Industrial output sinks by 10.25 percent in Venezuela

[spanza]

The Central Bank of Venezuela recorded overall decline in the sector

Economy
The data provided by the Central Bank of Venezuela (BCV) clearly show why President Hugo Chávez is working on a plan to inject vitamins into the economy's body.

The production of private manufacturing, a key area for job creation, better supply and availability of foreign currency from a source different from oil, plummeted 10.25 percent the first half of this year versus 3.4 percent during the same period in 2008.

Anemia is widespread. Among the 16 items broke down by the BCV, only paper products, electrical appliances and furniture remain on the surface.

Preparation of food dropped 1.55 percent; textiles 12.8 percent; chemical substances and products, 7.6 percent; rubber and plastics, 19 percent, and common metals, 32.6 percent.

Only in July, the thermometer showed that industrial production went down to the lowest level since 2005.

Experts explained that as oil prices shine no more, the government chopped expenses and quenched demand.

Concomitantly, the Foreign Exchange Management Committee (Cadivi) cut off the flow of foreign currency, with an impact on the input availability.

Barclays Capital commented that after clearing the effect on inflation, the central government expenditure in the first four months plunged by 27.8 percent. Official numbers show that the supply of foreign currency to the private sector halved in the first half of the year.

Noteworthy, for five years Chávez's administration has kept the exchange rate at VEB 2.15 per USD, even though all commodities, except for gasoline, have hiked by 70 percent.

As a result, the local currency is overvalued.

In this way, imported goods are cheaper than domestic products and competition has an impact on the domestic industry.

The impending government plan to recover the industrial growth has as primary ingredient some spoonfuls of concessionary loans at low interest rates and, thanks to rising oil prices, a better flow of foreign currency and a dose of public expenditure to feed in demand.

"When the government starts spending, demand will be enlivened, but supply responsiveness is the problem," said José Guerra, ex manager of Economic Research at the BCV.

"With the USD at VEB 2.15, with such an overvaluation level, oil only can be produced here. There could be granting of credits, but, for instance, what are the chances for the textile industry to compete with products from Brazil or Argentina?" he reasoned.

In his view, the local currency to be introduced by the government as supply is not enough could result in higher inflation rates.

Consider also that a portion of the incoming bolivars could be used to purchase US dollars in the parallel market and bolster the currency rate.

Notwithstanding the industry responsiveness to the government plan, the government would have to put the brake.

The sector has not made enough investments as to expand the production capacity, as soon as it starts using all the standby machines, it will touch ceiling.

In this context, enough jobs will be hardly created to absorb the labor force entering the labor market every year.

In August 2009, the unemployment rate climbed by 100,000 jobless versus the average number in 2008.


Translated by Conchita Delgado

Víctor Salmerón
EL UNIVERSAL

[Peace Patriot]

1. These Associated Pukes and El (non-) Universal headlines you have been posting

about Venezuela don't take into account that Venezuela is SOLVENT because of the Chavez government's quite conservative (in the best sense of the word) management of Venezuela's economy. While the Bushwhacks were spending us into Great Depression II, with hand over fist looting, the Chavez government socked away $43 billion in international cash reserves, for just such a "rainy day" as Bush Jr. rained on us all in September 2008. This, and other policies--some of them in common with Brazil, no doubt in part due to the close friendship and cooperation between Venezuela's and Brazil's leftist presidents (for instance, tight regulations on the banksters)--have resulted in Venezuela landing on its feet (and Brazil also). Venezuela's sizzling economic growth rate over the previous five years (2003-2008--nearly 10% economic growth, with the most growth in the private sector, not including oil) was due for a slow down. But their big savings (even while fully funding social programs) means that they have flexibility in how to ride out the Bushwhack Financial 9/11. Venezuela is in good shape, and the Chavez government has also helped its region to better survive the crisis, through cooperative efforts such as the Bank of the South, ALBA (barter trade group), and Chavez's and Lulu's "raise all boats" philosophy.

