You are on page 1of 10

30 November 2015

Economic Research

Venezuela: Legislative
elections preview
Economics Emerging Markets Latin America Venezuela

Research Analysts
How big could the opposition win?
Alberto J. Rojas
52 55 5283 8975
Legislative elections will be held on Sunday, 6 December and may be the
alberto.rojas@credit-suisse.com greatest electoral test that Chavismo has ever faced. The outcome could set
a new tone for Venezuelas political environment.
Casey Reckman
212 325 5570 The degree of presidential approval has historically been a good proxy for
casey.reckman@credit-suisse.com voter support for the ruling PSUV party. President Nicolas Maduros approval
rating was 22.9% in October according to Datanalisis. Other surveys suggest
that his popularity could be closer to 20%. Triple-digit inflation and acute basic
goods shortages are cited among the countrys biggest problems, as is
rampant crime.
Still, popular voting results do not translate one-to-one to the composition of
the unicameral National Assembly. This is due to the complicated manner by
which legislators are selected as well as gerrymandering. We estimate that
the opposition MUD coalition would require nearly 54% of the popular vote in
order to secure a simple majority in the National Assembly. Our model
suggests that it would need at least 59% of the popular vote in order to
capture the two-thirds majority that would allow it to pursue more meaningful
institutional changes.
We think that the opposition could win two-thirds of the National Assembly's
seats. Polls place it over 30 percentage points ahead of the ruling party in
terms of voting intentions, which could be enough to overcome the structural
factors that benefit Chavismo, in our view. A victory of this magnitude could
give the opposition momentum to push for political change, although it lacks a
clear policy agenda and its efforts may be frustrated by other Chavista-
dominated institutions. Such a big loss could also drive serious questions
about President Maduros leadership and fuel cracks within Chavismo.
We are not convinced that the opposition winning a simple majority would
trigger significant changes in Venezuela. Many of the powers associated with
a simple majority could be thwarted by the executive and judicial branches, in
our view. Furthermore, Chavismo could ironically see this outcome as
something of a victory given its poor prospects. We also note our concerns
that possible perception of a large-scale electoral fraud, which could occur if
the PSUV retains the majority, could lead to political and social instability as
well as a potential interruption in debt service.
We are not optimistic that economic policy will be adjusted in any scenario.
Substantive modifications are unlikely in a more confrontational political
climate, in our view. Moreover, both Chavismo and the opposition could be
reluctant to take responsibility for enacting unpopular measures, especially
with a potential presidential recall referendum looming in 2016. Thus, we still
see significant risk of a credit event as soon as the fourth quarter of 2016.

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES AND
ANALYST CERTIFICATIONS.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION
Client-Driven Solutions, Insights, and Access
30 November 2015

Chavismo faces its most difficult election


Legislative elections will be held on Sunday, 6 December. Venezuelans will choose 167
lawmakers to serve five-year terms. The number of seats in the unicameral National
Assembly will increase by two compared with the 2010 election due to population-related
changes. Aragua, Gurico and Nueva Esparta will each elect one additional lawmaker,
while the Capital District (Caracas) will choose one less. We would expect preliminary
results on Sunday night, although these could be released quite late. The National
Electoral Council (CNE) will likely make an announcement on national television and
figures should eventually be published on its website. Local press and social media should
also have information. The new national assembly will be seated on 5 January 2016.
These elections are possibly the greatest Exhibit 1: Presidential approval vs.
electoral test Chavismo has faced in its national election results
17-year history as a political movement %
since the ongoing economic crisis has
President's approval rating
generated substantial pressure on 80
President Nicolas Maduro and the ruling 70 Chavismo support in a national
PSUV party. Citizens cite shortages and 60 election
loss of purchasing power as bigger
50
problems than insecurity nowadays. They
hold President Maduros administration 40
more responsible for these problems than 30
they did President Hugo Chavezs and an 20
increasing number of people feel that
10
Maduro no longer represents Chavezs
legacy. The latter sentiment is fueling 0

