The Chávez Administration at 10 Years: The Economy and Social Indicators

This
paper looks at some of the most important economic and social
indicators during the 10 years of the Chávez administration in
Venezuela, as well as the current economic expansion. It also looks at
the current situation and challenges.

By Mark Weisbrot, Rebecca Ray and Luis Sandoval - CEPR
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For the full report in its original PDF format, click here (255kb).

Executive Summary

This
paper looks at some of the most important economic and social
indicators during the 10 years of the Chávez administration in
Venezuela, as well as the current economic expansion. It also looks at
the current situation and challenges.

Among the highlights:

  • The
    current economic expansion began when the government got control over
    the national oil company in the first quarter of 2003. Since then, real
    (inflationadjusted) GDP has nearly doubled, growing by 94.7 percent in
    5.25 years, or 13.5 percent annually.
  • Most
    of this growth has been in the nonoil sector of the economy, and the
    private sector has grown faster than the public sector.
  • During
    the current economic expansion, the poverty rate has been cut by more
    than half, from 54 percent of households in the first half of 2003 to
    26 percent at the end of 2008. Extreme poverty has fallen even more, by
    72 percent. These poverty rates measure only cash income, and does take
    into account increased access to health care or education.
  • Over
    the entire decade, the percentage of households in poverty has been
    reduced by 39 percent, and extreme poverty by more than half.
  • Inequality,
    as measured by the Gini index, has also fallen substantially. The index
    has fallen to 41 in 2008, from 48.1 in 2003 and 47 in 1999. This
    represents a large reduction in inequality.
  • Real (inflationadjusted) social spending per person more than tripled from 1998-2006.
  • From
    1998-2006, infant mortality has fallen by more than onethird. The number
    of primary care physicians in the public sector increased 12fold from
    1999-2007, providing health care to millions of Venezuelans who
    previously did not have access.
  • There
    have been substantial gains in education, especially higher education,
    where gross enrollment rates more than doubled from 1999/2000 to
    2007/2008.
  • The
    labor market also improved substantially over the last decade, with
    unemployment dropping from 11.3 percent to 7.8 percent. During the
    current expansion it has fallen by more than half. Other labor market
    indicators also show substantial gains.
  • Over the past decade, the number of social security beneficiaries has more than doubled.
  • Over
    the decade, the government's total public debt has fallen from 30.7 to
    14.3 percent of GDP. The foreign public debt has fallen even more, from
    25.6 to 9.8 percent of GDP.
  • Inflation
    is about where it was 10 years ago, ending the year at 31.4 percent.
    However it has been falling over the last half year (as measured by
    threemonth averages) and is likely to continue declining this year in
    the face of strong deflationary pressures worldwide.

The current situation and challenges:

Venezuela's
most important immediate challenge is, as for most countries, the
world economic recession. This affects Venezuela's economy mainly
through oil prices, which have fallen about 70 percent from their July
peak last year. At oil prices below $45 per barrel (for Venezuelan
oil), Venezuela would begin to run a current account deficit. However,
because Venezuela has an estimated $82 billion in reserves, it
could finance a modest current account deficit for some time - e.g.
even if oil prices were to remain at their current depressed levels for
the next two years. But economists and the futures markets are not
predicting oil prices to remain at current levels for that long:
futures markets are pricing oil at above $60 per barrel in December
2010.

With
balance of payments constraints unlikely, Venezuela's main challenge in
the near future will be to come up with an adequate fiscal stimulus
package. Over the intermediate run, it will also want to adjust its
exchange rate to a more a competitive level, in order to diversify its
economy away from oil. However, because of its ample reserves, the
government is unlikely to suffer a forced devaluation in the
foreseeable future.

Introduction

Hugo
Chávez Frías was first elected president of Venezuela in December 1998
and took office ten years ago, in February of 1999. Chávez is a
controversial figure, and most discussion of his tenure is polarized or
otherwise ideological, and mostly negative. This paper looks briefly at
some of the most important economic and social indicators over the last
decade, and also at the current situation and challenges. It relies on
data that are not in dispute. Some of the most important data have been
largely unreported, although they are publicly available.

Economic Growth

Figure 1 shows Venezuela's real quarterly GDP from 19982008 (second quarter).[1] As
can be seen from the graph, growth appears to be heavily influenced by
various shocks, including political instability and strikes.

