National
Assembly on March 28 and March 29 led to the
eruption of protests. While these decisions
were subsequently rolled back, protest activity
continued, with the opposition calling
hundreds of thousands of persons to the
streets consistently during the month s of April
and June. The governments controversial
decision to convene elections for the
Constitutional Convention contributed to an
escalation of tensions with the countrys
opposition, leading to a cumulative toll of at Source: Torino Capital

least 122 deaths since the start of the protest,

according to Prosecutor General Office.
The continued increase in default probabilities and
absolute value of the slope of the yield curves over the
last month suggest that the prospect of US economic
sanctions and other countries not recognizing the
legality of the decisions of the Constitutional
Convention has led to an increase in perceptions that a
near-term default is probable. As we have discussed
previously (Venezuela this Week: Sanctioning
Venezuela, 7/24/17), US economic sanctions would
almost certainly lead to a change in the strength of the
governments willingness to service its debt obligations,

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 VENEZUELA THIS WEEK
Monday, July 31, 2017

which is largely based on its fear of attachment of assets increase in the perception that the country would not
and revenue flows in the United States. be able to meet coming amortizations. It certainly
appears improbable that authorities would be able to
It is also likely that the success of the oppositions
pull off an exchange similar to that offered last year for
strategy of closing off access to international financial
maturing PDVSA bonds given the concerns about
sources through both formal communications with
repudiation of any new issuance undertaken without
international financial institutions and more informal
National Assembly approval if the opposition were to
naming and shaming of institutions involved in
come to power.
providing financial access to Venezuela, led to an

Chart 8: PDVSA Yield curves, Jan 2016 Jul 2017

PDVSA 01/28/2016 PDVSA 01/28/2017

y = -11,329x + 78,77 y = -1,7991x + 31,693
120 120
100 100
80 80
60 60
40 40
20 20
0 0
0 2 4 6 0 2 4 6 8

PDVSA 07/28/2016 PDVSA 07/28/2017

y = -3,6174x + 44,901 y = -9,4108x + 67,339
120 120
100 100
80 80
60 60
40 40
20 20
0 0
0 5 10 15 0 2 4 6 8

Source: Torino Capital

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Absent changes in the political landscape, it is likely that
the current perceptions of near-term default risk and a
highly inverted yield curve will continue into coming
months. In fact, if the risk of US sanctions has caused
the inversion, we would expect a further increase in the
absolute value of the yield curve slopes if sanctions are
________________________ 16________________________
Monday, July 31, 2017
imposed. Moves towards an easing of political
confrontation and advances in negotiations between
the government and the opposition, in contrast, could
lead to a new disinversion of the country and PDVSAs
yield curves.
Francisco Rodrguez
Chief Economist
franciscorodriguez@torinocap.com
Phone: 212-339-0021 (O), 646-630-4883 (M)
 VENEZUELA THIS WEEK
Monday, July 31, 2017

MACROECONOMIC FORECAST TABLES

Table 5: Annual Economic Time Series and Forecasts, 2012-2018

Variable 2012 2013 2014 2015 2016(E) 2017(F) 2018 (F)