Jul-00

Aug-04

Dec-07

Feb-09
Aug-06

Sep-10

Oct-12

Apr-13
divisions within Chavismo, as evidenced
by the rise of the leftist "Red Tide
movement and a growing proportion of
Source: CNE, Datanalisis, Credit Suisse
opinion survey respondents who say that
they prefer change from a source besides Chavismo or the MUD.
In this context, President Maduros approval rating stood at 22.9% in October according to
a Datanalisis poll. Other surveys have shown his support as low as 20%. This is the
weakest backing for a Chavismo president ahead of a national election since it came to
power in 1998.
The level of presidential approval has historically been a good proxy for the ruling partys
electoral support. In fact, these two metrics have never differed by more than four
percentage points since Chavismo began participating in national elections (Exhibit 1).
This could be related to Venezuelas very polarized and president-driven political setting,
in our view. Chavismo could obtain somewhere between just 18.9% and 26.9% of the
popular vote if this relationship holds up on 6 December. In fact, the October Datanalisis
survey showed the MUD opposition coalition with 63.2% of popular voting intentions
versus 28.2% for Chavismo.

Structural factors merit consideration


An opposition electoral victory does not guarantee an opposition-controlled congress as
popular voting results do not translate one-to-one to the National Assembly. As a
reference, the opposition won roughly 51% of the popular vote in the 2010 legislative
elections versus 49% for the ruling party and its allies.1 Still, Chavismo obtained 98 seats
versus 67 for the opposition (Exhibit 2). The opposition later lost two seats when its
representatives were removed and replaced with Chavista-aligned lawmakers.

1 This opposition tally includes the around 3% of votes received by Patria Para Todos (PPT), which had split from Chavismo at the
time. Many of the PPT's most prominent leaders have since left the party, reducing its importance.

Venezuela: Legislative elections preview 2


30 November 2015

Exhibit 2: 2010 National Assembly Exhibit 3: Current National Assembly


election results composition
Number of seats (lhs), % (rhs) Number of seats

100 Seats (lhs) 52


90 Votes (rhs)
80
51
70
60
65

50 50 Opposition
Chavismo
40
100
30
49
20
10
0 48
Chavismo Opposition
Source: CNE, Credit Suisse Source: CNE, National Assembly, Credit Suisse

These disproportionate results are partly due to electoral rules. A total of 54 lawmakers will
be chosen by "list" and 113 will be selected by "circuit in this election. The winning list
lawmakers will be determined according to the D'hondt method. All states will elect two
lawmakers by list except Carabobo, Miranda and Zulia. Those three states are each
allocated three list seats due to their larger populations. Another three list lawmakers will
be elected to represent indigenous communities. Meanwhile, the remaining National
Assembly members will be elected by "circuit" in 87 constituencies. 2 Each circuit is
comprised of a group of counties. The number of seats afforded to each circuit is
determined by population size. Venezuelan voters will cast as many votes as their circuit
has seats, plus one for their preferred list.
This list methodology can lead to overrepresentation of rural areas with smaller
populations, which is where Chavismo has historically been strongest. The boundaries of
the circuits, which are drawn by the Chavista-dominated CNE, may also enhance rural
voters influence. In fact, according to official figures, 61.9% of Venezuelas population
resides in the seven most populous states and the Capital District.3 However, only 47.9%
of National Assembly seats are allocated to these areas between the lists and the circuits.

Where is the bar for the opposition?


We estimate that the MUD coalition would need to obtain close to 53.9% of the popular
vote in order to secure a simple majority in the National Assembly. About 56.5% would be
required to achieve a three-fifths majority, according to our calculations. Additionally, our
model suggests that 59.2% of the popular vote would allow the opposition to capture the
two-thirds majority necessary in order to pursue more significant institutional changes.
The October Datanalisis survey showed the MUD opposition coalition with a 35.0
percentage point lead in popular voting intentions. Other recent polls put the MUD ahead
by at least 30.0 percentage points. This difference could be large enough to turn the
electoral system's structural factors in favor of the opposition, in our view. We assume that
the current electoral regime benefits large, united political movements, regardless of
whether it is Chavismo or the MUD in this case. Thus, we give the opposition coalition
credit for remaining intact for the purposes of this election, despite Chavismos control of
crucial institutions, increased resources and stronger political machine.