There
are different ways to evaluate the growth performance of the Venezuelan
economy during the Chávez years. One is to simply look at GDP growth
since Chávez became president in the first quarter of 1999. The latest
(seasonallyadjusted) data available are for the second quarter of 2008.
On that basis, the economy has grown 47.4 percent, or 4.3 percent
annually over 9.25 years. On a per capita basis, this is about 18.2
percent, or 1.9 percent annually. Although this is a vast improvement
over the two decades of economic decline that preceded Chávez, it is
modest growth, about the same as the regional average.

However,
looking at the entire decade is misleading because the Chávez
government did not control the stateowned oil company until the first
quarter of 2003. So for the first four years, the stateowned oil
company (PDVSA), which at the time accounted for more than half of
government revenue and 80 percent of export earnings, was controlled by
people who were hostile to the government. Furthermore, the managers of
the company actually used their control over these vital resources to
destabilize and even topple (temporarily) the government. Under these
circumstances there was not much that the government could do to
promote economic growth.

We
could therefore measure growth from the time that the government got
control over PDVSA, in the first quarter of 2003. This has the
disadvantage that part of the growth since that time is a rebound from
a deep recession. Nonetheless it is a better measure to evaluate the
performance of the Chávez administration than is the whole ten year
period. Also, it could be argued that this measure is relevant because
even the early part of the recovery was a difficult achievement for the
government. This was not a normal business cycle but a deep economic
recession that involved considerable sabotage in the oil industry. When
the strike ended, analysts quoted in the business press predicted a
slow and painful recovery, with much difficulty restoring oil
production.

Looking at growth from the first quarter of 2003, real GDP grew by 94.7 percent over 5.25 years, or

13.5
percent annually. This is extremely rapid growth by any historical or
international comparison. On a per capita basis, it was 78.8 percent,
or 11.7 percent annually.

Finally,
another way to measure growth that cancels out the effect of the
rebound from the 20022003 oil strike is to start from the point where
GDP reached is prerecession peak. This would be the third quarter of
2004. On this basis, GDP grew 37.2 percent over 3.75 years, or 8.8
percent annually. On a per capita basis, this is 28.2 percent, or 6.9
percent annually. This is also very rapid growth by almost any
international or historical comparison.

By
any reasonable comparison, then, the growth experience of the
Venezuelan economy during the Chávez years has been very successful. Of
course this is even more true if we compare to the two decades prior to
Chávez's election, when the Venezuelan economy actually suffered a
decline in per capita GDP, and one of the worst in the world during
this period. From 19781998, Venezuela's per capita GDP declined by 21.5
percent.

Figure 1 shows
some detail about how the economy was influenced by external shocks,
especially those related to political instability. Chávez took office
with the lowest oil prices in 22 years; the first year was marked by
negative growth. This trend reversed by the first quarter of 2000,
and the economy grew until the third quarter of 2001, a time of great
political instability. In December of 2001 the Venezuelan Chamber of
Commerce (FEDECAMARAS) organized a general business strike against the
government. This political instability, with much capital flight,
continued through April 2002, when the elected government was
overthrown in a military coup. The constitutional government was
restored within 48 hours, but stability did not return, as the
opposition continued to seek to topple the government by extralegal
means. Growth remained negative through the summer and fall of 2002,
and then the economy was hit with the oppositionled oil strike of
December 2002 - February 2003. This plunged the economy into a severe
recession during which Venezuela lost about 24 percent of its GDP. The
economy began to recover in the second quarter of 2003 and has grown
very rapidly since then, with one dip in the first quarter of 2008.

Components of Economic Growth

As can be seen from Figure 2 and Table 2, the
nonoil sector has accounted for the vast majority of the growth during
the current expansion. In fact, the oil sector had negative growth for
20052007, after a 13.7 percent jump in 2004 after production was
restored following the strike. Even in 2004, however, the nonoil sector
grew faster than the oil sector.

It
is also worth noting that in spite of the expansion of government
during the Chávez years, the private sector has grown faster than the
public sector. This has also been true throughout the current
expansion, with the exception of 2008, where the public sector
accounted for almost all of the growth in the first three quarters.

