Venezuelan GDP down 4.5%, stagflation is here, now what?

November 17, 2009

Economists like to measure GDP growth each quarter with respect to the previous year. I may not like it (many people don’t), but that is the custom. The alternative is to measure it with respect to the last quarters GDP and anualize it, somehow that seems more “real-time”, than to compare it to the same quarter last year. There are reasons for this, the main one that you know GDP is seasonal, so you want to compare it to the quarter a year ago, where the same seasonal factors came into play.

Thus, I had to laugh at the headline of the Central Bank report on this quarters growth (or lack of), which said:

“Venezuela’s GDP decreased by 2.2% between January and September 2009″

How is that for lying with statistics?

Because the reality is that this quarter’s GDP report is very ugly, as GDP was down 4.5%. Uglier than anybody expected. So much so, that the only positive you can find in it is that if the Central Bank is reporting it was so ugly, maybe they are not fudging the data as much as some people suspected.

But it is not the -4.5% in GDP that is ugly, it is some of the numbers behind it, which say Venezuela is in stagflation, precisely what Ali Rodriguez was telling us two months ago was not happening and would not happen thanks to the actions of the Government. I never believed Chavez’ BS that Venezuela was shielded against the world economic crisis, so I will not even go there.

Oil GDP was down 9.5%, while non-oil GDP was down 3%. But the numbers are ugly as public (Government) consumption was up 2.6%, but commerce was down 11.5%, private consumption was down 10.5%, as private investment was down 14.5%, imports declined 25.5% and exports were down 16.3%, the fourteenth consecutive quarter in which exports have gone down as the Venezuelan economy is no longer competitive due to the overvaluation of the currency. Manufacturing was down 9.5% for the quarter. Yes, -9.5%!!!

And despite all this, inflation barely abated during the year. Moreover, oil prices were up by the end of the second quarter. This all happens as the private sector has been completely intimidated as the Government believes it can do everything. But it obviously can’t.

And that is the problem, the infamous “funds” which accumulated wealth during the boom, were all consumed in sustaining current spending and not in investing. Money was used to needlessly nationalize working enterprises, rather than to back and fund companies with weak balance sheets and no investment. And the fact that there are elections in a year, does not contribute to good policy making in a Government without economic expertise.

So, only if  oil prices balloon, will the current administration be able to get us out of this. For the last three months we have all heard that we have touched bottom. Ali Rodriguez even dared say that this quarters growth would be almost zero and the year flat.

No more, stagflation is here to stay and funding social programs massively is going to get very hard over the next few quarters, let alone investing in water or electricity plants and maintenance just to keep supply normal.

Not a pretty picture.

22 Responses to “Venezuelan GDP down 4.5%, stagflation is here, now what?”


  1. [...] This post was mentioned on Twitter by rolita816 and Miguel Octavio, bolivarflojo. bolivarflojo said: RT @moctavio: Venezuelan GDP down 4.5%, stagflation is here, now what? http://bit.ly/FbkqF #Venezuela [...]


  2. Social comments and analytics for this post…

    This post was mentioned on Twitter by moctavio: Venezuelan GDP down 4.5%, stagflation is here, now what? http://bit.ly/FbkqF #Venezuela…

  3. geha714 Says:

    Now what? Nothing. Christmas is around the corner, then New Year.

    And then the long campaign for the 2010 begins. Money will be everywhere, even if it’s worthless. And the charade will continue…

    I worried about the stagflation. But sadly, many don’t.

  4. brian Says:

    You are now watching the beginning of the end for HC. He’s literally spinning out of control. He reminds of the “synthetic” in the movie “Alien” when he got his head knocked off. Does anyone really believe Venezuela is going to win a trumped up war with Colombia? The country has begun to hyper-suffer from ignorance, incompetence and tomfoolery. Prediction: It’s going to get a lot worse before it gets better. So, buckle up and enjoy the ride.

    I’m watching this from my point of view from the US, having lived in both Venezuela and Colombia and having married a Venezuelan many years ago. I have many inlaws that are living this nightmare as we speak!

    The price of everything will go up as production of goods and services decline and as more useless money is printed to cover HC’s bills. He does business with business men/women from other countries but won’t do business with business people from Venezuela. Capitalism is good in other countries but bad in Venezuela or so it seems in his contorted mind.

