Venezuela Mired in Deep Recession

[Zynx]

Venezuelan Recession Deepened After Electricity Cuts (Update2)
May 25, 2010, 10:54 PM EDT

(Updates to add current account figures in 13th paragraph.)

By Daniel Cancel and Corina Rodriguez Pons
May 25 (Bloomberg) -- Venezuela’s economy fell deeper into recession in the first three months of the year as electricity rationing decimated manufacturing and investment dried up because of government takeovers.

Gross domestic product shrank 5.8 percent in the first quarter from a year earlier, the central bank said today in a statement. Economists forecast a 7 percent decline, according to the median estimate of 11 analysts surveyed by Bloomberg.

“This is the worst performing economy in Latin America,” Alejandro Grisanti, an economist at Barclays Plc in New York, said in a phone interview before the report. “The government expropriations are weighing on production and it’s impossible to have adequate investment in that kind of climate.”

<snip>

http://www.businessweek.com/news/2010-05-25/venezuelan-recession-deepened-after-electricity-cuts-update2-.html

Just for comparison, our total GDP decline before the recovery started was just shy of 4.0%. Venezuela is really in the soup.

[dmallind]

1. Massive oil reveneues and a socialist leader? How can that fail according to DU?

[ProgressiveProfessor]

2. Its clearly all Bush's fault

Just as the Chavanistas when they show up on this thread.

[Union Yes]

3. Driven by the fall of global capitalism. It ain't Hugo's fault. America's economy fell..

and brought down the global economy.

Capitalism is to blame. No nation is immune to the fall of the global economy.

[Catherina]

4. I'm constantly amazed how people don't understand that n/t

[Zynx]

13. I'm amazed how many people use anecdotes instead of data.

The fact is that the U.S. started growing again in the summer of 2009 and most of the rest of the world either preceded us growing again or followed shortly thereafter. One notable exception is Venezuela.

[Catherina]

33. You used the same flawed bs the right wing uses to push its economic agenda

While things are getting worse just misrepresent the data and then claim they're getting better. Things are getting worse in this country. From your high and mighty investor perch with your nose stuck in a bunch of charts, you surely can't see it but let me tell you, it's not pretty down here on the streets.

It's a good thing Hugo isn't buying what you're peddling and instead is arresting the same type of criminals who brought America to her knees. This shaky global *recovery* you're admiring is just another phase of the sick economic charade taking place but it won't last much longer. All this bankster hocus pocus is only fooling those who want to be fooled.

Venezuelan authorities have arrested four executives of the country's largest brokerage firm, accusing them of irregularities in the bond market as the government tightens controls on currency trading.

http://www.businessweek.com/ap/financialnews/D9FU2EF82.htm

Venezuela's top prosecutor says police have raided 16 brokerages and arrested five executives amid a crackdown aimed at halting currency speculation.

Police raids and the arrests began last week after President Hugo Chavez ordered authorities to take action.

Chavez claims speculative trading is responsible for soaring inflation and the declining value of the bolivar.

http://www.businessweek.com/ap/financialnews/D9FRER8O0.htm

Venezuela is a capitalist investor's nightmare. From Che to Chavez, bad boys revolting against the great imperial ponzi scheme. Gotcha Zynx ;) Your sign of *growth* is bankster hocus pocus, not how many people are eating or how many people have shelter and medical care.

Real growth for Venezuela can only be measured against the following terms:

Article 299: The economic regime of the Bolivarian Republic of Venezuela is based on the principles of social justice, democratization, efficiency, free competition, protection of the environment, productivity and solidarity, with a view to ensuring overall human development and a dignified and useful existence for the community. The State, jointly with private initiative, shall promote the harmonious development of the national economy, to the end of generating sources of employment, a high rate of domestic added value, raising the standard of living of the population and strengthen the economical sovereignty of the country, guaranteeing the reliability of the law; the solid, dynamic, sustainable, continuing and equitable growth of the economy to ensure a just distribution of wealth through participatory democratic strategic planning with open consultation.

[Zynx]

39. When I am looking at a fetid pile of crap like your post, I generally walk away.

I am going to ignore this fantastic load in much the same way. It's a wonderful combination of personal attacks, lies, and ideological blathering.

By the way, by profession I am a public servant, not a "bankster".