The fastest growing sectors of the economy have been finance and insurance, which has grown 258.4
percent during the current expansion, an average of 26.1 percent
annually; construction, which has grown 159.4 percent, or 18.9 percent
annually; trade and repair services (152.8 percent, or 18.4
percent annually); transport and storage (104.9 percent, or 13.9
percent annually); communications (151.4 percent, or 18.3 percent
annually). Manufacturing grew 98.1 percent during the expansion, or
13.2 percent per year.

Poverty and Inequality

As can be seen in Table 3, there
has been a huge decline in poverty and extreme poverty during the
current economic expansion. The percentage of households in poverty
declined by more than half, from 54 percent in the first half of 2003,
to an estimated 26 percent at the end of 2008. The percentage of
households in extreme poverty fell by even more: a 72 percent decline,
to seven percent of total households. This is a significant
achievement, and puts Venezuela within reach of eliminating extreme
poverty altogether. It is worth noting that the United Nations'
Millennium Development Goals call for a reduction in extreme poverty by
half over the period 19902015.

If
we take the first half of 1999 as the starting point, the percentage of
households in poverty has been reduced by 39 percent, from 42.8 percent
to 26 percent. Extreme poverty fell by over half, from 16.6 percent to
seven percent.

There
has also been a sharp drop in inequality, as measured by the Gini
index. Since Chávez's election, the Gini index has dropped by almost
six points, from 46.96 to 40.99. In this most recent expansion, the
drop has been even greater: over seven points, from 48.11 to 40.99. For
a rough idea of the size of such a change in the distribution of
income, compare this to a similar movement in the other direction: from
19802005, the Gini index for the United States went from 40.3 to 46.9,[2] a period in which there was a large (upward) redistribution of income.

Health and Education

Health

Venezuelans,
especially children, have benefited from the government's social
policies over the past decade through improved health outcomes. As
shown in Figure 4, infant
mortality has decreased by over onethird, falling from 21.4 to 13.7
deaths per 1,000 live births. Likewise, child mortality has fallen by
over onethird, from 26.5 to 17.0 deaths per 1,000 live births. The
greatest benefit has been for children between the ages of one
and eleven months: postneonatal mortality has been cut by more than
half, falling from 9.0 to 4.2 deaths per 1,000 live births.

Venezuelans
have seen a similar improvement in food security. Average caloric
intake has risen from 91.0 percent of the recommended levels in 1998 to
101.6 percent in 2007. Even more importantly,
malnutritionrelated deaths have fallen by more than 50 percent, from
4.9 to 2.3 deaths per 100,000 in population between 1998 and 2006. Two
new programs have helped reach this goal. First, the PAE school feeding
program, which provides a free breakfast, lunch, and snack, began in
1999 serving a quartermillion students and has risen to over four
million students in 2008.

Secondly,
the Mercal network of government food stores began in 2003 selling
45,662 metric tons of deeply discounted food and has risen to a level
of 1.25 million metric tons in 2008.[3]

A
third improvement in health outcomes has seen potable water
and sanitation accessible to many more Venezuelans than before Chávez's
election. As Figure 5 shows,
in 1998, 80 percent of Venezuelans had access to drinking water and 62
percent had access to sanitation. In 2007, 92 percent had access to
drinking water and 82 percent had access to sanitation. Compared to
1998, then, roughly four million more Venezuelans now have access to
clean drinking water, and over five million more Venezuelans now have
access to sanitation.

These
achievements have been facilitated by a large expansion in access to
medical care. From 1999 to 2007, the number of primary care physicians
in the public sector increased more than twelve times, from 1,628 to
19,571, providing health care to millions of poor Venezuelans who
previously did not have access to health care. In 1998 there were 417
emergency rooms, 74 rehab centers and 1,628 primary care centers
compared to 721 emergency rooms, 445 rehab centers and 8,621 primary
care centers (including the 6,500 neighborhood clinics, usually in poor
neighborhoods) by February 2007. These new community healthcare centers
have had over 250 million healthcare consultations: nearly 37,000 each
since the program began. Since 2004, 399,662 people have had eye
operations

that
restored their vision. In 1999, there were 335 HIV patients receiving
antiretroviral treatment from the government, compared to 18,538 in
2006.[4]

Education

Improvements
in education are visible for both young and nontraditional age
students. Traditionalage enrollment has risen significantly, as shown
in Figure 7. Net
enrollment at the basic (grades 19) level has risen from 85 percent to
93.6 percent, and secondary enrollment has risen even more, from
onefifth to over onethird of the population.

