Headline of the day: Venezuela
From the Seattle PI: Despite Chavez, Venezuela Economy Not Socialist
Since 2007, Chavez has nationalized and expropriated companies in sectors he deems strategic, including the oil industry, cement, telecommunications, electricity, steel and food. But economists note that those businesses make up a relatively modest share of the economy.
And the balance between public and private sectors remains nearly identical to when Chavez took office in part because the private sector grew faster than the government between 2003 and 2006, when the economy was booming.
Last year the private sector accounted for 70 percent of gross domestic product, including 11 percent in taxes paid on products, according to Central Bank estimates. The public sector was 30 percent, a slightly smaller share than when Chavez was elected in 2008.
By international standards, Venezuela has long had a large public sector because it includes the oil industry. By comparison, the public sector in Sweden accounts for 25 percent of GDP, and in United States less than 14 percent.
The whole thing is worth the read.
23 comments:
Interesting article. As you mentioned in an earlier posting, Ecuador's got an analoguous situation, with Correa talking more socialism than he's practicing.
As Shifter points out, the phenomenon of globalization simply won't let Chavez or Correa practice what they preach; the citizenry in these two countries has no interest in going the way of Cuba. As well, note that the economies of VZ and EC have suffered/lagged behind those of neighboring countries because no one wants to invest here (or there, in the case of VZ).
(The above said, I'm from California, and I can't resist noting that the unemployment rate in CA is 12%, vs. 10% here in EC; draw your own conclusions...)
note that the economies of VZ and EC have suffered/lagged behind those of neighboring countries because no one wants to invest here
This is the kind of ideological statement that people constantly make within our political culture despite the fact that there isn't any real evidence to back up the claim.
Firstly, Venezuela and Ecuador are distinct from one another, so the tendency to try to conflate their political economies because both their governments are leftist isn't instructive. Secondly, there is nothing in the social and economic indicators of Venezuela and Ecuador to suggest that they have "lagged behind neighboring countries."
Sorry, Justin, check ECLAC figures; VZ and EC are behind Peru and Colombia by some distance.
Btw, speaking of conflating, you're conflating economic performance with ideology.
I don't consider either Chavez or Correa to be ideologues. They talk good poitical games, but they don't play them. Basically, socialism, as they characterize it, is used as a marketing slogan and not much else; neither of them are socialists in the old, classical sense of the word. What does unite these guys is their unrelenting, insatiable drive for power and complete control, permanently, if possible. Nothing new in that down here in LA, and actually, I'd class these guys more in line with someone like Peron or his ilk...
Sorry, Justin, check ECLAC figures; VZ and EC are behind Peru and Colombia by some distance.
You yourself don't even bother to check the figures, Tambopaxi. Over the past six years, Ecuador and Venezuela's growth rates are comparable to those of Peru and Colombia. Moreover, the rate of poverty is vastly lower in Venezuela than in Colombia or Peru. In terms of the Gini coefficient (the standard measure of economic inequality), Venezuela vastly outperforms Peru and Colombia.
The fact of the matter is that you just claim whatever you think will confirm your ideological preconceptions without really caring what the figures show. The problem is that reality is much more complicated than your preconceptions about it.
You yourself don't even bother to check the figures, Tambopaxi. Over the past six years, Ecuador and Venezuela's growth rates are comparable to those of Peru and Colombia. Moreover, the rate of poverty is vastly lower in Venezuela than in Colombia or Peru. In terms of the Gini coefficient (the standard measure of economic inequality), Venezuela vastly outperforms Peru and Colombia.
Talk about ideology supplanting reality, Delacour. n
First of all, despite Marx Brainrots questionable numbers, more than one serious economist has pointed out that Venezuela's income inequality gap is pretty high.
It does not help that the government fudges statistics or doesnt have them. But it is fairly easy to show there is a lot of income inequality.
Under Chavez' misrule both the boliburgesia and the old rich have made out like bandits. Literally tens (if not hundreds) of billions of dollars have been stolen from the treasury. Selling to these new rich has also made merchants rich.
So at the very top, you have created a fairly large, very wealthy class. While the middle classes and some urban poor receive benefits, it has also made things bad for the very poor.
At some point when there is 30 percent inflation, lowered food and industrial production, shortgages of basic foodstuffs, and high import prices, the poors income does not rise. An incompetent government, trying stupid unworkable policies does not help either. If people are in fact worse off than they were 3 or 4 years ago, it is hard to see the income gap closing at the bottom of the spectrum.