    All dictators use and then seem to hate their own countrymen. In their minds, it is the people that have failed not the freak in office. Think Stalin, think Hitler, think Mao. They believe that you want to work all day for 50 cents while they live it up in palaces! Then you go home to eat your 3 spoonfulls of white rice while they eat juicy steaks with fine wines.

    You Venezuelans have to wake up and end this (peacefully hopefully)before the misery that Russia and China or Europe experienced last century becomes your reality. If few things work now wait a few more years. Absolutely nothing will work and production of everything including oil will nearly be non-existent.

    I’m tired of it and I’m not even a Venezuelan.

  5. OA2 Says:

    “You are now watching the beginning of the end for HC.” It’s about the 2,000,000th time I’ve heard that. Even if it is true this time, what/who is going to dig Venezuela out of this mess? This disaster was made by, for, and of the people of Venezuela, so I’m not sure where salvation is, even without THugo.

  6. Kepler Says:

    Geha is right on track. OA2 as well.
    Brian, I am saying this as a Venezuelan living in Europe:
    we have seen this before.

    Getting rid of one figure does not solve most international conflicts these days, man.
    And then: chavismo will sell Venezuela’s soul if need be to get more cash to last quite some more.
    Either there is a fundamental change in the opposition leadership and it lets people see a plan and perspective for all (not just “freedom, freedom”) or we will have to wait for chavismo to decompose little by little for a long time

  7. Kepler Says:

    OT and on to Mali:
    I am not sure this IS the plane, but: can someone do something with the image?

    I suppose numbers on the metal can be repainted very easily. That plane does not seem to be big.

    Here more (in French):

    http://www.journaldumali.com/article.php?aid=674

  8. Anónimo Says:

    @Kepler
    > … we have seen this before.

    I don’t think Venezuela has ever seen anything quite at this level.

    > Either there is a fundamental change in the opposition leadership and it lets
    > people see a plan and perspective for all (not just “freedom, freedom”) or we will
    > have to wait for chavismo to decompose little by little for a long time

    Much of the political opposition is so bland as to be useless against Chávez or his government and a lot of the time is even part of the problem. Even Chavismo is turning a blind eye and doesn’t seem to want to get involved, witness their Sunday “election”. Venezuelans of all walks of life are getting really fed up.

    The 1989 riots in Caracas started under far less atrocious conditions than those we endure today. There is a very palpable fear element that wasn’t there in 1989, which will likely make events more implacably damaging when and if they actually happen. Chávez has lit the fuse, how long it’ll burn before it all blows up in his face is anybody’s guess.

  9. Kepler Says:

    I meant “we have seen this before” regarding people saying the regime is in its last throes.

    I agree we have not gone this low in many decades (perhaps during Gómez times, but then that was a feudal Venezuela where people could grow their own food, so it does not compare).

  10. bruni Says:

    …but oil prices will unfortunately balloon, just in time for the elections. As soon as the US gets back in its feet, China and India will resume their consumption and this whole game will repeat itself.

    Chavez is the luckiest man on earth.

  11. GWEH Says:

    Bruni for once I agree with you. Chavez is not going anywhere.

  12. GWEH Says:

    even without oil saving his ass, he will stay in power. Quien lo va a sacar del poder? Los cerros? Keep dreaming. Chavez locked it up after 11A. The firepower is firmly in their hands and that is what counts in the end.

  13. Anónimo Says:

    @GWEH
    Even though he’s sailing some stormy seas right now, Venezuela’s fearless leader is labouring under the illusion that he is firmly in control and going places. In the end it will always be a niggling, unforeseen or overlooked detail that will bring him down when we least expect it.

  14. livingInCCS Says:

    Hi,

    Nice to read a decent blog. I gotta say, getting rid of Chavez through a riot will be hard, because he is extremely good at manipulating situations, and absolutely ruthless when putting blame on anybody but himself. Unless there is a complete breakdown of economy, electricity etc (which of course could happen as early as mid 2010), a riot won’t get him out.

    As far as I know there have been a couple of military uprisings the last two years, but none of them got anywhere, which might actually be for the better.

    So the only thing left is an presidential electionvictory, which would have to be massive (70%) to overcome CNE cheating.

