Venezuelan government fails to revive local production

[ChangoLoa]

Several economic formulas have failed to restore the manufacturing sector in the 11 past years


Venezuela's President Hugo Chávez recently noticed that in 2010 the Gross Domestic Product (GDP) may shrink for the second consecutive year, which economists and business associations term inevitable.

"Did GDP fall in 2009? Yes, that's true. Will it shrink again in 2010? It may be true. But is it a reason for concern? Not at all," President Chávez said on April 25.

His statements differ from his remarks in early 2009. At that time, he said that no economic setback would hit Venezuela, not even if the price of "oil plummeted to zero."

Beyond this contradiction in the presidential discourse, figures show the inefficiency of government economic measures to revive the production apparatus.

When the government announced the devaluation of the Venezuelan currency in January, authorities said that the depreciation of the bolivar was aimed at strengthening domestic production. The Bicentennial Fund, with a total of USD 1 billion, and telephone numbers 0800Produce and 0800Exporta would stimulate domestic production.

"For practical purposes, the Bicentennial Fund has been a media circus," said Carlos Larrazábal, the president of the Venezuelan Confederation of Industries (Conindustria).

In the absence of official figures issued by the Central Bank of Venezuela (BCV), the industrial association believes that the manufacturing sector will fall 5 percent, only in the first quarter of 2010. Conindustria also estimates that Venezuela's GDP will drop 5 percent in 2010.

"I do not think it (the Fund) will have a major effect on industrial production," said Ángel García, an economist and professor of the Center for Development Studies (Cendes), Central University of Venezuela (UCV).

Economists and entrepreneurs agreed that one of the factors that have seriously undermined the productive sector was the government decision to keep the official exchange rate unchanged for five years. They stressed that measures such as devaluation or special funds are not enough to restore production levels.

This has been one of the formulas used by Chávez government in different opportunities since 1999.

In 2009, the GDP ended with a 3.3 percent decline and there was a 6.4 percent economic contraction, particularly in the manufacturing sector. In this area of the economy, the fall was higher in the last quarter of 2009, as it declined 6.9 percent.

Víctor Álvarez, a former Ministry of Basic Industries and Mining, is now a researcher at the Miranda Research Center (CIM). He believes that the government needs to identify the areas reserved to the State, the social economy and the sectors where the private sector will be able to participate.

Link:
http://english.eluniversal.com/2010/05/03/en_eco_art_venezuelan-governmen_03A3846371.shtml

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1. There's no solution

I don't think there will be a solution to the ongoing economic mess, because the government seems to be reacting to the downturn with more vitriol and hysteria, rather than a recognition that current policy is driving the country's economy down. The intemperate threats, the president's behavior as if he owned the country, his quest for absolute power, the divisive talk, and the crime and corruption wave only discourage the private sector, and this is the truly useful sector - PDVSA today survives producing the wells and using plants put up by the private companies and the old, technocratic PDVSA. The guys in charge today are pretty good at radical talk, but don't know how to get things done, so the wheels are comming off PDVSA's cart. And this means they're running out of money. There are many who are honestly interested in helping the country move forward, but the government is so corrupt and radical, they won't allow anybody into a responsible position unless they dress in red, pledge eternal allegiance to the maximum leader, and agree to become a robotic unit within this ugly tropical version of 1984 they are trying to build.

So, the brain drain is inexorable. Young people, the ones who are educated and can get things done, are leaving in huge numbers. The quality of education is gradually suffering, as professors and industrial mentors leave as well. This is truly horrific, we are witnessing the total destruction of a society by a group of people who really don't know how to manage or run a modern society, and whose focus is more towards the installation of a Cuba-style dictatorship. And we know what the communists did to Cuba, they ruined it, the same way they ruined Camboya, and the Soviet Union, and other nations unfortunate enough to fall in their hands. Our only hope may be for Mockus and somebody reasonable to win the elections in Colombia and Brazil,and for them to put pressure on the government here to behave rationally. Otherwise, we might as well fall into a black hole.

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2. I can't give details but

The parallel market rate is crashing. The government is in a panic, trying to figure out what to do.