Boston, MA -- (ReleaseWire) -- 05/05/2014 -- BMI View: Foreign currency controls and drug price cuts will continue to affect pharmaceutical companies' profitability, with the currency devaluation and high inflation exacerbating the situation. A close relationship and effective communication with the Venezuelan government are vital for the survival of domestic pharmaceutical companies. As the Venezuelan government tries to increase access to medicines, more co-ordination with drug producers to address these issues will become necessary.
Headline Expenditure Projections
- Pharmaceuticals: VEB59.85bn (US$9.85bn) in 2013 to VEB87.95bn (US$10.00bn) in 2014; +46.9% in local currency terms and 1.5% in US dollar terms. Forecast upwards from Q114 due to higher inflation forecast.
- Healthcare: VEB126.67bn (US$20.85bn) in 2013 to VEB185.43bn (US$21.08bn) in 2014; +46.4% in local currency terms and 1.1% in US dollar terms. Forecast up due to macroeconomic data changes.
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Risk/Reward Rating: Venezuela comes ninth in BMI's RRR matrix for Q214 in America, which ranks pharmaceutical markets according to their attractiveness to multinational drugmakers. Venezuela's pharmaceutical market is expected to grow at double-digit rates through to 2023 in local currency terms, largely due to inflation.
Key Trends And Developments
- In February 2014, the shortage of drugs in Venezuela increased by more than 10 percentage points and exceeded 50%. This has led to a deepening of the crisis in the distribution of drugs in the country. The government has not paid the more than US$3.5mn debt to international companies, and, as a result, these companies have cut down the supply of drugs to the country, according to president of the Venezuelan Pharmaceutical Federation Freddy Ceballos.
- In January 2014, Venezuela's local industry association CIFAR presented project plans to build new pharmaceutical plants to the national government. CIFAR, the representative of a large number of domestic pharmaceutical companies, expressed its interest in acquiring advanced machinery from overseas to produce more medicines that Venezuela needs.
BMI Political View: Venezuela's municipal election results are a disappointment for the opposition, which trailed the ruling party by seven percentage points in the popular vote according to preliminary estimates. Although our fundamental concerns about macroeconomic governance and political risk in the country remain, the outcome will afford the administration of President Nicolas Maduro sufficient political cover to enact modest reforms without losing face, and may lead to a short-term improvement in the country's credit profile.
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