Venezuelan Economic Measures Prioritise National Production

The Venezuelan government announced a range of economic measures that focus on national investment and production in order to combat unemployment, create economic growth, and decrease inflation.
Planning and Development Minister Jorge Giordani, centre (EFE/David Fernandez)

Mérida, October 11th, 2009 ( – The
Venezuelan government announced a range of economic measures that focus on
national investment and production in order to combat unemployment, create
economic growth, and decrease inflation.

On Friday Jesse Chacon, minister for science, technology,
and medium industry, presented some of the government's economic measures to
guarantee growth and social development next year.  He said the government's economic push will have three main
aims: economic growth, employment, and decreasing inflation.


In terms of economic growth, the government plans to invest
in the electric and hydrocarbon sectors, provide special subsidies for the
production of strategic goods, and improve the efficiency of designating loans
for productive activity and for medium and small industry by simplifying
procedures and through a new public banking structure.

Ali Rodriguez, minister for economy and finances, said the
government would also look at reforming the Bank and Other Financial
Institutions Law in order to guarantee that such institutions assist in the
financing of Venezuelan based production.

"Financial activity should be directed at …increasing the
production of food and housing, …electricity infrastructure and so on,"
Rodriguez said.

The government will also adjust its trading policies to
encourage more national production.

Chacon said in the next few weeks the government will
inaugurate eight factories and is constructing 18 more, most of which are
orientated towards fulfilling basic food needs. Also, a government factory,
Venezuelan Telecommuncations, will produce 400,000 cell phones by the end of
the year.

Finally, for economic growth, the government will encourage
construction, repairing of hospital infrastructure, and developing and
improving housing and the barrios. The government will also invest a further
$1.2 billion in steel and aluminium production.

In terms of specific projects to generate employment, Chacon
listed the maintenance of Petroleos de Venezuela (PDVSA) plants, road
maintenance, Mission Arbol (a reforestation project), broadening of the mission
Nuevo-Barrio Tricolor (replacing shanty housing with government built housing),
drinking water projects, and tourism projects.

As part of strengthening the economy and fighting inflation,
the government also decided to create a foreign currency or US dollar budget,
announced planning and development minister Jorge Giordani to press on
Thursday. This will help the private sector plan its resources in terms of
investment and foreign currency, he said.

"We're going to hand in the 2010 budget to the National
Assembly on 15 October, but at the same time we're doing a foreign currency
budget, something we haven't done before," Giordani said.

Payments of US dollars, where the government supplies
companies and travellers with US dollars at the official rate, a rate much
better than the unofficial black market rate, "has been stabilising, as has the
price of petroleum," said Chacon, adding that allocation of US dollars will be
based on who or which company "adds the most value" to the economy.

Other measures to control inflation include new technology
for farm based production, increased storage capacity for the preservation of
livestock feed, and specifically assigning dollars to car parts and car repair
and maintenance services.

Chacon said he had met with auto sector representatives in
July and the government has allocated $2.5 billion out of the foreign currency
budget to the auto sector, broken down to $2 billion for assembly of cars and
$500 million for finished cars.

outcomes this year

This year the auto industry has grown, with some assemblers
who left the country, returning. "Venezuela is the only country where the
vehicle is already sold while it's on the production line," Chacon said.

However, the president of the Central Bank, Nelson Merentes,
said economic growth this year would be close to zero, and that the GDP dropped
by 2.4% in the second quarter of 2009. Last year, Venezuela's GDP grew by 4.8%.

Nonetheless, "We think we've passed the worst," Merentes
said, explaining that indicators showed a positive turning point in the last
quarter this year. He also estimated that the year would finish with inflation
of around 27%.

Merentes and Giordani emphasised that Venezuela was "holding
out" in the face of the economic crisis.

"There hasn't been as much impact here because measures were
taken. The Chavez government isn't afraid of transparency," Giordani said.

In March this year the government revised its 2009 budget to
adjust it to the drop in oil prices as a result of the world economic crisis,
maintaining social spending but demanding that high level functionaries cut
their wages, bonuses, and unnecessary spending. Last week President Hugo Chavez
said there will be no problems fulfilling the budget, with all wages and social
spending guaranteed.