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Opinion and Analysis: Economy

The Booming Venezuelan Economy, and how it affects Monte Carmelo

The major media in the United States and Venezuela are overflowing with misinformation about Venezuela and its social and economic indicators, so it was relief to see a reliable appraisal of Venezuela’s economic growth appear recently: “The Venezuelan Economy in the Chávez Years,” by Mark Weisbrot and Luis Sandoval at CEPR, the Center for Economic and Policy Research in Washington, DC, February 2008. ( For those of you who are not familiar with CEPR, you should visit their website at http://www.cepr.net/, since they are primarily engaged in producing reliable information, analysis, and prognostication concerning the U.S. economy – they predicted the dangers of the stock market bubble in the late 1990s, and the housing bubble of the 2000s, when most economists were ignoring the problems because they were giddy with the joys of short-term profit-taking; likewise, they are one of the best, non-hysterical guides to understanding the current state of the U.S. Social Security system.)

In their report, which reviews solid statistics gathered through 2007, they note that Venezuela’s economy has been one of the fastest growing in Latin America and the world over the past five years: “since the first quarter of 2003, Venezuela's real (after adjusting for inflation) GDP has grown by 87.3 percent.”

“…employment in the formal sector has increased to 6.17 million (2007 first half), from 4.40 million in the first half of 1998 and 4.53 million in the first half of 2003. As a percentage of the labor force, formal employment has increased significantly since 1998, from 45.4 to 50.6 percent (2007).”

The figures above indicate, according to my handy calculator, that total employment, including both the formal and informal sectors, was 12.19 million in the first half of 2007, versus 9.69 million in 1998. This is an increase of 26% in nine years, a remarkable achievement for any country.

Such numbers are enough to drive Bush, Cheney, and their gang wild with envy, and makes them determined to destroy Venezuela’s experiment in developing “21st century socialism.” Too bad they only read opposition newspapers and bogus CIA and State Department reports instead of real information from CEPR, where they could find out that one major effect of Chavez’s “dangerous,” “destabilizing,” and “dictatorial” tendencies (the U.S. government’s words) has been to bolster the private sector.

The United States, given its paltry economic growth over the past eight years and its current economic downturn, should be coming to Venezuela for lessons in how to create jobs. Republicans and Democrats alike could re-learn the strategies that were once implemented in the United States through Franklin Roosevelt’s New Deal: government policies that redistribute income, democratize and support public education, and invest in broad systems of public works will also stimulate the private sector. Most job growth in Venezuela has taken place in the private, not the public sector. In fact, the private sector is growing faster than the public sector. “Private employment was a larger percentage of the labor force (75.0 percent) in the first half of 2007 as compared to the first half of 1999 (71.6 percent).”

Most U.S. Republicans, of course, would be adverse to the kind of income growth that has taken place. The bottom 80% of the population has seen its incomes increase by 60% to 100% over the past nine years (figures adjusted for inflation – see my previous November article on incomes and social classes). Middle-class income growth has been positive, but not as great as among the lower classes, and upper-class incomes have risen at the most modest rate. A recent article in the opposition newspaper, El Universal of Caracas, has a table of economic analysis indicating that the poorest sector of the population, level E, which represents almost half of the population, enjoyed income growth at more than twice the rate of the highest level AB, which amounts to 2% or less of the population.

Economic activity in the village of Monte Carmelo: a mini-boom in construction

One sure sign that economic growth is benefiting poor and working class people is the amount of construction activity that can be found all around the country. People in the lower-income barrios of the big city of Barquisimeto report that they have never seen so much activity undertaken by homeowners: they are replacing old make-shift construction of tin and boards with concrete and steel, adding on additional rooms or second stories, and re-plastering and repainting entire houses inside and out.

The campesinos of Monte Carmelo are also busy with building projects because they now have a little extra money to pay for materials, and because it’s summertime here. During the three dry months – January, February, and March, many campesinos don’t have enough water to cultivate vegetables for the market, so they take advantage of the dry weather and some free time to fix up their property in various ways. Some are also taking advantage of government loans and credits that are designed to help low-income homeowners and farmers. Alexis and his son are building a new hen house for 50 egg-laying chickens, making use of a government program that is giving small grants and loans to expand agricultural production on small plots adjacent to people’s homes.


The three bodegas (little stores) in town are doing a brisk business. One bodega is located in the front room of a family’s house, and they just decided to lift the roof and create a small, bamboo-walled garret for a couple of teenagers (it’s comfortable during the cool evening and nighttime hours, but baking hot between 10 and 3 in the daytime when the summer sun is blazing.)
The local construction boom means more activity for local carpenters: new rooms and houses will need furniture. Luis and two other 20 year-olds started up production in the carpentry shop at the Las Lajitas farming cooperative where the space and tools had been underutilized in recent years. They used a loan from the Monte Carmelo’s community council (“consejo communal”) to purchase an inventory of high-quality hardwoods, and the orders for furniture immediately started coming. Double beds seem to be their most popular items: they’ve already sold and delivered six, with another six are on order.

Diluvin, the village’s master welder and master folk violinist, and his nephew stand by the new concrete-block tank that will hold 6,000 liters of water to slake the thirst of 4 pigs who will soon be taking up residence in Monte Carmelo.

Local residents eat pork, but campesinos here are not used to raising pigs (they do raise chickens and cows for meat) because they can be dirty and smelly. However, a new program promoted by the Ministry of Agriculture is demonstrating that it is possible to raise pigs in small numbers without damaging the environment or offending your neighbors. In fact, if the pigs are incorporated into a small-scale system that includes organic gardening, overall production of healthy foods can be increased while also enhancing the quality of the local environment.