The
increase in basic education enrollment represents 8.6 percent of
children age 5 through 14, or nearly a halfmillion children in school
who would otherwise be without education. For secondary education, the
increase means that 14.7 percent of children ages 15 through 19, or
nearly 400,000 children, have been able to stay in school as a direct
result of improved social investment.[5]

The
largest gains have been seen in higher education: from the 19992000
school year to 20062007, enrollment increased by 86 percent; estimates
for the 20072008 school year put the increase at 138 percent from the
19992000 base.[6]

The
Chávez administration has also initiated the Ribas Mission to provide
secondary education for returning adult students. The Ribas Mission
began in 2003 and its first students graduated in 2005. In its first
three years of operations, the program has graduated over half a
million students - about three percent of the country's adult
population.[7] The government also carried out a large scale literacy training program, Mision Robinson.[8]

Labor Market and Social Security

Labor Market

Venezuelan workers face a substantially better labor market than a decade ago, as shown in Table 4. There
are now 2.9 million more jobs than in 1998, which represents a
onethird increase. The unemployment rate has dropped from 11.3 percent
to 7.8 percent; it rose to 19.2 percent in 2003, but has fallen by over
half since that time. There has also been a significant increase in job
quality, as measured by formal sector employment. Over half of the
labor force - 51.8 percent - is now employed in the formal sector, up
from 45.4 percent in 1998. Most of the job growth have been in the
private sector, but both sectors have outpaced the growth in the labor
force: the decade has seen a 47.2 percent increase in publicsector jobs
and a 30.6 percent increase in privatesector jobs.

Also,
the rate of employment (employed as a percentage of the labor force)
has increased enormously during the current expansion, from 80.8
percent to 92.2 percent. Measured from 1999 it is much less but still
substantial, increasing from 88.7 percent. In sum, the labor market
indicators, by any comparison, all show substantial improvement during
the Chávez administration. These are consistent with the reduction in
poverty as measured by cash income.

Social Security

For
those beyond employment age, widowed, orphaned, or unable to work due
to a disability, the social security programs have vastly
expanded their protection, as shown in Figure 8. The
reach of old age, disability, and survivors benefit programs has more
than doubled since 1998. Among the entire population, this figure has
risen from 1.7 percent receiving benefits to 4.4 percent. As is the
case for other indicators, social security's performance was slow at
the beginning of Chávez's term, actually fell slightly during the oil
strike, and has grown very rapidly since 2003, when Venezuela
recovered from the oil strike and the government gained control over
the oil sector.

Government Finance and Current Account

Government
revenues have benefited enormously from the rising price of oil until
last year; world oil prices rose from an average of $19.3 per barrel in
1999 to $99.7 per barrel in 2008.[9] However, it is
worth noting that nonoil revenue also increased significantly as a
percentage of GDP over the decade, from 11.7 percent of GDP in 1998 to
14.2 percent of GDP in 2007. This was due to improved tax collection.

Revenue
and spending are shown in Table 5. As can be seen, revenue
increased from 17.4 percent of GDP in 1998 to 28.7 percent of GDP in
2007. Spending also increased, from 21.4 to 25.7 percent of GDP over
this period. The government ran a fiscal surplus of 3 percent of GDP
for 2007; there are still no official figures available for 2008.

It
is important to note that not all government spending is included in
these figures for central government finances. Much of the government's
spending has, in recent years, been carried out directly from PDVSA,
the state oil company. For example, in the first three quarters of 2008
(January through September) PDVSA had $13.9 billion, or 6.1 percent of
GDP in public expenditures.

It is also worth noting that real (inflationadjusted) social spending per person more than tripled from 1998-2006.[10] Over
the decade, the government's total public debt has fallen from 30.7 to
14.3 percent of GDP. The foreign public debt has fallen even more, from
25.6 to 9.8 percent of GDP.

Inflation and the Exchange Rate

Figure
10 shows the monthly yearoveryear inflation over the past decade, as
measured by changes in the Caracas Consumer Price Index. President
Chávez took office with inflation at 29.5 percent. This dropped to 12.3
percent over the next three years, then soared to a peak of 38.7
percent in February of 2003 as a result of the economic destruction
caused by the oil strike at that time. After the strike ended in that
month, the economy grew very rapidly while inflation declined sharply
to a low of 10.4 percent in May of 2006. It then began an upward climb
that, except for a dip from FebruaryDecember 2007, brought inflation to
a peak of 36 percent in September of 2008, from which it has since
declined to 32 percent.

However,
the yearoveryear numbers give only a rough picture of current trends.
For a more detailed picture, it is better to look at threemonth
intervals and separate out the core (excluding food and energy) from
headline inflation. This is especially important because
food and energy prices surged worldwide in the 15 months from April
2007 to July 2008, and then fell back sharply.

As
can be seen in Figure 11, headline inflation in Venezuela during the
year ending July 2008 averaged 33.7 percent with core inflation
averaging 28.7 percent over the same period. Both figures are
significantly higher than they were in the two previous years -17.2
and 16.5 percent respectively. However, recent inflation has been
concentrated in the first half of 2008 and has abated considerably in
the second half. The threemonth average headline inflation peaked in
January at 54.3 percent and for the three months ending in December ran
only 31.4 percent. Core inflation also peaked at 43.8 percent in the
three months ending in January, but now stands at 24.7

percent.
While this rate of inflation is still much higher than the previous
couple of years (although still low by Venezuela's historical
standards) the considerable deceleration of inflation during 2008 does
not appear to be cyclical, but rather the passing of temporary price
shocks.

Given
the trajectory of the regional and world economy, inflation is likely
to continue declining this year, in the absence of unanticipated events
and/or serious shortages. Inflation itself, then, does not seem to be a
direct threat to economic growth in Venezuela, although the government
will want to bring it down over time.[11]

The
more serious problem posed by Venezuela's inflation is that, due to
Venezuela's fixed exchange rate regime, it contributes to a growing
and ultimately unsustainable overvaluation of the country's real
exchange rate. The bolivar is pegged at 2,150 to the dollar; it was
fixed at 1,600 in February 2003 when the government implemented foreign
exchange controls. If we assume that the currency was neither
overvalued nor undervalued when the exchange controls were
implemented - more likely it was already overvalued - we would expect a
depreciation to about 4,200 (or 4.2 Bolivares Fuertes) as a result of
Venezuela's inflation.

Thus
the Venezuelan currency is at least 49 percent overvalued relative to
the dollar. It is worth noting that this is not necessarily
overvalued to the extent indicated by the parallel market rate, which
fluctuates considerably and is currently at about 5,400 bolivares to
the dollar. Nonetheless the currency is still very overvalued. This is
something that will have to be remedied if Venezuela is going to pursue
a longterm development strategy that diversifies the economy away from
oil. An overvalued currency discourages the development of nonoil
sectors, exports and import competing sectors, and especially
manufacturing. It makes imports artificially cheap and the country's
exports more expensive on world markets, thus putting the country's
tradable goods at a serious disadvantage in both international
and domestic markets. As can be seen from the data on sectoral growth,
manufacturing did not grow. This is a serious longterm development
problem. There are also distortions and inefficiencies associated with
the system of exchange controls and the parallel market.

The
overvalued fixed exchange rate, combined with present levels of
inflation, thus presents a significant intermediateterm problem. Even
if inflation is stabilized and begins to be reduced, so long as it
remains at or near current levels and the nominal exchange rate remains
fixed, Venezuela's currency will become increasingly overvalued in real
terms. This will increasingly squeeze domestic production outside of
oil and nontradables, and would eventually become unsustainable. It is
worth noting that the growth in manufacturing has fallen sharply in
2008 (see table 2 above); it is possible that the overvalued exchange
rate has contributed to this decline, and very likely that it has
limited the overall growth of manufacturing relative to other sectors
of the economy (see above) during the current economic expansion.

Nonetheless,
Venezuela's overvalued exchange rate does not present the kind of
immediate threat that e.g., overvalued exchange rates in Argentina,
Mexico, Brazil, or Russia presented in the 1990's, where a sudden
and forced devaluation was imminent. The Venezuelan government still
has a number of options for bringing the currency to a more competitive
level over time. There is no reason to think that the government
would be forced to devalue, nor would a devaluation necessarily have to
be sudden or drastic.