2 Please see Appendix 1 for an example of how this works in Monagas state.
3 Venezuela's most populous states are Anzotegui, Aragua, Bolvar, Carabobo, Lara, Miranda and Zulia.

Venezuela: Legislative elections preview 3


30 November 2015

We compute our thresholds by taking the results of the 2010 legislative election and
adding a constant (c) to opposition support in every legislative race. Under a polarized
scenario, the net effect of c is twice its value since Chavismo loses one percentage point
for every one the opposition gains. This helps explain why the opposition would not need a
larger incremental share of the popular vote to ascend from a simple majority to three-
fifths and two-thirds in our analysis.
Of course the victory margin could vary in magnitude across different electoral districts.
For instance, there are 17 circuits where the difference in the popular vote for Chavismo
and the opposition was below 10% in 2010. Twenty-one seats will be in play in those
particular districts this time around, four seats more than the opposition would need to
increase its share of the National Assembly to a simple majority.
Voter turnout could also be an important factor in these elections. Historical data suggest
that lower participation seems to benefit the PSUV more than the opposition. However,
recent polls indicate that a larger share of Chavistas than opposition voters say that they
could abstain this time around. Datanalisis figures point to 65%-70% turnout on 6
December, which is similar to the 66% participation rate recorded in 2010.

Post-election scenarios
Below we discuss four possible outcomes and their implications for Venezuelas political
and economic outlook.

1. The opposition wins a simple majority


The opposition must secure at least 84 seats to capture a simple majority. This seems
quite feasible in the current political environment, but would probably not lead to significant
changes in the near term, in our view.
With a simple majority, the opposition would control important congressional committees.
It could pursue an Amnesty Law to free alleged political prisoners such as Leopoldo Lopez,
Antonio Ledezma and Daniel Ceballos. It could also try to initiate the process of calling a
presidential recall referendum in 2016, which would probably be the most orderly path to
regime change in the near to medium term, in our view.4 Some MUD leaders have also
expressed interest in formally requesting Maduros resignation or trying to amend the
constitution to reduce the length of the presidential term.
Ironically, Chavismo could interpret this outcome as something of a victory given its poor
prospects. It would retain significant representation in the National Assembly, and it could
also employ its control of other government institutions to undermine opposition-led
initiatives.
We would expect economic policy continuity in this scenario. The executive branch would
probably remain empowered to make most economic decisions and still be reluctant to risk
governability by making meaningful adjustments with a potential recall referendum on the
horizon. Furthermore, the opposition has not articulated a clear and unified plan for
addressing macroeconomic imbalances or the dollar-denominated debt service burden.
Instead there is evidence of disagreement among its leaders, which is not surprising given
that most necessary measures would probably be highly unpopular.

4 The referendum process can begin once President Maduro has completed the first half of his term. There is debate about whether
his term technically began on 10 December 2013, which is when President Hugo Chavez would have been sworn in if he had not
been ill, or on 19 April 2016, following Maduro's victory in a special presidential election. We tend to assume that the CNE and
TSJ would favor the later date.

Venezuela: Legislative elections preview 4


30 November 2015

2. The opposition wins a three-fifths majority


At least 100 seats are needed for a three-fifths or qualified majority. We would not expect
this scenario to differ substantially from the simple majority case other than it could be
nosier. A qualified majority is the hurdle for authorizing presidential decree powers, which
the opposition would almost certainly not do. It would also allow the opposition to censure
and remove the Vice President and ministers. This possibility could increase pressure on
the government and help facilitate dialogue with the opposition, but may not lead to much
more significant policy changes than a simple majority would, in our view.