General indicators
Nominal GDP (US$ bn) 351.8 224.6 180.6 75.7 140.2 130.6 220.2
GDP per capita (US$) 11919.7 7499.8 6025.0 2489.9 4507.6 4145.6 6881.0
Unemployment rate (%) 7.8 7.5 7.0 6.8 7.3 7.9 7.5
Population (millions) 29.5 29.9 30.0 30.4 31.1 31.5 32.0
Output and aggregate demand components
Real GDP growth (% yoy) 5.6% 1.3% -3.9% -6.2% -17.0% -7.2% 3.3%
Domestic demand growth (% yoy) 12.3% -1.9% -8.8% -10.1% -26.8% -10.8% 8.8%
Real investment growth (% yoy) 23.3% -9.0% -16.9% -17.6% -29.1% -10.8% 12.4%
Real consumption growth (% yoy) 6.9% 4.4% -2.5% -6.7% -27.9% -11.8% 8.1%
Real private consumption growth (% yoy) 7.0% 4.7% -3.4% -7.8% -27.9% -12.0% 7.9%
Real government consumption growth (% yoy) 6.3% 3.3% 0.6% -2.4% -27.6% -11.2% 8.7%
Real export growth (% yoy) 1.6% -6.2% -4.7% -0.7% -7.0% -7.4% 0.4%
Real import growth (% yoy) 24.4% -9.7% -18.5% -18.7% -52.4% -28.9% 38.1%
Prices, wages and exchange rates
CPI inflation (% yoy, eop) 20.1% 56.2% 68.5% 180.9% 400.1% 717.2% 131.9%
CPI inflation (% yoy, avg) 21.1% 40.6% 62.2% 121.7% 299.4% 635.9% 336.6%
Minimum wages (% yoy) 27.2% 36.4% 68.4% 131.6% 453.8% 388.6% 71.5%
Transaction-weighted average exchange rate (vs USD, avg) 4.6 10.0 16.8 79.6 214.5 1729.2 5551.7
Transaction-weighted average exchange rate (vs USD, eop) 5.1 17.0 32.1 125.0 457.4 3490.4 7221.8
Nominal exchange rate 1 - DIPRO (vs USD, eop) 4.3 6.3 6.3 6.3 10.0 10.0 6957.0
Nominal exchange rate 2 - Other (vs USD, eop) 5.3 11.3 50.0 199.7 670.0 10155.5 -
Nominal exchange rate 3 - Parallel (vs USD, eop) 16.4 64.1 173.1 833.3 3164.7 16925.8 12174.8
Bilateral real exchange rate (% yoy, + dep) -3.3% 54.2% 11.2% 28.5% -33.8% -5.0% -9.9%
Monetary and credit indicators
Monetary base growth (% yoy) 55.3% 65.8% 70.4% 111.2% 236.0% 633.7% 88.2%
Broad money growth (% yoy) 61.0% 69.7% 64.0% 100.7% 159.6% 313.7% 54.4%
Central bank policy rate (%, eop) 29.5% 29.5% 29.5% 29.5% 29.5% 29.5% 60.0%
Commercial bank lending rate (%, eop) 16.3% 16.0% 18.9% 20.1% 21.8% 24.0% 48.7%
External accounts
Current account balance (% of GDP) 0.7% 1.2% 0.7% -26.9% -3.8% 4.6% -0.2%
Current account balance (US$ bn) 2.6 4.6 3.6 -20.4 -5.4 6.0 -0.5
Trade balance (US$ bn) 31.9 31.6 27.2 -1.0 9.4 17.1 12.0
Exports, f.o.b. (US$ bn) 97.9 88.8 74.7 36.3 27.2 30.2 31.1
Main export - Oil 93.6 85.6 71.7 34.1 24.9 27.8 28.6
Imports, f.o.b. (US$ bn) 66.0 57.2 47.5 37.4 17.8 13.1 19.1
Exports of services 2.2 2.2 1.9 1.5 1.5 1.6 1.6
Imports of services 19.4 19.3 16.9 14.6 10.8 7.2 8.9
Service balance (US$ bn) -17.2 -17.0 -15.0 -13.1 -9.3 -5.7 -7.3
Income balance (US$ bn) -11.1 -8.7 -8.4 -6.0 -5.4 -5.3 -5.1
Foreign direct investment (US$ bn) 0.9 2.5 2.1 3.3 2.9 1.0 1.0
International reserves (US$ bn) 26.5 24.6 21.1 17.8 12.6 9.7 10.5
Price of main export commodity - oil (US$ per barrel) 103.1 101.1 87.6 44.9 35.5 43.4 44.7
Fiscal accounts
Central gov. expenditures (% of GDP) 33.5% 33.3% 36.0% 33.9% 22.3% 20.9% 23.1%
Central gov. revenues (% of GDP) 27.8% 31.0% 35.0% 35.5% 24.8% 15.6% 19.3%
Central gov. primary budget balance (% of GDP) -2.6% 1.3% 2.1% 3.1% 3.7% -4.4% -3.0%
Central gov. budget balance (% of GDP) -5.7% -2.3% -1.0% 1.6% 2.5% -5.3% -3.8%
Restricted public sector expenditures (% of GDP) (1) 47.1% 47.1% 48.7% 49.7% 33.2% 31.1% 32.9%
Restricted public sector revenues (% of GDP) (1) 29.6% 30.2% 35.0% 39.3% 27.1% 15.7% 21.0%
Restricted public sector primary budget balance (% of GDP) (1) -13.6% -12.9% -9.6% -8.2% -4.5% -14.2% -10.7%
Restricted public sector budget balance (% of GDP) (1) -17.5% -16.9% -13.6% -10.4% -6.1% -15.4% -11.8%
Debt Indicators
Gross external debt (% of GDP) 37.2% 58.9% 75.2% 183.4% 90.9% 106.5% 62.9%
Public (% of GDP) 32.2% 49.9% 64.9% 158.8% 77.8% 92.8% 54.8%
Private (% of GDP) 5.0% 9.0% 10.3% 24.7% 13.0% 13.7% 8.1%
Gross government debt (% of GDP) 28.5% 39.7% 43.5% 55.5% 36.7% 32.3% 30.3%
Domestic (% of GDP) 15.6% 19.8% 19.5% 10.8% 3.4% 0.5% 0.2%
External (% of GDP) 12.9% 19.9% 24.0% 44.7% 33.4% 31.8% 30.1%
External debt amortizations (US$ bn) 7.3 10.3 11.7 12.1 8.6 6.4 6.0
External debt interest payments (US$ bn) 6.5 6.8 6.6 6.3 6.9 7.1 6.8
External debt service (% of XGS) 13.8% 18.7% 23.9% 48.6% 53.9% 42.6% 39.1%
Savings - Investment Balance
Savings (% of GDP) 19.7% 13.0% 3.2% 3.2% 7.0% 10.0% 11.0%
Investment (% of GDP) 20.3% 22.2% 21.6% 15.8% 11.3% 9.8% 8.9%