Please understand that the corpo/fascist press hates Chavez because he is an unapologetic socialist, and they have been unable to topple him, or even dent his nearly 60% approval rating in Venezuela. Try as they have, their constant negative headlines and demonization hasn't worked--at least in Venezuela and Latin America in general. (It has had some success in the US, however.) They hate him with unparalleled venom. And they will never, ever acknowledge the Chavez government's significant achievements, nor credit the views of the people of Venezuela. They are anti-democratic, and they want Venezuela's uppity socialists to fail! Negative headline after negative headline, for well on ten years now. Where are the headlines about Venezuela's cash reserves? Where are the headlines about Venezuela halving the poverty rate and wiping out illiteracy? Where were the headlines about Venezuela's economic growth rate over the previous five years? Nowhere! And you are contributing to this psyops/disinformation campaign by posting corpo/fascist headlines without analysis and without context.

(Please see my post at: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=405x23336 )

------

In your one positive post about Venezuela--"El Sistema Mentors Venezuela's Poorest Youth"--both you and the article fail to credit the Chavez government for its support of this superb musical education program for Venezuela's poorest children. Sans Chavez, sans socialism, sans the Boliviarian Revolution, sans transparent elections in Venezuela, this program would never have been able to expand to every city in Venezuela, nor train 250,000 poor children as classical musicians--not to mention some of the best classical musicians in the world.

Chavez saves lives. Chavez creates some beauty in this world. Where are the headlines?

[Braulio]

2. Venezuela's Rainy Day Fund

I don't know where you get your figures, but as far as I know Venezuela doesn't have a $43 billion "rainy day" fund. Most of the cash at hand is in the form of foreign reserves used to back its currency - this isn't considered a rainy day fund - it can't be used without driving up inflation and collapsing the currency even more.

"Venezuela's Sizzling Economic Growth", as I pointed out, was driven by the reference point (set conveniently at a low spot caused by an oil workers' strike), and the sizzling growth in oil prices. But if we focus on what's happening this year, it seems they indeed are in a downward spiral they'll find very difficult to reverse. Chavez is implementing structural changes which are slowly killing off both the non-oil and the oil sectors. The fact that Venezuela has the highest inflation in Latin America, and that it hasn't changed the controlled exchange rate in many years, is something I assume you won't debate.

Venezuela's currency exchange practices are "exotic", to be kind to them. I've read analysis by experts which explain what's going on. They have a system intended to facilitate control of the private sector, but at the same time it is making it very easy for corruption to flourish, and causing the slow destruction of national industry.

[EFerrari]

3. The last quarter doesn't constitute a "downward spiral"

which is why you only want to look at the quarter that seems to support you dire prediction. Previous to that, more than twenty quarters growth put the lie to your claim that the private sector is being killed off.

As far as corruption killing off national industry, we here in the United States have a mote and beam problem with corruption so bad we have little dry land to stand on, let alone high ground.

[Braulio]

5. What did Mel Gibson say?

Just kidding.

The last quarter is the beginning of a downward spiral, from which Venezuela is unlikely to recover unless oil prices reach the $80 per barrel range. Given oil price volatility, it's hard to say what's going to happen, but very few experts are predicting such high prices in the near or medium term, due to excess capacity.

Economists also point out the current exchange rate regime, coupled to a very high inflation rate (in the 20 to 30 % per year range), is harming Venezuelan producers. The Venezuelans were able to sustain the absurd currency exchange regime and government over-spending (which caused high inflation), as long as oil prices were as high as they were in 2008, but that was likely a "spiky" event, and we're unlikely to see a continuous run up in prices above $100 per barrel. The Chavez government seems to be quite focused on foreign policy, buying weapons, tweaking the US's nose, and so on and so forth, but soon they'll have to focus on trying to survive, because it does look grim for the Venezuelan economy.

Regarding corruption, if we look at published data from the World Bank and similar organizations, Venezuela ranks way up there in the corruption all-stars. It's pervasive, and at all levels. Whether the USA has high corruption rates or not (and it doesn't have anything close to what Venezuela has), it's irrelevant. We're discussing Venezuela.

Remember, I just quote what experts say. And what they say is that Venezuela is headed for a serious downturn.

[EFerrari]

7. LOL

[Judi Lynn]

6. We've discussed the management-induced WORK LOCKOUT here for years.

We're all very aware it was in no way whatsoever a workers' strike.

