Venezuela Pharmaceuticals and Healthcare Report Q1 2011
BMI calculates that pharmaceutical sales in Venezuela, under pressure from economic and pricing factors, reached VEB12.76bn (US$5.95bn) in 2009, a 31.2% local currency year-on-year (y-o-y) increase. However, this was largely because of double-digit inflation levels, rather than a reflection of true market development. Inflation is expected to continue to be a massive problem in the coming years, remaining partly responsible for pushing the overall market value to grow at a compound annual growth rate (CAGR) of 13.63% in the 2009-2014 period. However, US dollar CAGR development will fall firmly in the negative territory (to -16.5%), due to weak local tender. Chávez has made it clear that a weaker bolívar is part of a strategy to discourage imports whilst trying to bolster exports and domestic productivity. However, although the devaluation is doubtless one key step towards reducing distortions in the economy – and reflects some pragmatism on part of Chávez – the messy nature of the new exchange rate set-up could work against the government’s objectives.
Additionally, despite significant oil reserves, BMI’s country risk team forecast economic growth to recover very slowly from the deep recession of 2009. The consumer price inflation increase is expected to top 34% y-o-y by the end of 2010 and production capacity may be further eroded by possible government appropriations. Widespread corruption and rising state interference in private business also contribute to the fact that Venezuela remains a majorly risky market in which to operate. Similarly, while we revised our real GDP growth forecasts for Venezuela upwards, we are still projecting negative growth, of -2.0% in 2010. The figure is expected to return to positive territory in following years, but we caution that structural imbalances in the economy are only likely to deepen as there is little to suggest that President Chávez's distortive policy mix will let up anytime soon.
Our Q111 Business Environment Ratings tables for the Americas – and the world – continue to reflect the fact that Venezuela’s pharmaceutical market is one of the most challenging in the region. Venezuela again finds itself with the third lowest overall rating in the Americas region, as the operating environment for drugmakers remains suboptimal due to weak intellectual property (IP) laws and a political regime that does not favour private enterprise. However, the structure of the country, with its fast-growing urban population, creates an environment in which strong returns can be achieved, particularly for players with a strong hand in the generics sector, although risks continue to be on the downside.
On a positive note, president of the UN General Assembly, Ali Abdussalam Treki, said in September 2010 that he admired Venezuela’s progress toward achieving its Millennium Development Goals (MDGs) according to venezuelanalysis.com. The Venezuelan National Statistical Institute states that the country has already achieved a significant amount of the MDGs with five years remaining to accomplish them all. The country is also aiming to increase access to antiretrovirals (ARVs) by offering those medicines free to patients suffering from HIV from 2011,"
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