By the way, I will ask you how measurements of real income, industrial production, and inflation are "bankster" measures. When last I looked, real income is precisely the same measure we used to condemn the Bush years as being a sham.

[dmallind]

6. Oil fell dramatically? Since when? NT

[Statistical]

8. Except the majority of the world is growing now and Venezuala is not.

http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/EXTGBLPROSPECTS/0,,menuPK:615470~pagePK:64218926~piPK:64218953~theSitePK:612501,00.html

Global GDP is projected to grow modestly 2.7% in 2010 and 3.2% in 2011 while Venezuela tanks 7%.

The reality is $150 oil hid the fact that Venezuela had no real economy for last 2 years. When oil money is coming in by the hundreds of billions it can hide the fact that the emperor has no clothes.

[Zynx]

10. Why is Venezuela one of the few economies still in recession?

Not only is it in recession, it is in a very deep one.

[Statistical]

15. And likely going into a depression.

You don't fall 7% in a qtr and turn that around to a positive overnight.
At best they will stem the tide. -5% next qtr, -1.5% next qtr, etc.

So they are likely looking at a depression a year into the global recovery.

[hunter]

5. So is the USA.

Lucky for us we don't depend so much on hydroelectricity. If we had to depend on the Colorado River for most of our electricity we'd really be screwed now. The dams on the Colorado haven't been running at capacity for many years now.

Unfortunately, we burn lots of coal and natural gas instead, which probably contributes to the droughts worldwide that reduce hydroelectric production.

We can point at Venezuela and pretend we are better, but we are all standing in the same shit. Some of us are even throwing it.

[Statistical]

9. Venezuala largest export is oil.

Without burning fossil fuels Venezuala would essentially have no economy.

The reality is $150 oil helped hide real problems in the poorly run economy in Venezuala.

When oil fell back to more realistic problems the reality isn't pretty. Kinda like water level in a polluted river dropping to show what the recent rains have been hiding.

[Zynx]

11. Not by an economic data measure.

Our GDP is up over 2% year on year. Venezuela's is down about 6%.

[ozone_man]

16. Fake GDP numbers from deficit spending

$1.6T this year.

Wait until the end of this year or next year to get a better view of our economy. It's likely to be a world wide recession/depression due to global debt, once the credit dries up. Party's over, now for the hangover.

[Zynx]

18. So you will go double or triple short on everything then?

Check back in a year and let's see. If you are that certain that the end is here, let's do it then.

[Zynx]

20. Also, of course we are running a deficit to get out of recession.

In fact, the deficit should have been larger. I suppose the economic growth caused by WWII was all fake because of the even larger deficits (as a % of GDP).

[Statistical]

22. Venezuala racked up a massive deficit in 2009 & 2010 and the economy STILL contracted.

Credit for US debt isn't going to dry up anytime soon. If risk of defaults in EU and even more in Latin American will drive low risk investors into Treasuries and keep yields low.

That doesn't mean we can ignore the deficit but it is more a problem in near future (4-6 years) rather than immediate future.

Venezuela may default on sovereign debt this year which would instantly shutoff any remaining foreign capital in that country. With an inability to deficit spend in a recession the country would be forced to CUT SPENDING and massively raise taxes at the worst possible time.

If global economy cools we can expect commodity prices to fall which helps nations like the US (by freeing up consumer spending) but kills commodity exporting nations like Venezuela.

[Joanne98]

7. More media lies.........

While it’s true that there is awful inflation in Venezuela, much of it has been caused by business owners, large-scale private distributors and producers, import-exporters and the economic elite that seek to destabilize and overthrow the Chavez administration. They sell dollars on the black market at pumped up rates and speculate and hike the prices of regular consumer products to provoke panic and desperation among the public, all with the goal of forcing Chavez’s ouster. And despite ongoing economic sabotage, the economy has still grown substantially in comparison to other nations in the region. In fact, according to the neoliberal International Monetary Fund (IMF), Venezuela is the only South American nation to forecast economic growth this year.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x538266

[Zynx]

12. That (your post) is under the category of damned lies.

Look it up: http://www.imf.org/external/pubs/ft/weo/2010/01/pdf/tables.pdf

Venezuela is one of a very few Latin American economies projected to CONTRACT this year and its growth thereafter is the weakest in the region.

Did you invert the damned numbers?

Also, the ONLY reason Venezuela had any growth in the last decade was oil exports.