Diluvin and family just received a government loan that has allowed his family to initiate such a project on their four or five acres of land. In addition to the water tank above, they are constructing a small concrete residence for the pigs and concrete bins where compost, pig manure, and worms (vermiculture) will be combined to produce very high quality organic soil and liquid fertilizers. The new organic material will be used to cultivate an acre of vegetables and fruits while also enriching the soil of two more acres which are already planted with mature and fledgling coffee trees. And the pigs, besides producing valuable manure, will be reproducing little piglets which will be sold to neighbors who can fatten them up for ham, pork roasts, and bacon.
The Brouwer boys took a day off from farm work at the cooperative in order to level the terrain outside a new four room house. The campesino family that owns the property already has an older house next to the main street, and built this new “casita” with savings that they had accumulated over the past several years.

Other kinds of economic activity in the state of Lara

The little village of Monte Carmelo, population 800, has three shops, all little bodegas that sell food and household items. They are doing well.

Ten minutes away in the town of Sanare, population 25,000, there are hundreds of stores and shops, but no supermarkets or malls, so it’s much like a U.S. town circa 1955. Business is good.

The big city of Barquisimeto, with a million inhabitants, has all sorts of shopping centers that are booming: supermarkets, hypermarkets (similar to the big WalMarts in the U.S., only fancier), fast food outlets, big discount warehouse stores, and car dealers – consequently shoppers can buy most anything that we can buy in the United States. There is a huge new, ultra-spiffy mall called Sambil, part of a chain that began in Caracas, but we thought the Metropolis, also quite new, was prettier.

Although we have been living continuously in Venezuela since September, we didn’t venture into a shopping mall until a few weeks ago when we accompanied our friend Ruben to his university classes in Barquisimeto. After an hour or two in these pseudo-environments, where we purchased nothing except some really awful Italian lunches, we happily escaped. But we can report that the middle and upper classes of Venezuela (about 20% of the population, mostly anti-Chavez and continuously complaining about their endangered economic status) are doing well financially and spending their money with wild abandon.

Venezuelan shopping centers have several things in common with U.S. malls: for instance, terrible meals are served at the food courts. Also, most goods are sold in the same multinational brand-name stores -- Levis, Skecher, and Adidas – that you would see in the States or many other parts of the world. While the biggest malls are spiffier than those we have in south central Pennsylvania, they are also much more expensive – you have to pay twice as much here for brand-name shoes and brand-name burgers like Burger King. We did not sample the food at Burger King because there were long lines, and later that night we ate giant hamburguesas and Vikingos (super “Viking size” burgers) for one quarter the price at a small roadside stand along the main road from Barquisimeto to Sanare.

We went to the second shopping center shown above, which looked like any well-kept, medium-sized mall in a middle-class area of the U.S., because our teacher friend, Ruben, wanted to buy his wife a pair of shoes. The mall was busy, although you can’t see the crowds in the picture because everyone was standing around the corner in another corridor waiting to get into one of three shoe stores. The stores were having sales for El Dia de Amor (“Love Day” or Valentine’s Day on February 14) because it seems that a sure-fire way to a woman’s heart in Venezuela is through her feet. There were guards holding back the waves of would-be shoppers and limiting the number of people who could enter a store at any one time. Most customers were women accompanied by their husbands or boyfriends, but a few men, like Ruben, were feeling bold enough to pick out the perfect shoe all by themselves. We were in a hurry to get to a meeting, however, so Ruben decided he had to pass up the shoes in favor of a purse in an empty leather goods store down the corridor.

A Ruined Economy?
There are some faults with the Venezuelan economy, such as high inflation and occasional shortages of food in some stores, but most people are still earning much more (after adjusting for inflation) and eating much more than they did ten or twenty years ago. For this reason, although commentators in the opposition press and the U.S. are constantly claiming that Chavez is ruining the economy, these anti-Chavistas are unable to produce any reliable data to back up their arguments. Besides, they are constantly disproving their contention by engaging in their favorite recreation: going shopping.

Meanwhile, back in the U.S., working people are losing: in the last quarter of 2007 there was 5.6% annual rate of inflation in CPI, and only a 2.3% annual rate of increase in wages – that is, a decrease in income after it’s adjusted for inflation. CEPR recently reported that manufacturing employment in the United States hit a low point, for less than 10% of the working population now labors in factories, the lowest figure ever recorded since statistics were first gathered a century ago:

The loss of manufacturing jobs continues the downward trend of the last decade. Manufacturing employment has fallen by 3,880,000 jobs, or 22.0 percent, since January of 1998. It lost 279,000 jobs in the last year. The newly revised data show that employment in manufacturing fell below 10.0 percent of total employment in October. The loss of jobs has hit every sector of manufacturing, although the auto sector has been especially hard hit, losing 57,400 jobs or 5.6 percent of
employment in the last year. The loss of 18,300 jobs in textile mills and 20,300 in apparel (10.1 and 9.1 percent of employment, respectively) also stand out.

And his recent column in The New York Times, economist Paul Krugman indicated that worse news is yet to come, a product of the insane U.S. government policies that deregulated banking, mortgage, and financial transactions over the past three decades. The American taxpayers, he says, will be forced to bail out some of the biggest U.S. banks, the ones that wasted a large proportion of U.S. savings on bad loans:

“The result of all that bad lending was an unholy financial mess that will cause trillions of dollars in losses.”