[NYTr] New Study Says Venezuelan Economy to Continue to Boom

[All the News That Doesn't Fit]

Venezuelanalysis - July 26, 2007
http://www.venezuelanalysis.com/news.php?newsno=2363


New Study Says Venezuelan Economy to Continue to Boom

Washington, DC: A new paper from the Center for Economic and Policy
Research looks at the Venezuelan economy during the last eight years
and finds that it does not fit the mold of an "oil boom headed for a
bust," as is commonly believed.

"There's no obvious end in sight for Venezuela's current economic
expansion," said economist Mark Weisbrot, Co-Director of the Center for
Economic and Policy Research and co-author of the paper ?The Venezuelan
Economy in the Chávez Years.?

The paper notes that Venezuela's economy was wracked by political
instability for the first four years of President Hugo Chávez's tenure,
but has grown steadily and rapidly over the last four years, after
political stability returned to the country following the oil strike of
December 2002 to February 2003.

Since the bottom of that downturn in the first quarter of 2003,
Venezuela's real GDP has grown by 76 percent.

Moreover, the private sector is still a larger share of the economy
than it was before President Chávez took office.

In real (inflation-adjusted) terms, social spending per person has
increased by 170 percent during the period 1998-2006. But this does not
include the state oil company PDVSA?s social spending, which was 7.3
percent of GDP in 2006. With this included, social spending was at
least 314 percent more in 2006 than in 1998 (in terms of real social
spending per person). This has brought about significant gains for the
poor in health care, subsidized food, and access to education, some of
which are detailed in the paper.

The official poverty rate, which measures only cash income and does not
include such advances as increased access to health care and education,
has dropped by 31 percent from 1998 to the end of 2006 ? from 43.9
percent of households to 30.6 percent. Measured unemployment has
dropped from 15 percent in June 1999 to 8.3 percent in June 2007.

The authors also look at fiscal, monetary, exchange rate and other
government policies, as well as investment and the sustainability of
the expansion. They note that the government faces significant
challenges over the intermediate run in controlling inflation and bring
Venezuela's currency to a more competitive level. However, the
country's declining public debt (as a percentage of GDP), large current
account surplus, and the accumulation of reserves have given the
government considerable insurance against a decline in oil prices. This
favorable macroeconomic situation has also left the government with
much flexibility in dealing with inflation and the related imbalance in
the exchange rate. The authors therefore conclude that ? contrary to
popular belief -- there is no imminent threat to the country's current
economic expansion.