[FLPanhandle]

19. On inflation

"While it’s true that there is awful inflation in Venezuela, much of it has been caused by business owners, large-scale private distributors and producers, import-exporters and the economic elite that seek to destabilize and overthrow the Chavez administration"

I'd love to see your proof of that opinion. That's not how inflation gets going in any economic text I've ever read. You'll have to show me the mechanics behind that statement, or it's all just B.S.

[Joanne98]

29. It's typical shock doctrine tactics

[FLPanhandle]

32. So, in other words, you don't know but you like empty slogans.

I thought so.

If I'm wrong, simple, explain the actions and mechanisms they are using to do this and how those actions are enough to lead to inflation levels that Venezuela is dealing with and how they got the world markets to buy into this. Don't be afraid to go into details either. I have a Masters in Economics.

I won't hold my breath.

[Zynx]

37. Will you address the blatant lies in your post?

[Renew Deal]

14. "investment dried up because of government takeovers."

Shocking

[Statistical]

17. Crazy how the knowledge that if you invest the government will simply seize your investments "might"

Crazy how the knowledge that if you invest the government will simply seize your investments just MIGHT influence people to not invest.

Hell even if I was Venezuelan I wouldn't invest in my own country. Why take the risk that the government will seize your assets when you could earn higher return in other countries?

I got a good amount of money invested in Brazil. I wouldn't invest in Venezuela no matter what the "potential" returns are promised. I mean grow 40% per year for 3 years and then the government seizes your assets. Oh wait let me calculate that it is a -100% ROI. :)

[Zynx]

21. Another big fan of Brazil here. It's been one of the best places to invest in the world.

I wouldn't even think about investing in Venezuela. Same goes for Russia.

[Statistical]

23. Russia is risky but if commodity prices rise significantly I would at least consider Russia.

Their economy is 90% commodity export based so it provides a nice hedge if commodity prices start to hamper global profits.
I would keep exposure to Russia small though since their "legal" structure has a lot to be desired.

I would keep exposure to Venezuela at 0.0%. :)

[Zynx]

24. Yeah. On a commodities rally bet I might put, say, 3-5% of my assets in Russia.

I would never even poke at Venezuela.

[EFerrari]

27. Japan to Insure Inpex, Mitsubishi Stake in Oil Field (Update1)

http://www.bloomberg.com/apps/news?sid=aIez736c61Kw&pid=20601087

China Digital TV Wins Satellite TV Contract in Venezuela
http://www.sys-con.com/node/1412349

Venezuela to sign oil deals worth $40 billion

snip
Outlines of the deal were known earlier. The government granted operating licenses in February to Spain's Repsol; Malaysia's Petronas; Indian companies Oil and Natural Gas Corp., Oil India Ltd. and Indian Petroleum Corp.; U.S.-based Chevron Corp.; Venezuelan company Suelopetrol, and Japan's Mitsubishi, Inpex Corp. and Japan Oil, Gas and Metals National Corp. JOGMEC.

http://finance.yahoo.com/news/Venezuela-to-sign-oil-deals-apf-355336256.html?x=0&.v=1


Chavez inspects railroads work; announces Chinese involvement and investment
The railroad plan stretching through 2030 covers 13,665 kilometers, which, the President stated, needs an investment of $150 billion ... almost as big as the investment in the Orinoco Oil Belt. All the companies arriving at the Belt, the President said, bring investments with them.

http://www.vheadline.com/readnews.asp?id=92313

US$ 80 billion Venezuela's Orinoco belt Carabobo projects starts
http://www.petroleumworld.com/storyt10051603.htm

NewMarket Announces New Contract With Movistar, a Division of Telefonica, Signed by NewMarket South American Subsidiary

snip, Separately, NewMarket recently announced that its subsidiary RKM also signed a three-year renewal contract to provide Microsoft licensing to their existing client, Electricidad de Caracas (http://www.laedc.com.ve/) in Latin America. The three-year contract value is U.S. $2.3 million. NewMarket and its subsidiaries are focused on turning short-term, project-based contracts into long-term contracts to support their recurring revenue business. Founded in 1895, Electricidad de Caracas generates, sells and distributes electricity to more than one million residential and commercial customers in the Caracas, Venezuela area.