Doing a quick check I found an immediate DU f'r instance, by JackRabbit:

In Venezuela last year, the managers of the state-run oil company, men who make six-figured salaries in a country where most people are impoverished, decided that what the country needed to overthrow its popular and populist President was a general strike. So the managers shut down the oil industry and called it a general strike. It was really a lock out. Thankfully, their tactics failed.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x518487#519933

~~~~~~~~~~~~

~snip~
The key institutional devices deployed by the U.S. in its covert support for the coup remained the same in its aftermath: the neoconservative National Endowment for Democracy (NED) and the U.S. Agency for International Development (USAID), both convenient mechanisms for bypassing Congressional oversight. What was new on this front, as Golinger demonstrates, was the establishment by USAID in the months following the coup of a sinister-sounding Office of Transition Affairs (OTI). Both the NED and USAID (via the OTI) immediately began to shift strategies, providing covert support for the opposition-led bosses lockout of the oil industry which crippled the Venezuelan economy for two months in late 2002 and early 2003, and when this failed, by providing direct support for efforts to unseat Chávez electorally (a là Nicaragua) in a 2004 recall referendum spearheaded by opposition "civil society" organization Súmate.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3065896

~~~~~~~~~~~~

~snip~
It's a Little Late for the Opposition To Adopt These Tactics
although it is the right way for them to conduct the campaign. Like Bush, the opposition has doomed itself by its rhetoric and actions -- the failed coup and oil lockout.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x694485#694907

~~~~~~~~~~~~

~snip~
On December 28, Venezuelan President Hugo Chavez Frias delivered his annual "greeting speech" to the National Armed Forces (FAN) and announced the operating license of TV station Radio Caracas Television (known as RCTV) broadcasting on VHF Channel 2 won't be renewed when it expires on May 27, 2007. The station played a leading role, along with the other four major commercial private television channels in the country controlling 90% of the TV market, in instigating and supporting the 2002 aborted two-day coup against President Chavez. Later in the year they acted together again in similar fashion as an active participant in the economically destructive 2002-03 main trade union confederation (CTV) - chamber of commerce (Fedecameras) lockout and industry-wide oil strike that included sabotage against the state oil company PDVSA costing it overall an estimated $14 billion in lost revenue and damage.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x259029

~~~~~~~~~~~~

~snip~
“We know the whole scheme,” Maduro added, and he should as it happened before in 2002, again during the disruptive 2002-03 oil management lockout, and most often as well when elections are held to disrupt the democratic process. These are standard CIA operating tactics used many times before for 50 years in the Agency’s efforts to topple independent leaders and kill them.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x321609

~~~~~~~~~~~~

~snip~
Journal writers are masters of half-truths and distortion that goes along the the paper's policy of being hostile to any government not in line with the neoliberal Washington Consensus (wreaking havoc wherever it spreads) and not fully subservient to US wishes. Nothing in their article explains that the Bolivarian Revolution is a true participatory democracy where the people have a say in how the country is governed; that the lives of the majority poor have benefitted enormously by an impressive array of essential social programs and services unimaginable in the US; that Hugo Chavez aids his neighbors (Castro included who aids Venezuela in return) and doesn't threaten war or sanctions against them; has no secret prisons; no illegal political prisoners or illegal detentions; doesn't practice torture; doesn't ethnically cleanse neighborhoods to aid corporate developers; and never suspended the constitution even after a coup d'etat, mass street riots and a crippling US-instigated oil lockout and shutdown. It's even working to clean up and change a many decade-long legacy and systemic climate of corruption and inefficient state bureaucracy and is making slow progress against great odds that would challenge any leader.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=364x1464604

~~~~~~~~~~~~

~snip~
"All this is being achieved despite the implacable hostility of Venezuelan capital and of U.S. imperialism, which supported the failed 2002 coup against Chávez, and the subsequent oil industry employers’ lockout that did enormous economic damage."