Besides the fact that Colombia with almost twice the population and half the budget has lowered the poverty rate, while growing.
This is the kind of ideological statement that people constantly make within our political culture despite the fact that there isn't any real evidence to back up the claim.
You are the one talking without evidence Delacour.
The FACTS are that the countries that have grown and reduced poverty in South America (as in most of the developing world) are the ones that are open to and received Foreign Direct Investment in key areas of their economy. Foreign investment, also involves receiving know-how and technology transfers that raise entire industries like hydrocarbons, mining, or agriculture. Lack of foreign investment in the end, means less productive capacity.
All you need to do is look at Colombia's surging industries (in just about everything) and compare it to disastrous Venezuela - in just about every area.
Venezuela - GDP reduced 5& FAIL!
Last year the private sector accounted for 70 percent of gross domestic product, including 11 percent in taxes paid on products, according to Central Bank estimates. The public sector was 30 percent, a slightly smaller share than when Chavez was elected in 2008.
Funny that part of that private sector growth is attributable to Chavista "corruption stimulus". While many Chavistas export their ill-gotten gains to the benefit of Miami realtors and financial advisors, they do spend enough to keep this crazy consumption going.
Said consumption has also created entirely new industries, like importing food for the well-heeled, as well as kidnapping and robbing old and new rich.
First of all, despite Marx Brainrots questionable numbers, more than one serious economist has pointed out that Venezuela's income inequality gap is pretty high.
High compared to what? Venezuela has the lowest recorded Gini coefficient in Latin America. Its Gini coefficient is lower than that of the United States. Rather than making ideologically-charged claims, you can check the ECLAC data yourself.
Neither I nor Mark Weisbrot claims that Venezuela has a great economic development strategy, but it does compare favorably to other Latin American countries on the question of economic inequality.
more than one serious economist has pointed out that Venezuela's income inequality gap is pretty high.
Please show us the economist that says Venezuela's inequality is high for the region. They would be dead wrong. Their Gini coefficient is among the best and they have reduced inequality more than any other Latin country in recent years according to the UN's ECLAC. Is inequality still too high there? Of course! But unless you are arguing for Cuba-style equality, I don't think we can take your concern for more equality seriously. Meanwhile, according to ECLAC, Colombia is the only major country in Latin America in which the gap between rich and poor has increased in recent years.
While the middle classes and some urban poor receive benefits, it has also made things bad for the very poor.
Again, facts show this to be nonsence. In no other country have the poor made out as well than in Venezuela under Chavez. Extreme poverty had been reduced by a huge margin (from 40% in 1996 to 6% today) and this does not even county the many non-income ways the poor have benefitted - subsidized food, better health care and education opportunities, ect.
The FACTS are that the countries that have grown and reduced poverty in South America (as in most of the developing world) are the ones that are open to and received Foreign Direct Investment in key areas of their economy.
You have no FACTS to prove this. Poverty has been reduced the msot in Venezuela, followed by Peru, Argentina and Ecuador (ECLAC). FDI has fallen in Venezuela and Ecuador, while has risen in Argentina faster than Peru.
At some point when there is... lowered food and industrial production (in Venezuela)
Actually industrial production in Venezuela has increased at a fast 6.6 clip (on average) since 2005. While in Colombia, it has increased only 4.8 (indexmundi). Food production in Venezuela is also way up (25% in the previous few years). The only reasons there have been periodic shortages in one thing or another is that demand for food is through the roof, as the poor are able to afford more things like milk and meat. Plus there has been hoarding.
Here's latest info for Ecuador that I've got (June 30) http://www.bloomberg.com/news/2010-06-30/ecuador-first-quarter-gdp-expands-0-33-as-oil-revenue-slumps-on-boycott-.html. Growth for the first quarter, 2010 was .6% over last year, compared to 4.4% for Colombia and 9.3% for Peru in the same period. Venezuela, in contrast, had its economy contract by over 5%.
This isn't ideology, Justin, this is reality. It's a reality in which people who have money that's not/not controlled by the government decide that they don't want their assets to be taken by the government.
Note that within the Bloomberg article, that the GOE says it's contemplating seizing foreign oil investments. Yesterday (July 22), it did just that, seizing (expropriating) all assets of Perenco Oil. The GOE has been clear, very clear, that it's going to do the same thing will everyone else, with the exception of the Chinese, who just agreed to lend them $1b.
Events and governmental attitudes like these aren't lost on investors and trust in economies is lost. Private investment is down, and it'll continue to go down because GOE actions (not their rhetoric) discourages it.
