Venezuela: Mirages and dances
By Veneconomy
21.12.04 | 2004 was a year of mirages. On the surface, Venezuela looked like the most dynamic economy in the region, with growth of nearly 20%. However, things are not at all what they seem, largely because this growth was based on consumption driven by unsustainable levels of public spending and not on investment. What is more, this revival of the economy has not been accompanied by a substantial, permanent recovery of jobs, leaving room for a sizeable informal sector. The mistaken measure of the firing freeze, inflexible legislation, and a populist public spending spree explain this poor performance on the employment front.
Despite this, Venezuela is seen as being a solid democracy with a President that has emerged the stronger following the “landslide” victories at the August and October elections. The former sanctioned under the scrutiny of the international community and with the unconditional backing of the Carter Center and the OAS. Yet Venezuelans are experiencing a rapid implosion of the democratic system, with their civil and constitutional rights as the first victims.
It is clear to everyone that Venezuela has a vigorous, profitable oil industry. However, it is hiding its weaknesses behind the current high oil prices. PDVSA has gone from being a solid, autonomous corporation with technically qualified people to become yet another arm of the Executive, without technical people or managers who know the business. In addition to PDVSA’s undercapitalization, there has been a drop in private investment to less than 5% of GDP, while, in the short term, no substantial foreign investments are in sight, despite the efforts that the president has personally being making to attract them.
On the political front, a demobilized, cowering opposition will probably lose the upcoming referendum against its deputies, so putting an end to the already undermined opposition in the National Assembly. Without a doubt, President Chávez will consolidate his absolute control over the machinery of power, and with the five branches of government in his hands, there is scant room for maneuver left for political dissent. The strengthening of the revolution during 2005 is a foregone conclusion. Looks like we’ll have to put on our espadrilles.
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