Murex Weekly Comments -- July 5th

8/6/2019 Murex Weekly Comments -- July 5th

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solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Murex Capital and

its subsidiaries. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, orneeds of individual clients. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete,

and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material and are subject to

change without notice.

Weekly Market CommentsJuly 5, 2011

Venezuela UpdatePresident Chavez went to Cuba on June 10th in order have an operation to treat a pelvic abscess. At thattime, doctors discovered some tumors that a subsequent biopsy reveled should be treated urgently.

Chavez underwent another surgery on June 20 and stayed in intensive care until the 24th in accordanceto his own admission. He is presently under a rigorous cancer treatment involving chemotherapycombined with around the clock care. In other words, his health remains fragile and his prognosis istreated as a state secret.

To the surprise of many, President Chavez landed in Venezuela at about 3:30 AM on Monday and wasreceived by a small group that included the Vice President and some of his ministers. The officialtelevision staged a brief interview during which he seemed in good spirits and later in the day he gave aspeech to his hard core followers from the balcony of Miraflores in a reminiscent Peron moment. Thereturn was driven by the need to avoid a power struggle, fill-in the political void he left while outside thecountry and take away the oppositions argument that he was incapacitated.

Mr. Chavez arrival in the middle of the night to avoid the crowds, his brief and staged interview at theairport, the brief speech from the balcony of Miraflores and finally his move to Fuerte Tiuna suggests a

very serious condition. Given this premise, investors should be working on constructing some post-

Chavez scenarios. That is not to say the Mr. Chavez may not recover, win next year elections and remainseveral more years in power -- such scenario however, has deeply diminished probabilities.

From a constitutional standpoint, if Chavez dies or is incapacitated to govern, then the Vice President,Mr. Elias Jaua, should finish the mandate which lasts until the end of 2012. Our sources indicate thatMr. Jaua will be replaced by the now foreign minister Mr. Nicolas Maduro and that General HenryRangel Silva will be the next Minister of Defense. The changes may signal that he may be absent for along period of time while the strong Mr. Maduro and General Rangel Silva keep things under control(covering the political front and the armed forces respectively). The positioning of Mr. Maduro indicatesthat Chavez considers him a potential successor.

We understand that on the advice of his Cuban friends, the President may also try to position hisbrother Mr. Adan Chavez (governor of Barinas state and with strong Cuban ties) at the center ofChavismo. At this point it is unlikely that he will develop the following needed to win an election or thathe is as savvy enough to manage the different factions of Chavismo.

One figure with good probabilities to win an election from within Chavismo is Mr. Diosdado Cabellowho was Mr. Chavez Chief of Staff and Vice President before he was pushed out due to his risingpopularity that was starting to eclipse that of his boss. He has strong ties with the armed forces and thepowerful General Henry Rangel Silva, but he is also linked to drug trafficking and corruption. It is fairto say that he has a large war chest to make a strong bid for the presidency, but he needs to cut a deal

with Chavez himself in order to succeed.

After more of a decade of Chavismo, the opposition is not well organized or prepared to take over thegovernment. The governor of Miranda state, Mr. Henrique Capriles Radonsky, is the best figure withenough pull to bring the opposition together and win the upcoming presidential elections in 2012.

The potential political transition next year, the probable infighting within Chavismo and enoughtime for the opposition to put their act together; all increases the attractiveness of Venezuelanassets. Prices could go $5 to $10 higher in the middle and long end of the curve in the next fewweeks.Jorge A. Piedrahita

PS: The announcement that PDVSA will issue a new 2013 bond with the same terms and conditions

than the outstanding 2013 but with a different ISIN that will not merge with the old one got many by

surprise. Sources indicate that the previously announced re-tap of the PDVSA 2022 is on hold for now

and the announced 2013 will be used to swap or pay Templeton for its holdings of the PDVSA 2011.