    In the short term the most important step for the opposition (and the whole country) will be to get a big representation in the National Assembly because it makes it a lot harder for Chavez to blatantly fake democracy. Today the AN is 90% cheerleaders. Having even 40% opposition would be huge, because the tyrannic nature of the chavismo would blatantly expose itself. They have shown themselves to not be able to handle dissidency elegantly. This would in turn affect popularity and hinder and expose fascist discourse and action in general, which again slows down the communist train (as clearly shown by the aftermaths of electoral victories of the opposition in regional elections).

    Why are elections, albeit difficult, the main hope? Because the big majority of Venezuelans aren’t used to caring for their society in a significant manner. It’s absolutely horrendous to see that almost nobody organizes or does political activism while the country is going to pieces. I could talk for a long time about how incompetent and selfish opposition leaders are, but for now it’s enough to state that none of them have been able to significantly thrive on the huge discontent with infrastructure and crime disasters. No mass movement against Chavez is in sight. Only mass discontent and anger.

    Another positive factor would be Fidel going away (not that I usually want to wish death on anybody) because most likely Raul would open up a lot to a Chinese model and the whole communist paradigm would loose a lot of prestige in Venezuela. After all, Chavez is primarily feeding his supporters dreams, and if the main dream is discredited it is a big issue.

  15. Roberto Says:

    GWEH:

    THe last time the subject came up, I told you that my belief is that his hold on power will not be forever, and that by 2012 he would be gone (well, 2013). You bet me an arepa, and I accept that bet and raise you a batido de lechosa.

    I still think you are going to owe me that batido, plus I insist on a Reina Pepiada.

    Seriously though, Venezuela is not Cuba, nor is Chavez Fidel. Having the guns on one’s side helps, but as was shown on 11-A, all it takes is one miscalculation for the guns to switch sides.

    You may be more aware of the machinations inside than some, but never discount the people in the street.

  16. Roger Says:

    So whats New?!!! My first trip to “The land of enchantment” from 19 Abr1991 to 4 Mayo 1991, the Bolivar ( to the minus 3 Eh) was 58 to the $. Even on that first trip Venezuelans ( middle class) were telling me how inflation had eaten up their savings and such. Come back 3 Jul 1991 and the Bs are now 85 to the $! By the late fall of 1992 the Bee is hitting 100 or so but better than doubles that by the end of the year and banks fail at record rate. We stop the project and when we restart it a year later the inflation is even worse (400 Bs). I still charge the same USD but now that is a lot of Bolivars! By 1994 even thought I had not raised my rates, the price beyond my Venezuelan partners. Even with Oil money, at some point, this has to reach critical mass and crash. In the past, one could live (perhaps not well ) on Venezuelan production but, now the large amout of imports makes everyone in Venezuela tied to the Global Economy.

  17. island canuck Says:

    From today’s El Universal:

    Earnings at PDVSA down 67%

    http://www.eluniversal.com/2009/11/19/petro_ava_ganancias-de-pdvsa-c_19A3079651.shtml

  18. Roger Says:

    Chavez is mentioned twice in this political song http://www.youtube.com/watch?v=5XyGDxu-MJ8&feature=related cute anyway

  19. Bob Taylor Says:

    Why on earth can´t the opposition get their act together to give us some hope.??????
    All it needs is someone who has a good personality on t.v and no background that chavez can use.
    Once all the empty headed chavistas like the guy,then he can start putting forward his programme to show them whats in it for them.
    Chavez´s faults and lies, corruption and b.s. can be exposed and hopefully everyone will see sense in getting rid of this communist dictator.!!

  20. deananash Says:

    Roberto, I want in on that. Unfortunately, Chavez, like his mentor, isn’t going anywhere soon. To Hell with Venezuela, his ego, his power, is all that matters. How, after 10+ years, this is self-evident to everyone, is simply beyond my ability to comprehend.

    Has anyone heard of any organized betting pool on Chavez? Kinda like an over/under on his rule.

    Miguel, if so (perhaps in London), it might make a good topic for you to periodically follow. The U.S. military and intelligence agencies (sometimes these are oxymorons, but many times not) have used these types of things with some success.

  21. Roberto Says:

    Ok deananash, I’ll take your wager too.

    Just to be clear, the wager is that Chavez will not be president beyond 2013.

    I hope there is a low fat version of the reina pepiada!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 11,711 other followers

%d bloggers like this: