VENEZUELA, BROKE? By LUCIANO WEXELL SEVERO, June 12th 2009
The majority of analyses about the current situation of the Venezuelan economy is based on three ideas: 1. That the Chávez administration received a dollar rain during the past years, as a result of high oil prices. 2. That the Chávez government doesn’t know how to invest these huge resources to stimulate diversification of production, practicing a disastrous economic policy based on handouts, via the Social Missions, and 3. That now, with the oil price at a low, Venezuela and state oil company PdVSA are “broke.”
We will try to demonstrate in this article that these three allegations are quite incorrect.
Between 1999 and 2008, the Venezuelan economy went through five stages: 1. Chávez’ political ascent, in February 1999, facing an adverse economic, political and institutional scenario (the country was choking on the heritage of periods of disinvestment and de-industrialization of the 1980s and 1990s, and the price of oil was on its lowest level since 1973); 2. The adoption of interventionist measures and more development-oriented policies, beginning in the second half of 1999; 3. The coup and “economic sabotage” applied by the opposition, between the fourth quarter of 2001 and the third quarter of 2003, as a reaction to the increase of state intervention in the economy; 4. The economic recovery starting in the fourth quarter of 2003, from a base already quite above the previous situation. The state began to interfere in a more decisive way in economic questions (particularly PdVSA); 5. The “sowing oil” policy and advance towards “Bolivarian Socialism,” the effort for productive diversification, for a new industrialization process, for the payment of the high social debt accumulated during decades, and the expansion of state and people power into strategic economic sectors.
A study performed by the ministry of finance in 2004 shows that
the per capita dollar value of oil exports was, at least until mid-2005, lower than during previous administrations: 26 percent that of the value received during the first administration of Andrés Pérez (1974-79), 35 percent of that received by Herrera Campins (1979-84), 56 percent of that received by Lusinchi (1984-89), 49 percent that during the second mandate of Pérez (1989-93), and 85 percent of that received during the second mandate of Caldera (1994-98). It is necessary to take into account two factors: 1. That the comparison prices must be expressed in constant values, and 2. That the population of Venezuela more than doubled between 1973 and 2005. For that reason,
the study concluded that the Chávez government did not enjoy a petrodollar “rain” — quite the contrary. In spite of that, social spending — according to a 2008 study by Mark Weisbrot and Luis Sandoval — rose from 8.2 percent of GDP in 1998 to 13.6 percent of GDP in 2006. Taking into account the contributions made by PdVSA, social spending reached 20.9 percent of GDP. In per-capita terms, it quadrupled since 1998.The dynamism of the Venezuelan economy has been a direct — but not exclusive — result of the rise of oil prices to a record $135.2 per barrel Brent in July 2008 (as of December, prices plummeted to $43.3; currently it is back up to $59). Oil is and will continue for a long time to be the base of the Venezuelan economy. In the meantime, there are two pieces of news:
1. In 2003, the Venezuelan state recovered control over the oil industry, reducing the drain of resources leaving the country and the domestic concentration of income; and 2. Since then, the country has been depositing increasing installments of oil revenues in productive sectors, in the structuring and strengthening of the domestic market, in a process of sovereign industrialization (with majoritarily Venezuelan capital, acquisition of technology, local workforce training, and increasing incorporation of national Gross Value Added). Therefore, the notion that Venezuela has adopted an artificial and miserably subsidized economy is mistaken.(SNIP)
Between the fourth quarter of 2003 and the fourth quarter 2008, the GDP grew 94.7 percent:
The Venezuelan economy aggregated 21 consecutive quarters of growth, at an average rate of 13.5 percent. Since 2004, the non-petroleum GDP has been growing at rates significantly above the petroleum GDP. Equally significant was the acceleration of the manufacturing GDP between 2004 and 2008, as tracked by electricity consumption, and sales of vehicles, cement, construction equipment, steel, iron and aluminum, among others. Within manufacturing, the areas that grew most were food and drinks, tobacco, leather and footwear, editing and print, nonmetal minerals, rubber and plastic products, automotive assembly, and production of machines and equipment. This performance must improve even more when the impact of important government measures aimed at stimulating domestic private enterprise are fully felt. According to a study published by Weisbrot in February 2009, “in spite of the expansion of government during the Chávez years,
the private sector has grown faster than the public sector.” The current oil price level has triggered a reduction in economic growth of approximately 8 to 4 percent — recently ECLAC forecasted a GDP rise of 1 percent for 2009, still above the regional median of -0.3 percent. According to Weisbrot and Sandoval (2008), at a price below $45 per barrel for Venezuelan oil, the country would begin to register current-account deficits. However, given that Venezuela has approximately $82 billion in reserves, it could finance a modest current-account deficit for some time — even if the oil price would remain at the current low levels during the next two years. Both authors sustain that the negative forecasts about the Venezuelan economy are based on quite fragile arguments.
(MORE)
http://venezuelanalysis.com/analysis/4514------------------------------
Mark Twain once stated that "the rumors of my death are greatly exaggerated." The same could be said about the rumors (alleged 'analysis') of the corporate shills (aka, 'journalists') who relentlessly flog Venezuela as a failed state, when the opposite it true: Venezuela, under the Chavez government, is alive and well!
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