3. The opposition wins a two-thirds majority


This would require 112 of the National Assemblys 167 seats. We think that this is a
realistic possibility. A victory of this magnitude could give the opposition momentum to
push for more meaningful political changes even though it lacks a clear policy agenda and
its efforts may be frustrated by other Chavista-dominated institutions. Such a big loss
could also amplify serious questions about President Maduros leadership and fuel cracks
within Chavismo.
This super-majority would give the opposition the power to approve and modify organic
laws and to amend the constitution. It could initiate the process of removing and replacing
members of the CNE and Supreme Court (TSJ), although this would also require backing
from Chavista-controlled bodies.5 A two-thirds majority would also allow the opposition to
call for a constituent assembly, which could reshape the government under a new
constitution, albeit after a lengthy process.6
We note that some of these actions have not been attempted previously under the current
Constitution. Local legal experts have told us that these procedures could take a
considerable amount of time as a result and could also potentially be blocked by the TSJ
over technicalities. We also highlight the risk that a share of oppositions support could be
driven by social discontent rather than attracted by promises to pursue these changes.
We would not expect important economic policy changes in this scenario of significant
political turmoil either. We would expect dollar-denominated debt service to continue as
long as capacity to pay remains intact.7

4. Perceptions of widespread electoral fraud lead to crisis


We see potential for political instability if the electoral results differ substantially from what
opposition auditors report.8 This is not our base case, though, as massive fraud seems
difficult to execute and would risk the governments legitimacy at home and abroad.
The consequences of this scenario are rather unpredictable. It could be unlike the
opposition-led protests in early 2014, when Chavismo actually unified around President
Maduro, because Maduros popular support is now so much lower and Chavismo suffers
from greater fatigue. 9 One option for the government could be to tighten its grip and shift
in a more autocratic direction. Alternatively, the military, which has allies in many
gubernatorial offices and the majority of economic cabinet posts, could also play a role in a
regime change scenario.10
We would not expect economic policies to be modified in the midst of a power struggle,
but would be more concerned about continuity of debt service in a chaotic environment.

5 Please see appendix 2 for more details on how the government could obstruct these changes.
6 Please see appendix 3 for more details on the constituent assembly process.
7 The soonest Venezuela and/or PDVSA could default would be the fourth quarter of 2016, according to our estimates.

8 UNASUR's observation mission will share its findings with the CNE, but they will not be published.

9 President Maduro's approval rating was at 46.8% on February 2014, according to Datanalisis.

10 Please see Appendix 4 for a list of military-affiliated governors and cabinet members.

Venezuela: Legislative elections preview 5


30 November 2015

Appendix 1: An example from Monagas


We use an example from Monagas state, a well-known Chavista stronghold, to illustrate
the asymmetric relationship between the popular vote and the number of seats allocated in
the National Assembly. In Monagas, two lawmakers are elected by list and four are
chosen by circuit. Circuit 1 has three lawmakers and circuit 2 has one. The PSUV won the
popular vote by at least 20 percentage points in both circuits in 2010 and secured all four
circuit seats (Exhibit 4). If the opposition were to gain support in Monagass circuit 2, it
would pick up only one lawmaker. In fact, in an extreme case, the opposition could receive
57% of the state's popular vote and obtain only 25% of the circuit seats (Exhibit 5).

Exhibit 5: Monagas circuit results


Exhibit 4: Monagas 2010 circuit assuming an asymmetric increase in
results opposition support
% (lhs), number of seats (rhs) % (lhs), number of seats (rhs)

70 Votes (lhs) Seats (rhs) 4 100 4


Votes (lhs) Seats (rhs)
60
80
50 3 3
40 60
2 2
30 40
20 1 1
20
10
0 0 0 0

Chavismo

Chavismo
Opposition

Opposition
Chavismo
Chavismo

Opposition

Opposition

Circuit 1 Circuit 2 Circuit 1 Circuit 2


Source: CNE, Credit Suisse Source: Credit Suisse

Appendix 2: Requirements for structural changes


CNE officials
The National Assembly can vote to remove CNE officials, according to Constitutional
Article 296. The necessary majority is not specified, but we assume that it is two-thirds.
This would also require confirmation by the Supreme Court (TSJ), which could be a
significant obstacle as it has typically sided with Chavismo in Venezuelas recent history.