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x297844#297882

These represent only a small sampling of the many, MANY discussions DU'ers have had in which this subject was mentioned. There are FAR, FAR more, but I had no interest in taking up more of my time. We are NOT going to be misled by ANY crap anyone with an dirty agenda tries to pass off here as the truth.

~~~~~~~~~~~~

~snip~
After the failed coup, the tone of Solidarity Center reports on Venezuela changed. A grant proposal to the NED noted that within the CTV, the "ardent declarations by the president of the organization have overshadowed the more moderate and constructive positions of the organization."<26> Still, in late 2002, Ortega was able to use his authority as CTV president to lead a lockout by top management and a walkout by technical personnel at PDVSA.<27> Stan Gacek, AFL-CIO Assistant Director of International Affairs for Latin America, criticized the lockout-strike, but argued that it raised "legitimate issues of freedom of association."<28>

Leaving aside the AFL-CIO's support for Ortega, the controversy over the AFL-CIO's role in Venezuela stems from the fact that the Solidarity Center, like AIFLD before it, relies on government funding directly through the State Department's U.S. Agency for International Development (USAID) and the Department of Labor, or indirectly, through the NED.<29> According to documents obtained through the Freedom of Information Act, the NED provided some $2.2 million in training and funding opposition groups between 2000 and 2003-the period of the coup attempt and oil strike-lockout. For these reasons, Venezuela was cited by key activists who successfully passed a resolution at the 2004 convention of the California Labor Federation, that both called on the AFL-CIO to open the books on its cold war collaboration with U.S. government foreign policy. It further condemned the NED for its role in overthrowing democratically elected governments and interfering in the internal affairs of the labor movements of other countries."<30> The critics charged that funding from the NED and USAID keeps the AFL-CIO entrenched in the foreign policy apparatus of the U.S. state.

http://www.thirdworldtraveler.com/Labor/Venezuela_AFL_CIO.html

[spanza]

4. Venezuela is still solvent

Only a very few times in history our economy hasn't been solvent. We're an oil producing country, so structurally our account balance is in surplus. But that's not the point here. In fact, I'm a bit surprised of your reaction since the article I sent was only describing figures from the Central Bank concerning industrial sectors. Where's the corpo-fascist propaganda?!

I'll explain the point. When you insist that Venezuela's growth happens in the non oil sector whenever oil revenues increase, you're putting your finger in a typical pattern of our growth since the 30's. These GDP figures are calculated in constant prices which means that they don't describe price changes but volume changes. If oil prices go up and oil volumes produced stay the same, then the oil GDP in constant prices stays at the same level. Now, for the non oil economy, we have a structural situation where the volume produced depends closely on the oil revenues. This happens because the public spending is strongly correlated to oil revenus and, in a petro-state, it is the state who creates the market.

The actual sequence is: oil boom => oil revenues go up with stable production => oil GDP (volume) stays the same but state revenues go up.
state revenues go up => state current and capital spending go up => internal market grows (production capacity and demand or investment and consomption) => non oil GDP grows in volume.

The reverse sequence happens when oil revenues go down.

So, in conclusion, the fact that an oil boom produces real growth in the non oil sector does not mean that the economy is less dependent on oil. The proof of that is when oil prices go down, the non oil sector decreases again. That's what's happening now. It's not to blame Chavez, it's just an observation about the venezuelan economy.

[Braulio]

8. Let's call it the Venezuelan disease

Or as they say, they like the Devil's Excrement.

The Norwegians, Canadians, and other nations with hefty oil-derived reveneue streams have been able to manage the economy a lot better, by making sure the currency is kept at a level such that local industry can compete somewhat (although the last time I visited Norway I found myself unable to buy even the smallest troll, as their prices were way out of my league).

I've been looking at the situation in Venezuela ever since I noticed their oil production was dropping, because I'm interested in the overall oil supply and demand balance. It seems to me they have squandered opportunity after opportunity. When I asked a Venezuelan expert about it, he told me most Venezuelans thought Venezuela was rich, and oil revenue was a lot more than it really was, so they develop false expectations, and thus populist governments prone to make promises they can't keep are the norm. Labor laws are appallingly inflexible, the legal regime is corrupt, shambolic, abused by both the rich and the state, government at all levels is inefficient, the economic freedom index is lousy...and Chavez is making things worse across the board. Given this toxic mix, it's clear why they're doing so poorly in spite of the income they get from oil.