It is hard not to shed a tear for Venezuela. Latin America’s largest oil producer on Tuesday confirmed that it had pulled off the remarkable feat of contracting 1.4 per cent during a year in which oil prices rallied.
That was the second consecutive year of negative growth for Venezuela – in 2009, the country led by socialist President Hugo Chávez shrank 3.3 per cent – and it comes as the rest of Latin America is rebounding strongly from the global recession of two years ago.
Indeed, as Venezuela has continued to suffer, it has looked more and more like an outlier in a region that, for the most part, finally seems to have freed itself from the cycles of boom and bust that previously characterised economic development. In 2010, the only countries in the region likely to post negative growth are Venezuela and Haiti.
It was not all bad: the central bank also said Venezuela’s economy grew by 0.6 per cent during the last quarter of 2010. That was the first quarter of positive growth in at least six.
It was certainly cause for optimism at the bank. It said in a statement:
The favourable result in the fourth quarter breaks the negative trend we have been reporting since the second quarter of 2009, when the impact of the international financial crisis started to be felt.
Yet even here, caution should temper enthusiasm. Part of the fourth quarter’s growth is the result of comparing economic activity with the same period of 2009, when the economy was contracting.
And many important sectors of the Venezuelan economy remain depressed. True, communications grew 12.3 per cent, public services 3.7 per cent, the banking and insurance sectors 3.3 per cent and transport and storage, 2.6 per cent.
But what about manufacturing industry, which shrank 0.4 per cent, commerce, which contracted 2.9 per cent, construction, which fell a whopping 8.6 per cent or mining, which tanked 17.5 per cent?
And then there is the serious problem of inflation, which, at 26.9 per cent last year, is off the charts when compared to almost all other Latin American economies – and private-sector economists believe inflation is actually much higher than that official figure.
Many economists blame Mr Chávez’s “21st century socialism”, with its nationalisation of key industries, multiple devaluations and arcane currency controls, for many of Venezuela’s woes.
By contrast, Mr Chávez, whose government is predicting growth of at least 2 per cent this year, has laid the blame squarely at the door of the international financial crisis.
Time will tell. But with the rest of Latin America recovering vigorously and Venezuela still looking fragile, many would argue that time had already delivered its verdict.
By Adam Thomson
Source: http://blogs.ft.com
That was the second consecutive year of negative growth for Venezuela – in 2009, the country led by socialist President Hugo Chávez shrank 3.3 per cent – and it comes as the rest of Latin America is rebounding strongly from the global recession of two years ago.
Indeed, as Venezuela has continued to suffer, it has looked more and more like an outlier in a region that, for the most part, finally seems to have freed itself from the cycles of boom and bust that previously characterised economic development. In 2010, the only countries in the region likely to post negative growth are Venezuela and Haiti.
It was not all bad: the central bank also said Venezuela’s economy grew by 0.6 per cent during the last quarter of 2010. That was the first quarter of positive growth in at least six.
It was certainly cause for optimism at the bank. It said in a statement:
The favourable result in the fourth quarter breaks the negative trend we have been reporting since the second quarter of 2009, when the impact of the international financial crisis started to be felt.
Yet even here, caution should temper enthusiasm. Part of the fourth quarter’s growth is the result of comparing economic activity with the same period of 2009, when the economy was contracting.
And many important sectors of the Venezuelan economy remain depressed. True, communications grew 12.3 per cent, public services 3.7 per cent, the banking and insurance sectors 3.3 per cent and transport and storage, 2.6 per cent.
But what about manufacturing industry, which shrank 0.4 per cent, commerce, which contracted 2.9 per cent, construction, which fell a whopping 8.6 per cent or mining, which tanked 17.5 per cent?
And then there is the serious problem of inflation, which, at 26.9 per cent last year, is off the charts when compared to almost all other Latin American economies – and private-sector economists believe inflation is actually much higher than that official figure.
Many economists blame Mr Chávez’s “21st century socialism”, with its nationalisation of key industries, multiple devaluations and arcane currency controls, for many of Venezuela’s woes.
By contrast, Mr Chávez, whose government is predicting growth of at least 2 per cent this year, has laid the blame squarely at the door of the international financial crisis.
Time will tell. But with the rest of Latin America recovering vigorously and Venezuela still looking fragile, many would argue that time had already delivered its verdict.
By Adam Thomson
Source: http://blogs.ft.com
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