The Current Situation and Looking Forward

The
Venezuelan economy slowed in 2008, to an estimated 4.9 percent growth
rate, from 8.4 in 2007. The slowdown was probably at least partly due
to government efforts to slow inflation in 2007. From February to
September 2007, monthly yearoveryear inflation dropped from 20.4 to
15.3 percent (see Figure 10, above),
before rising again. Another change that may have contributed to the
slowdown in growth was a decline in public sector capital formation.
Table 7 shows that public sector capital formation slowed sharply in
2007. It had previously grown quite rapidly throughout the expansion,
although not as fast as in the private sector. For 2008, there is not
yet a breakdown between public and private capital formation, but total
capital formation (public and private) actually declined by 1.5
percent. This is a problem that will have to be addressed if the
economy is to continue at a healthy rate of growth; right now it
appears likely that the government will address this problem in the
near future through a stimulus program that includes public spending on
infrastructure and other public investment.

Like
almost all developing countries, Venezuela faces a number of challenges
in 2009. World economic growth is falling drastically; the IMF has now
lowered its estimate for World GDP growth to 0.4 percent, the lowest
since World War II and down from an actual GDP growth of five percent
in 2007. The ILO estimates that between 30 and 50 million people will
be added to global unemployment. The global financial crisis, which the
IMF now estimates will result in $2.2 trillion in losses in the
United States alone, is still not resolved, and it is increasing the
cost and reducing the availability of credit in developing countries.

Venezuela
does not receive any significant foreign investment from the
United States or other countries that have been hardhit by the
financial crisis and economic slowdown. The most important,
and practically the only, direct impact of these external events on
Venezuela is through oil prices. Petroleum exports are currently about
93 percent of Venezuela's exports.

The
relevant question for Venezuela is therefore how far oil prices
would have to fall before the country would begin to run an
unsustainable current account deficit. This is the binding constraint
for developing countries. In other words, the United States, Europe,
and Japan will - inasmuch as they choose to do so - pursue expansionary
monetary and fiscal policies, including deficit government spending, in
order to counteract the current recession. Developing countries can
and ideally should do the same, but unlike these rich countries, they
face a constraint due to the fact that their national currencies are
not "hard" currencies. Therefore they cannot count on being able to
borrow nearly as much, relative to GDP, or for so long a period of
time, as countries with hard currencies, to cover their import needs.
For this reason, the balance of payments - not the central government
budget, which can be covered in local currency - is the most important
and binding constraint on developing countries such as Venezuela in the
present situation.

Venezuela
ran a current account surplus estimated at 13.9 percent of GDP for
2008. This huge current account surplus would fall to zero at about $45
dollars a barrel for Venezuelan oil. Venezuela's oil is currently at
approximately $38 per barrel, so if oil prices remain at present
levels, we would expect a current account deficit by the end of this
year. However, this would not cause any balance of payments problems,
as Venezuela has approximately $82 billion, or 25 percent of GDP, in
foreign exchange reserves - more than twice what the country needs. A
current account deficit of 2 or 3 percent of GDP, which is what we
might expect if oil prices remain at this level, is not significant in
the face of such large reserves. This could even continue through next
year without posing a significant problem.

Of
course, oil industry analysts, as well as futures markets, do not
expect oil prices to remain this depressed for very long. The futures
price for December 2010 crude (WTI) is over $60 per barrel. So, unless
oil prices remain depressed for years longer than anyone is expecting,
Venezuela is not likely to have to dip very far into its reserves.
Venezuela is also fortunate in that its foreign public debt is low, at
about 9.8 percent of GDP. Principal payments for the next four years
are about $1.5 billion a year, which is very modest. Therefore
Venezuela could also increase its borrowing internationally if
necessary, but it is extremely unlikely to encounter any balance of
payments problems.

The
main determinant of Venezuelan growth in 2009 and probably 2010 is
likely to be the size, speed, and efficacy of a fiscal stimulus. The
government has recently announced a major public spending program of
about $12 billion, or 3.6 percent of GDP. As in most other countries in
the hemisphere, including the United States, it will be important to
move quickly on this program. In the face of strong deflationary
pressures, as discussed above, Venezuela's inflation is likely to
continue falling in the near future. As in most countries today, the
government should not be overly concerned about inflation, so long as
it continues falling; nor does it need to worry about adding to the
public debt, which is not very high at 14.3 percent of GDP. The
challenge is to compensate for falling private demand until the
world economy begins to recover, so as to avoid an unnecessary
recession. It is worth noting that Peru, Chile, Argentina, Mexico,
and other countries in the hemisphere have already
announced significant fiscal stimulus programs, some of them comparable
to that of the United States, relative to their economies.