http://www.tradingmarkets.com/news/press-release/nwmt_-nwmt-newmarket-announces-new-contract-with-movistar-a-division-of-telefonica-signed-by-newmarke-953744.html


Foreign investment in Latin America to jump 40-50% in 2010

Direct foreign investment in Latin America and the Caribbean is expected to rebound 40 to 50 percent in 2010 following a "stormy" year hit by the international economic crisis, said the head of the U.N's Economic Commission for Latin America and the Caribbean.
http://www.ibtimes.com/articles/22642/20100506/foreign-investment-in-latin-america-to-jump-40-50-in-2010.htm

[Statistical]

31. "Foreign investment in Latin America to jump 40-50% in 2010"

I said Latin America (specifically Brazil) is a GREAT place to invest. Venezuela is PART of Latin America and while investment in Latin America likely WILL grow by 50% (or more) they won't in Venezuela.

The politics of Venezuela introduce a principle risk that doesn't exist in rest of Latin America. Investors face substantial risk of simply seeing their investment seized. So while nobody is saying investment in Venezuela will drop to zero it would be an attractive location for investors.

The Chinese sat deal isn't exposing Chinese capital to risk of seizure. The oil deals are to be expected. High risk but high payoff. I doubt even Chavez is stupid enough to fuck up Venezuela most important industry. The Railroad deal once again doesn't expose Chinese capital to seizure.

Latin American GDP will rebound sharply this year. However that is excluding Venezuela which will sink further and further into a recession.

Per the article:
"The International Monetary Fund forecasts that Venezuela will be the only country in South America to see a decline in GDP this year"

Yeah Chavez. Managed to drag big V into a recession in a boom year!

If you think Venezuela is good for investors then why don't you invest there?

[EFerrari]

35. Where would Latin America be without the IMF?

"Wolf Says Henhouse Can't Do Without It"

Hilarious.

[EFerrari]

25. Venezuela is Not Greece

Venezuela Is Not Greece
by Mark Weisbrot

With Venezuela's economy having contracted last year (as did the vast majority of economies in the Western Hemisphere), the economy suffering from electricity shortages, and the value of domestic currency having recently fallen sharply in the parallel market, stories of Venezuela's economic ruin are again making headlines.

The Washington Post, in a news article that reads more like an editorial, reports that Venezuela is "gripped by an economic crisis," and that "years of state interventions in the economy are taking a brutal toll on private business."

There is one important fact that is almost never mentioned in news articles about Venezuela, because it does not fit in with the narrative of a country that has spent wildly throughout the boom years, and will soon, like Greece, face its day of reckoning. That is the government's debt level: currently about 20 percent of GDP. In other words, even as it was tripling real social spending per person, increasing access to health care and education, and loaning or giving billions of dollars to other Latin American countries, Venezuela was reducing its debt burden during the oil price run-up. Venezuela's public debt fell from 47.5 percent of GDP in 2003 to 13.8 percent in 2008. In 2009, as the economy shrank, public debt picked up to 19.9 percent of GDP. Even if we include the debt of the state oil company, PDVSA, Venezuela's public debt is 26 percent of GDP. The foreign part of this debt is less than half of the total.

Compare this to Greece, where public debt is 115 percent of GDP and currently projected to rise to 149 percent in 2013. (The European Union average is about 79 percent.)

http://mrzine.monthlyreview.org/2010/weisbrot070510.html

[Zynx]

26. They may not be in a debt crisis, but their economy is suffering worse than nearly anywhere

else on earth at the moment.

[MyNameGoesHere]

28. Worse than Haiti and Nicaragua?

Please.

[Zynx]

38. You clearly ignored the word "nearly", but I suppose you wanted to make a statement.

Good for you.

[MyNameGoesHere]

40. Nearly?

thanks for pointing that out, now your statement seems evener more bizarre.

[Greyhound]

30. The problem with this, and almost every economic analysis, is that it measures

only the factors that indicate how the "investor class" is doing.

Also bear in mind that Venezuela is almost singlehandedly fighting against the greatest powers on earth. Every day the Central banks and the web of corporations exploiting that system do all they can to hurt Venezuela.

[tritsofme]

34. Viva Chavez!!!!!

Uncle Hugo has everything under control.

[EFerrari]

36. He's doing something right because the corporate prestitutes are after him 24/7.

If he would just turn his head and cough like Uribe, you wouldn't even know his name.