(1) Restricted public sector includes central government plus PDVSA

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Table 6: Quarterly Economic Time Series and forecasts, 2015-18

2015 1Q 2Q 3Q 4Q
Real GDP growth (% yoy) -1.4% -4.7% -7.1% -10.7%
Real GDP growth (% qoq, sa, annualized) -0.9% -16.5% -2.7% -21.5%
CPI inflation (% yoy, eop) 82.4% 97.2% 141.5% 180.9%
Imports of goods, growth (%, yoy) 1.5% -22.3% -27.3% -31.3%
Transaction-weighted average exchange rate (vs USD, eop) 40.3 79.7 117.2 125.0
Current account balance (US$ bn) -6.1 -1.9 -5.1 -7.3
Nominal exchange rate 1 - DIPRO (vs USD, eop) 6.3 6.3 6.3 6.3
Nominal exchange rate 2 - DICOM (vs USD, eop) 185.8 198.4 199.3 199.7
Nominal exchange rate 3 - Parallel (vs USD, eop) 252.6 484.4 823.1 833.3
2016(E) 1Q 2Q 3Q 4Q
Real GDP growth (% yoy) -16.9% -16.5% -19.4% -13.7%
Real GDP growth (% qoq, sa, annualized) -25.7% -15.8% -11.2% -0.7%
CPI inflation (% yoy, eop) 208.3% 257.5% 322.8% 400.1%
Imports of goods, growth (%, yoy) -51.6% -49.5% -49.8% -58.4%
Transaction-weighted average exchange rate (vs USD, eop) 173.2 182.1 190.6 457.4
Current account balance (US$ bn) -1.4 -1.3 -1.5 -1.2
Nominal exchange rate 1 - DIPRO (vs USD, eop) 10.0 10.0 10.0 10.0
Nominal exchange rate 2 - DICOM (vs USD, eop) 229.7 591.6 650.0 670.0
Nominal exchange rate 3 - Parallel (vs USD, eop) 1172.6 1043.6 1078.3 3164.7
2017(F) 1Q 2Q 3Q 4Q
Real GDP growth (% yoy) -9.8% -7.4% -6.8% -5.2%
Real GDP growth (% qoq, sa, annualized) -3.8% -6.6% -5.4% 3.3%
CPI inflation (% yoy, eop) 481.2% 597.0% 671.9% 717.2%
Imports of goods, growth (%, yoy) -30.7% -26.8% -27.6% -19.8%
Transaction-weighted average exchange rate (vs USD, eop) 582.7 1343.0 2466.9 3490.4
Current account balance (US$ bn) 2.1 1.2 1.3 1.5
Nominal exchange rate 1 - DIPRO (vs USD, eop) 10.0 10.0 10.0 10.0
Nominal exchange rate 2 - DICOM (vs USD, eop) 710.0 2640.0 4974.4 10155.5
Nominal exchange rate 3 - Parallel (vs USD, eop) 3790.8 7781.0 14212.5 16925.8
2018(F) 1Q 2Q 3Q 4Q
Real GDP growth (% yoy) 3.3% 2.3% 2.7% 4.8%
Real GDP growth (% qoq, sa, annualized) 25.1% -10.0% -1.9% 10.1%
CPI inflation (% yoy, eop) 829.1% 513.2% 268.2% 131.9%
Imports of goods, growth (%, yoy) 36.6% 42.5% 53.1% 53.3%
Transaction-weighted average exchange rate (vs USD, eop) 5381.3 6229.5 6805.3 7221.8
Current account balance (US$ bn) 0.4 1.1 0.6 1.2
Nominal exchange rate 1 - Other (vs USD, eop) 5184.0 6001.1 6555.8 6957.0
Nominal exchange rate 3 - Parallel (vs USD, eop) 9072.0 10502.0 11472.6 12174.8

Disclosure: Although the statements of fact and data in this presentation have been obtained from, and are based upon, sources that Torino
Capital LLC believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All
opinions included in this material constitute Torino Capital LLCs judgment as of the date of this material and are subject to change without
notice. This material is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or
sale of any security. This is a product of the sales and trading desk and should not be considered research. It is intended for institutional,
professional and accredited investors only.

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