These are economic decisions and actions, not ideological ones and they're having palpable, rapid effects here in Ecuador, which has a relatively small economy. The same thing's happening in Venezuela only it's taken longer to be felt, given the size of that economy and the oil growth in prior years.
Given the government's latest initiatives (i.e., moves to seize foreign oil investments and now they're trying to get access to Central Bank reserves on private bank deposits), I don't foresee private investment going up any time soon. (This comment's gotten too long, so I won't go into public sector investment, which is facing growing problems of its own.)
The bottom line again, though, is that Ecuador (and Venezuela) are weak performers and other countries are not. I believe that those trends will continue as long as Ecuador and Venezuela have leaders who believe that they, and only they, know what's good for their economies, and who feel free to take other people's property. Note that I don't qualify this as ideology; Chavez and Correa,and their actions, are realities, and so are the reactions of private investors to these people; get away from them and stay away from them...
Growth for the first quarter, 2010 was .6% over last year, compared to 4.4% for Colombia and 9.3% for Peru in the same period. Venezuela, in contrast, had its economy contract by over 5%.
You're talking about growth rates for one quarter, Tambopaxi. To try to draw conclusions on the basis of one quarter without looking at longer-term trends is absurd.
Just because you would like to see foreign investors like yourself as the linchpin of economic growth doesn't make it so. How quickly people forget that the quintessential late-developing success story --South Korea-- had a low rate of foreign investment. The South Korean road to development was driven mostly by domestic capital, not foreign capital.
Tambo, yes, if you look at just this one period in time, Venezuelan and Ecuadorean growth is not as good as others. But if you look at the much more significant picture of economies over time, the picture is not that clear at all. Venezuela has grown the most... Ecuador has been stable for the first time in a while. Poverty reduction in both places has been fantastic (almost a halving in Ecuador, much more dramatic drops in Venezuela). In Peru, meanwhile, malnutrition and hunger has actually risen the last 2 years.
The point is you can not credibly state some trend about the importance of FDI when the real bulk of evidence does not support you. You can't cherry pick numbers at the one point in time when oil prices fell through the floor and think they can be extrapolated over time. Things are not so simple. In fact, many of your certainties are plainly shown to be wrong by the facts.
Plenty of oil companies still want in to the Venezuelan and Ecuadorean markets, even with increased state control (as the many bids for the Orinoco fields showed a few months ago). The time of allowing oil (or mineral) companies to do what they want, without the people getting to share substantially in the profits, is over. The result has been more money to spend on social and infrastucture projects, which is why the social indicators in Ven. and Ecuador look so good - and why they barely budged in countries that continue to be exploited.
The South Korean road to development was driven mostly by domestic capital, not foreign capital.
And billions in US trade preferences and subsidies throughout the 60s and 70s did not hurt either.
Again, facts show this to be nonsence. In no other country have the poor made out as well than in Venezuela under Chavez. Extreme poverty had been reduced by a huge margin (from 40% in 1996 to 6% today) and this does not even county the many non-income ways the poor have benefitted - subsidized food, better health care and education opportunities, etc.
ummm... There has been poverty reduction. But CEPAL itself finds that "extreme poverty" levels for the last year recorded was 9.9 percent which in itself is very good, and a substantial reduction from 1990's levels.
But it is also in line with previous boom times. In 1981 it was 8.6 percent.
Which brings me to the larger point I have made repeatedly. That Venezuela's poverty reduction is quite simply the result of it being an oil-rich country in a boom period. That the Chavez government efforts at poverty reduction are nothing new, since previous governments effected large income transfers that reduced poverty. The difference is that this government is so incompetent and corrupt that somehow GDP is shrinking despite still high oil prices. Under previous governments (hardly a model of efficiency and honesty) at least they waited till oil prices collapsed for the economy to fall. Which of course resulted in higher poverty rates and inequality
And Tambo, even if you insist on using this moment in time as your startig point to make all kinds of claims, here are the facts about right now.
The fastest growing countries in 2010 are predicted (by ECLAC) to be(in order): Brazil, Uruguay, Paraguay, Argentina, Peru. If you think you can glean some trend about market friendly policies and growth out of that result, be my guest. But I think it would be rubbish.
Under previous governments (hardly a model of efficiency and honesty) at least they waited till oil prices collapsed for the economy to fall.
That's just wrong. Venezuela had negative growth rates in four of the first five years of the 1980s, a period during which the price of oil --adjusted for inflation-- was actually higher than it was in 2009.