TSJ Justices
TSJ Justices can be removed with the approval of two-thirds of the National Assembly.
However, this process must be initiated by the Citizens power branch of the Venezuelan
government as per Constitutional Article 265. The Citizens' power is comprised of the
People's Ombudsman, the Attorney General and the Comptroller General. This could
represent another impediment as these government-appointed officials have also tended
to back Chavismo and could be unwilling to cite the justices for misconduct.

Citizens' power
Constitutional Article 279 says that members of the Citizens' power can be removed by
an unspecified majority in the National Assembly. Once again, we assume it is two-thirds.
However, the TSJ would also need to endorse this. This gives the Citizens' power
authorities and the TSJ justices incentives to support each others survival.

Venezuela: Legislative elections preview 6


30 November 2015

Appendix 3: A constituent assembly


The National Assembly can call for a Constituent Assembly with support from at least two-
thirds of lawmakers. The purpose of a constituent assembly is to reorganize the
government and write a new constitution. Article 349 of the current Venezuelan
constitution states that "the constituted branches of power cannot impede the decisions of
the Constituent Assembly in any way. New presidential elections, legislative elections and
judicial appointments could be held as a result of this process. The last constituent
assembly occurred in 1999 under President Hugo Chavez.
This is not a simple or rapid process. The National Assembly would first require the two-
thirds vote. A popular referendum would also need to approve the decision. Then national
elections would have to be held to select the representatives who would participate in the
constituent assembly. Subsequently, another popular referendum would need to approve
the new constitution. In 1999, eight months passed between the two referenda.

Appendix 4: Military-affiliated government officials


Exhibit 6: President Nicolas Maduros cabinet
Ministry Name Military link
Ministry for the Transformation of Caracas Ernesto Villegas N/A
Ministry of the Penitentiary System Iris Varela N/A
Ministry of University Education, Science and Technology Manuel Fernndez N/A
Ministry of Air and Water Transportation Giuseppe Gioffreda Air Force Major General
Ministry of Industry and Commerce Jose David Cabello Retired member of the military
Ministry of Health Nancy Prez N/A
Ministry of Labor Jesus Martinez N/A
Ministry of Defense Vladimir Padrino Lpez Army General in Chief
Ministry of Internal Affairs, Justice and Peace Gustavo Gonzlez Lpez Army Major General
Minister of Ecosocialism and Waters Guillermo Barreto N/A
Ministry of Food Carlos Osorio Army Major General
Ministry of Culture Reinaldo Iturriza N/A
Ministry of Tourism Marleny Contreras Hernndez N/A
Ministry of Youth and Sports Pedro Infante N/A
Ministry of Communications Desire Santos Amaral N/A
Ministry of Women and Gender Equality Gladys Requena N/A
Ministry of Communes and Social Movements Rosngela Orozco N/A
Ministry of Agriculture and Lands Yvn Gil N/A
Ministry of Economy and Finance Rodolfo Marco Torres Army Brigadier General
Ministry of Foreign Affairs Delcy Rodrguez N/A
Ministry of Housing and Ecosocialism Manuel Quevedo National Guard Brigadier General
Ministry of Oil and Mining Eulogio Del Pino N/A
Ministry of Electric Energy Luis Motta Domnguez National Guard Army Major General
Ministry of the Presidency Jess Salazar Army Brigadier General
Ministry of Indigeneous People Clara Vidal N/A
Ministry of Education Rodulfo Prez Prez N/A
Ministry of Land Transportation Jos Luis Bernardo N/A
Ministry of Planning and Finance Ricardo Menndez N/A
Source: Credit Suisse

