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domingo, enero 01, 2006

Year-end economic roundup

Assorted reports on Venezuela’s 2005 economic performance that made the news:

The country’s GDP grew by a healthy 9.4% in 2005, according to the Central Bank of Venezuela. Contrary to criticisms that Chavez is merely coasting on high oil prices while neglecting the rest of the economy, the non-petroleum sectors actually showed higher growth, at 10.3%, than did the petroleum sector.

Annual inflation was at 14.4%, the lowest in four years, and nearly half the 27% rate of 2003. According to the National Statistics Institute (INE), unemployment fell to 8.9% in December, down from 10.9% in December 2004. This was the nation’s lowest unemployment rate since 1998.

This is good news for Venezuela. A second year of strong GDP growth shows that the economy overall has recovered from the petroleum stoppage and political turmoil of 2002-2003. Falling unemployment and poverty rates provide an indication that this growth is bringing benefits to all Venezuelans, not just (as often occurs) to a wealthy few.

The opposition, perhaps unable to accept that the policies they’ve condemned might actually be working, disputes these statistics. But they don’t quite seem to have their story straight. Some opposition commentators are attacking the numbers themselves, accusing the Central Bank of manipulating the data in Chavez’s favor, while others say the data are valid, but aren’t really good news.

Pablo Castro of the CTV called the BCV’s unemployment rate "magical data", saying its own numbers reveal unemployment of 15%. It’s not entirely clear what accounts for the difference between the Bank’s data and the CTV’s (assuming the CTV actually has any data, which I don’t know. Has the CTV traditionally publicized an independent measure of unemployment? Anyone know?)

Froilan Barrios, executive secretary of the CTV, said much the same in an interview with Unión Radio, again placing unemployment at 15% (the article says 12% in two places, but in quoting Barrios it returns to 15%, so I think the 12% is a typo.) Barrios does point out, accurately, that many of those who do have jobs don’t earn nearly enough to escape poverty. The fact that their jobs don’t pay well doesn’t make them unemployed, though.

Castro claims that "the government continues dressing up the data through the creation of jobs that are not . . . formal [employment]," and then makes reference to the government Missions, cooperatives, and co-managed enterprises. So I’m guessing that the CTV’s statistics exclude some or all of the workers employed in these categories.

How they would justify doing so, I don’t know. Why shouldn’t workers at cooperatives, co-managed plants, and government missions be considered employed? The U.S. has cooperatives and worker-owned companies, albeit many fewer than Venezuela, and their workers are counted in employment totals, as are workers in government programs.

The only possibility that springs to mind is that the CTV may be claiming that the BCV includes Venezuelans who are participating in the educational missions in its employment numbers. As students, even if they receive a stipend, they should not be considered employed, unless they have jobs in addition to their studies (which many surely do).

But I haven’t seen anything that would lead me to believe that the BCV numbers incorporate those students as employed. I would be quite surprised to find that they did so. Again, I haven’t delved that deeply into this issue; if anyone can offer hard evidence, it’s welcome. In its absence, though, I suspect that the CTV is just blowing hot air.

Bloomberg has another angle: in an article on the Venezuelan economy, they mention that "[t]he decline in the unemployment rate has been helped by the institute's decision to drop more than 200,000 people from the country's economically active population. The number of economically active people fell 3.2 percent over the last year, the institute said."

This argument could very well have merit; who should and shouldn’t be counted as "unemployed" versus "out of the labor force" is often subject to debate, and can easily be manipulated to show greater or lesser unemployment,. But removing people from the economically active population (the labor force) doesn’t jive with Castro’s complaint that the government is massaging the numbers by "creating jobs" that are illusory. I remain doubtful that the CTV’s claim has any merit.

This is supported by the fact that other opposition-leaning commentators claim that the BCV’s numbers are indeed valid; for them, it’s the Bank’s interpretation that is misleading. Regional daily El Tiempo cites economist Orlando Ochoa in arguing that the Bank’s calculations are right, but regardless, the nation is not on a path of sustainable growth.

This argument actually has some meat to it. Ochoa lists three problems that may mask the economy’s condition or imperil its growth: the national debt, high inflation rates, and increased public spending. El Tiempo doesn’t go into detail on the first two, but I think it’s generally agreed that inflation, though falling, is currently higher than desirable, and one of the government’s goals is to lower it to 10% next year.

On the third point, Ochoa argues that the non-petroleum sector owes its growth primarily to government funds flowing into the economy, which in turn are fueled by the state’s oil revenues. As best as I can make out, he says that this means the economy is not truly experiencing sustainable growth, I suppose because the government wouldn’t be able to maintain current levels of expenditures if oil revenues were to fall.

He may have a point – or not – I don’t really know enough about Venezuela’s economic intricacies to say. But I do have to say that his arguments would be much more convincing if they weren’t appearing side by side with an apparently coordinated campaign to discredit any statistics that don’t favor the opposition’s worldview.

For a good review of economic and political happenings in Venezuela over the past year, plus some commentary on what may lie ahead, see Humberto Márquez's article with IPS.

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