More dishonesty from Boli. I just showed you that extreme poverty in Venezuela is at 6%, but you come back with some dated number of 9.9%. So, in fact, extreme poverty has never been lower in Venezuela.
And your theory that Venezuelan policies (that increased hydrocarbon revenues) had nothing to do with the astounding growth there has been shown to be nonsense. Venezuela grew faster than all other oil exporting nations during the boom.
Under previous governments (hardly a model of efficiency and honesty) at least they waited till oil prices collapsed for the economy to fall.
Umm, Venezuela's economy did not fall until oil prices fell. What are you talking about?
More dishonesty from Boli. I just showed you that extreme poverty in Venezuela is at 6%, but you come back with some dated number of 9.9%. So, in fact, extreme poverty has never been lower in Venezuela.
Hey leftside, if I am wrong it is my bad on that figure. But I can not find the 6 percent number. And the ECLAC figures that I normally cite come from the Millenium Goals statistics on poverty and extreme poverty.
And the figure they cite is extreme poverty is at 9.9 percent in Venezuela - for the last recorded year 2008.
That is the number on the CEPAL site, and it is also cited in the very last Millenium Goals Report
http://www.eclac.cl/publicaciones/xml/5/39995/2010-496-ChapterII.pdf
As is the case with total poverty, the scale of indigence differs widely between Latin American
countries. Chile, Costa Rica and Uruguay have the lowest rates at under 6%; while Argentina, the Bolivarian Republic of Venezuela, Brazil, Ecuador, Mexico, Panama and Peru all display medium-low rates of extreme poverty, of up to 50%. Countries with medium-high indigence levels include Colombia, Dominican Republic, Ecuador, El Salvador, and Peru, with rates between 19% and 29%; while those with the highest rates, above 30%, are Honduras, Nicaragua, Paraguay and the Plurinational State of Bolivia (see figure II.2).
And your theory that Venezuelan policies (that increased hydrocarbon revenues) had nothing to do with the astounding growth there has been shown to be nonsense. Venezuela grew faster than all other oil exporting nations during the boom
the policies that led to the growth were sectoral policies adopted during the so-called "apertura petrolera" that expanded public and private investment in exploration, production and refinement in the 90's, as well as expanding the refining capacity for heavy Venezuelan crude in the foreign markets through key foreign purchases like CITGO. By the time Chavez got in, the country had a turnkey petroleum industry cranking out more than 3 m barrells a day. As it stands now, it still produces over 2m barrells a day through PDVSA and foreign companies.
That's just wrong. Venezuela had negative growth rates in four of the first five years of the 1980s, a period during which the price of oil --adjusted for inflation-- was actually higher than it was in 2009.
actually by the late 70's and early 80's the external financial crisis - namely inflation - resulted in Venezuela's revenue from oil falling in real value, despite the high oil prices.
To make matters worse, high interest rates on the state's large debt, further sapped the economy, negating growth further.
Despite the current recession, oil prices are still somewhat high in real terms, inflation is low, and the interest rates for servicing debt are low.
Anyways, its clear the Venezuelan government did a lot of silly unsustainable things in 1977, which it repeated in 2007. Nothing new here kids.
And your theory that Venezuelan policies (that increased hydrocarbon revenues) had nothing to do with the astounding growth there has been shown to be nonsense. Venezuela grew faster than all other oil exporting nations during the boom.
Leftside you are totally wrong
As you can see here,
real GDP and GDP per capita in Venezuela have not kept up with other oil producing countries.
The recent economic expansion has been impressive, with real gross domestic product (GDP) growing at an average rate of about 8 percent in the last 4 years. Nonetheless, the long run performance of the Venezuelan economy has been considerably more modest: per capita GDP remains below levels observed during the 1970s; real growth has lagged that of other oil exporters and developing countries, and has become more volatile
real GDP and GDP per capita in Venezuela have not kept up with other oil producing countries.
Boli, the study proves exactly my point. Venezuela fell behind other oil exporters in the 70s-90s. Since Chavez has been in power however, the trend has reversed. They try hard to obscure this point, but it is plain to see in the graph on page 2. In fact, since Chavez got full control over PDVSA after the strike, Venezuela appears to have grown almost twice as fast as other oil exporters (using a rough calculation). The only reason the figures get skewed when you use the artificial 2000-2007 dates is because of the devastating effects of the owners lockout strike (an 18% reduction in real GDP).
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