We maintain a cautious view on the impact of US sanctions relief on Venezuela's oil sector. Prospects hinge on the extent of sanctions reimposition, including licenses for private oil companies. We project real GDP growth of 4.2% in 2024, amid higher oil production and a decline in inflation.

The U.S. has temporarily lifted economic sanctions on Venezuela, leading to a sharp resurgence of investor interest. Heightened tensions over the Guyana Essequibo region and the recent order to arrest opposition members in Venezuela seem to undermine Venezuela s negotiated position to end sanctions and raise the possibility of the reimposition of snapback sanctions.

We project a real GDP contraction of 7.5% in 2020 and a modest rebound in 2021. Tourism remains depressed, but remittances have surpassed pre-COVID-19 levels. SLV, JAM, and PAN are set to endure the steepest recessions, while GTM should contract the least due to its stable macroeconomic framework.

Exchange rate flexibility has eased the adjustment to COVID-19 in most large countries. However, "fear of floating" is still high across Central America and the Caribbean. While local market financing is increasing, countries have largely had to borrow in hard currency to help withstand the shock.

COVID-19 has increased external funding challenges despite moderate borrowing needs. Notwithstanding oil price relief, collapsing remittances and tourism will weigh on current account receipts. While some countries have tapped global debt markets, uncertainty over financing sources remains.

COVID-19 has affected Latin America through multiple channels. Pre-existing challenges and increased exposure put the region in a difficult position. We project a deep recession this year amid a sudden stop in capital flows and limited policy space.

Current account deficits in Frontier LatAm are wide by EM standards, largely due to energy trade imbalances, but lower oil prices since 2014 have helped ease financing gaps. Despite global headwinds and regional tensions, we project CA deficits to stay contained in 2019-20, broadly financed by FDI.

We still expect Brent oil prices to average $65/b in 2019 and $62/b in 2020. Growth in non-OPEC supply combined with deceleration in global oil demand growth in 2019 and 2020, is offsetting upward pressure on oil prices from rising geopolitical tensions that could disrupt supply.

Venezuela’s oil sector has been in decline for decades. As in Iran, US sanctions are having a severe impact, making the oil output collapse almost unprecedented. Even though sanctions did not deter Asian buyers, the oil sector’s outlook is dim unless policies change.

Venezuela’s GDP decline is nearly unprecedented, as is the collapse of oil output, its main export. The initial impact of US sanctions was manageable, but history suggests they will have severe effects. Recoveries from oil output collapses tend to be fast, making higher oil revenue feasible if policies change.

We present estimates of Venezuela’s external debt, which more than doubled in the last decade. Nearly half of Venezuela’s debt sits with PDVSA. Non-bonded debt, especially bilateral loans, is high. External debt rose sharply relative to exports, and, on this metric, is very high relative to peers.

External funding dried up as the economy collapsed, pushing the current account roughly into balance. Import compression was unavoidable as exports fell. External deficits are not the issue, unlike past EM crises.

We assess Venezuela’s macroeconomic fundamentals after years of policy mismanagement and social turmoil. The GDP drop is on par with the Soviet Union’s collapse.

In our last edition of Sticky Notes in 2018, we look at President Xi's reform anniversary speech, Venezuela's future, NAFTA termination, oil markets, and a potential U.S. government shutdown.

GDP and political institutions have collapsed, and hyperinflation is well entrenched. There is no foreign exchange left to meet external debt payments.

" Flat yield curve? No problem " Fund investors slash exposure to Mexico " U.S. tax reform-the waiting is the hardest part " Venezuela-the check i.

" A negotiated solution to the political crisis has become more difficult following the regional elections " The likelihood of holding a legitimate.

Limited access to global debt markets and waning oil income has eroded international reserves While debt servicing has been a government priority, dra.

" Dueling policymakers " Currency valuation in focus " Intra-EM correlations on the rise-trouble brewing? " Venezuela-new sanctions could squeeze.

The increasingly repressive government of Nicol s Maduro has dispelled hopes for political change. Foreign exchange shortages have intensified and ar.

Bond swap falls below target. On October 24, state-owned oil company PDVSA announced that holders of 39.4% of the $7.1 billion in bonds due in April a.

PDVSA has proposed to exchange senior unsecured bonds maturing in 2017 ($7.1.

Default would l.

" The' economic crisis' is deepening.' Real GDP contracted 5.7% in 2015, annual inflation is running above 200%, and food and medi.

A massiv.

A pivotal victory. Amid strong voter turnout (about 74%), the opposition candidates unified under the Democratic Unity Round Table (MUD) have thus far.

B arring an unexpected surprise, the opposition should seiz.

The policy response so far has mainly consisted of increasing external borrowing where it still can, but this life line runs the risk of being exhaus.

The oil price slump has stoked external default fears and heightened risks of social upheaval. The policy response, thus far, has consisted of seeking.

Policy inaction has further deepened macroeconomic imbalances. Meanwhile, stagflation, shortages of goods and public insecurity continue to brew socia.

Persistent social protests are threatening political stability and weighing on the economy's performance. Although the government has induced a 60% de.

University students-led protests have escalated challenging the administration of President Nicol s Maduro. Social unrest is being fueled by rampant.

Policy mismanagement in the context of stabilizing oil prices has exposed Venezuela's deep macroeconomic imbalances. Seeking to restart growth, the go.

President Nicol s Maduro is struggling to boost growth and stem inflation. With very limited policy scope, we expect the government to devalue the bo.

President Nicol s Maduro faces the daunting task of addressing rapidly growing fiscal challenges while avoiding political upheaval stemming from the.