Venezuela: Legislative elections preview 7


30 November 2015

Exhibit 7: Venezuelan governors


State Governor Party Military link
Amazonas Liborio Guarulla MUD N/A
Anzoategui Aristbulo Isturiz PSUV N/A
Apure Ramn Carrizalez PSUV Retired Army Colonel
Aragua Tareck El Aissami PSUV N/A
Barinas Adn Coromoto Chvez Fras PSUV N/A
Bolvar Francisco Jos Rangel Gmez PSUV Retired Army Division General
Carabobo Francisco Ameliach PSUV Retired Army Major
Cojedes rika Faras Pea PSUV N/A
Delta Amacuro Lizeta Hernndez Abchi PSUV N/A
Lara Henri Falcon MUD Retired member of the military
Falcon Stella Marina Lugo Betancourt PSUV N/A
Guarico Ramn Rodrguez Chacn PSUV Retired Navy Rear-Admiral
Mrida Alexis Ramrez PSUV N/A
Miranda Henrique Carpiles Radonski MUD N/A
Monagas Yelitce Santaella PSUV N/A
Nueva Esparta Carlos Mata Figueroa PSUV Retired Army General in Chief
Portuguesa Wilmar Alfredo Castro Soteldo PSUV Retired Air Force Lieutenant Colonel
Sucre Luis Acua PSUV N/A
Tchira Jos Gregorio Vilema Mora PSUV Retired Army Captain and Lawyer
Trujillo Henry Rangel Silva PSUV Retired Army General in Chief
Vargas Jorge Luis Garca Carneiro PSUV Retired Army General in Chief
Yaracuy Julio Cesar Len Heredia PSUV Retired member of the military
Zulia Francisco Javier Arrias Crdenas PSUV Retired Army Colonel
Source: Credit Suisse

Venezuela: Legislative elections preview 8


GLOBAL FIXED INCOME AND ECONOMIC RESEARCH
Ric Deverell
Global Head of Fixed Income and Economic Research
+1 212 538 8964
ric.deverell@credit-suisse.com

GLOBAL ECONOMICS AND STRATEGY


James Sweeney, Chief Economist Neville Hill
Co-Head of Global Economics and Strategy Co-Head of Global Economics and Strategy
+1 212 538 4648 +44 20 7888 1334
james.sweeney@credit-suisse.com neville.hill@credit-suisse.com
GLOBAL STRATEGY AND ECONOMICS
Axel Lang Jeremy Schwartz Sarah Smith Wenzhe Zhao
+1 212 538 4530 +1 212 538 6419 +1 212 325-1022 +1 212 325 1798
axel.lang@credit-suisse.com jeremy.schwartz@credit-suisse.com sarah.smith@credit-suisse.com wenzhe.zhao@credit-suisse.com

US ECONOMICS
James Sweeney
Head of US Economics Xiao Cui Zoltan Pozsar Dana Saporta
+1 212 538 4648 +1 212 538 2511 +1 212 538 3779 +1 212 538 3163
james.sweeney@credit-suisse.com xiao.cui@credit-suisse.com zoltan.pozsar@credit-suisse.com dana.saporta@credit-suisse.com

LATIN AMERICA (LATAM) ECONOMICS


Alonso Cervera
Head of Latam Economics Casey Reckman Daniel Chodos Juan Lorenzo Maldonado Alberto J. Rojas
+52 55 5283 3845 +1 212 325 5570 +1 212 325 7708 +1 212 325 4245 +52 55 5283 8975
alonso.cervera@credit-suisse.com casey.reckman@credit-suisse.com daniel.chodos@credit-suisse.com juanlorenzo.maldonado@credit-suisse.com alberto.rojas@credit-suisse.com
Mexico, Chile Argentina, Venezuela Latam Strategy Colombia, Ecuador, Peru

BRAZIL ECONOMICS
Nilson Teixeira
Head of Brazil Economics Daniel Lavarda Iana Ferrao Leonardo Fonseca Paulo Coutinho
+55 11 3701 6288 +55 11 3701 6352 +55 11 3701 6345 +55 11 3701 6348 +55 11 3701-6353
nilson.teixeira@credit-suisse.com daniel.lavarda@credit-suisse.co iana.ferrao@credit-suisse.com leonardo.fonseca@credit-suisse.com paulo.coutinho@credit-suisse.com

