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Let's discuss Venezuela's economic growth

By Daniel Duquenal

19.11.04 | Today the Venezuelan Central Bank, BCV, issued its third trimester report. In it we find a few interesting things.

First the GDP increase in comparison to the third quarter of 2003 (after the devastating oil strike) is 15.8% when that last one had a 7.1% drop respective to 2002. This would be very good on its face value. And indeed things are going much better than one year ago. But let's be a little bit more inquisitive in our lecture of the recent economic numbers.

The sector that showed the largest recovery was construction, the one comatose since 2002. It increased in the third quarter by a whopping 40.3%! How come? Well, in the purest of Venezuelan political tradition, the government released a lot of cash to build quickly popular housing that it could have built earlier. But it makes for better photo-ops when the president himself goes to open a few dozen subsidized housing here and there. Yet we can read that the construction sector is still 40% below its 2001 level, which was not that great to begin with.

More good news, in large part due to the extraordinary electoral spending so decried through this blog since early this year. General consumer demand increased by 29.2%!!! And the jobless rate is still 14.5% and the underemployed (street vendors and the like) is still hovering at 50%. No big change there. So how come people have money suddenly? Cash grants from a mision or another?

Still the BCV is careful and gives a 12% for the whole year in spite of such a gleaming third quarter. Do they know something we do not know? Like a sudden slow down in the 4th quarter?

Elsewhere we read that the increase in accounts balances towards a surplus is due to an increase of 37.1% of oil price. Yet the National Assembly issues a new debt emission of 500 million USD against the objections of the BCV!

And from CEDICE with have a Cassandra voice announcing that the current oil plenty has a déjà vu feeling all over again.

And to reassure your doubts about the good management of the country, the BIV, one of the two "commercial banks" which is state owned, has a bad debt roll of 34.3%, the highest within the Venezuelan banking system whose average is 2.4%. That is, a whopping 1/3 of the loans issued by the BIV (many to associates of the regime) are bad debt that probably will never be recovered. Imagine that!

And supposedly we should cheer up the GDP increase in the third quarter. One wonders what would that GDP be if we had a better managed country and not the corrupt mess that we are putting up with.

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