The
main challenge for Venezuela in the next couple of years will therefore
be to implement an effective stimulus package that can keep the economy
on a steady growth path. It would be even better if, as the Chinese
government did during the Asian crisis ten years ago, Venezuela
could make infrastructure and other public investments that will
increase productivity in the years that follow.

About the Authors

Mark
Weisbrot is CoDirector; Rebecca Ray and Luis Sandoval are Research
Assistants at the Center for Economic and Policy Research in
Washington, DC.

Acknowledgements

The
authors would like to thank Dean Baker and Dan Beeton for their
comments, and Jake Johnston, Juan Vazquez and Kunda Chinku for
editorial and research assistance.

Works Cited

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(Banco Central de Venezuela), 2009. "Indicadores: Información
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SISOV
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SISOV
(Sistema Integrada de Indicadores Sociales de Venezuela), 2009.
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http://www.sisov.mpd.gob.ve/indicadores/

INE
(Instituto Nacional de Estadística), 2008. "Resumen de Indicadores
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INE
(Instituto Nacional de Estadística), 2009. Homepage. Caracas:
Ministerio del Poder Popular para la Planificación y Desarrollo. Online
database. Consulted 2 February 2009. http://www.ine.gov.ve/

Rosnick,
David and Mark Weisbrot. 2009. "Inflation Experiences in Latin America,
20072008." Washington, DC: Center for Economic and Policy Research
(Forthcoming).

Weisbrot,
Mark and Rebecca Ray, 2008. "Oil Prices and Venezuela's Economy."
Washington, DC: Center for Economic and Policy Research (November). http://www.cepr.net/index.php/publications/reports/oilpricesandvenezuela...

Endnotes

[1] Seasonally adjusted.

[2] United States Census Bureau. 2006. “Current Population Survey, 1968 to 2006 Annual Social and Economic Supplements, Table A3.” http://www.census.gov/hhes/www/income/histinc/p60no231_tablea3.pdf

[3] SISOV (2009).

[4] Ministerio del Poder Popular para la Salud, 2007. "Logros de la Misión Barrio Adentro I al 16 de febrero de 2007" (As of February 16, 2007).

[5] These estimates use the Instituto Nacional de Estadísticas (INE) population estimates by age for 2008: 5,522,489 children ages five through 14, and 2,703,056 children ages 15 through 19. (INE, 2009).

[6] The estimates for enrollment in higher education for the 2006-2008 period are from Ministerio del Poder Popular para la Planificación y Desarrollo, 2008, "Logros de la Revolución en un país de 28 millones de habitantes", October, Caracas, Venezuela. Population estimates are from the Instituto Nacional de Estadísticas (INE).

[7] SISOV (2009).

[8] There has been some debate over the size and effectiveness of Mision Robinson -see Rodríguez, Francisco and Daniel Ortega. 2006. "Freed from Illiteracy? A Closer Look at Venezuela's Robinson Literacy Program." Middletown, CT: Wesleyan University, Department of Economics and Rosnick, David and Mark Weisbrot.2008. "'Illiteracy' Revisited: What Ortega and Rodríguez Read in the Household Survey". Center for Economic and Policy Research, Washington, D.C.

[9] These prices refer to WTI oil, according to U.S. Energy Information Agency data.

[10] Real per capita social spending in Venezuela increased by 218.3 percent over the 1998-2006 period. This calculation includes social spending by both the central government and PDVSA, deflated by the Caracas Consumer Price Index. Data for central government social spending are from SISOV and for PDVSA from the company's financial statements. Consumer price data are from the Banco Central de Venezuela.

[11] See Weisbrot, Mark and Luis Sandoval. 2008. "Update: The Venezuelan Economy in the Chávez Years." Center for Economic and Policy Research, Washington, D.C., p.18.

[12] This is based on the ratio of Venezuela's cumulative consumer price inflation since February 2003, which is 201.4 percent, to U.S. inflation of 14.8 percent.

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