EUROPEAN ECONOMICS
Neville Hill
Head of European Economics Christel Aranda-Hassel Giovanni Zanni Sonali Punhani Mirco Bulega
+44 20 7888 1334 +44 20 7888 1383 +44 20 7888 6827 +44 20 7883 4297 +44 20 7883 9315
neville.hill@credit-suisse.com christel.aranda-hassel@credit-suisse.com giovanni.zanni@credit-suisse.com sonali.punhani@credit-suisse.com mirco.bulega@credit-suisse.com
Peter Foley
+44 20 7883 4349
peter.foley@credit-suisse.com

EASTERN EUROPE, MIDDLE EAST AND AFRICA (EEMEA) ECONOMICS


Berna Bayazitoglu
Head of EEMEA Economics Carlos Teixeira Alexey Pogorelov Nimrod Mevorach Chernay Johnson
+44 20 7883 3431 +27 11 012 8054 +44 20 7883 0396 +44 20 7888 1257 +27 11 012 8068
berna.bayazitoglu@credit-suisse.com carlos.teixeira@credit-suisse.com alexey.pogorelov@credit-suisse.com nimrod.mevorach@credit-suisse.com chernay.johnson @credit-suisse.com
Turkey South Africa, Sub-Saharan Africa Russia, Ukraine, Kazakhstan EEMEA Strategy, Israel Nigeria, Sub-Saharan Africa
Mikhail Liluashvili
+44 20 7888 7342
mikhail.liluashvili@credit-suisse.com
Poland, Hungary, Czech Republic

JAPAN ECONOMICS NON-JAPAN ASIA (NJA) ECONOMICS


Hiromichi Shirakawa Dong Tao
Head of Japan Economics Head of NJA Economics Dr. Santitarn Sathirathai Christiaan Tuntono
+81 3 4550 7117 +852 2101 7469 +65 6212 5675 +852 2101 7409
hiromichi.shirakawa@credit-suisse.com dong.tao@credit-suisse.com santitarn.sathirathai@credit-suisse.com christiaan.tuntono@credit-suisse.com
China Regional, India, Indonesia, Thailand Hong Kong, Korea, Taiwan
Takashi Shiono
+81 3 4550 7189 Deepali Bhargava Michael Wan Weishen Deng
takashi.shiono@credit-suisse.com +65 6212 5699 +65 6212 3418 +852 2101 7162
deepali.bhargava@credit-suisse.com michael.wan@credit-suisse.com weishen.deng@credit-suisse.com
India Singapore, Malaysia, Philippines China
Disclosure Appendix
Analyst Certification
Alberto J. Rojas and Casey Reckman each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal
views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this
report.
References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link:
https://www.credit-suisse.com/who-we-areThis report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state,
country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing
requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way,
transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks
or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an
offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat
recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an
independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or
strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact
an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be
reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to
the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the
future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical
methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will
be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication
or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original
date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and
financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of
which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are
capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward
interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own
investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High
volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the
potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in
consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may
prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which
the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website
material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's
website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the
Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse International,
One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being
distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the
United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse
(Mxico), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm,
Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial
Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia)
Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road,
Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no.
U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637;
INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit
Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese
securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit
Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and
expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations).
By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the
Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse
AG, Singapore branch may provide to you. This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (DFSA). Related financial services
or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The
Gate Building, DIFC, Dubai, United Arab Emirates. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will
only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or
licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should
do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional
investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this
report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers
and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities
or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of
Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the
municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to
provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation
to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in
connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a
financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities
mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their
respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission
rate or the amount agreed with a customer when setting up an account or at any time after that.
Copyright 2015 CREDIT SUISSE AG and/or its affiliates. All rights reserved.
Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal
can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.
When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you
will be requested to pay the purchase price only.

You might also like