Klaus Bartsch - Venezuela´s economy

7/27/2019 Klaus Bartsch - Venezuelas economy

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Klaus Bartsch 23.11.2013

European Research Director

The World Advanced Research Project WARP!"T#!#$%E&

Berlin

'ene(uela)s econo*+ ! so*e o,servations and -uestions

The following analysis was motivated by Professor Dieterichs recent articles on the

Venezuelan situation, published in Kaosenlared, aporrea, and many other progressive web

sites. ne of the ma!or results of my analysis is that "eal wage growth in Venezuela was

around one Percent per year during the period of #$$%&'#. This situation changed

dramatically in the last year( overall consumer price change more than doubled in

comparison with the $%)'# period, food prices nearly tripled. "eal wages shrun* by

around #$ + only mentioning the food prices, the food value of nominal wage sun* by

over - +.

1. The Develop*ent o Wa/es and nlation in the last ive ears

n the base of data of the /0V, own calculations gave the following results concerning

wages and prices since #$$%(

1tem Percent 0hange

-rd 2uarter '-)'# 34ages5

ct '-)'# 3Prices5

6early P0 3geom. average5

-rd 2uarter '#)$% 34ages5

ct '#)$% 3Prices5

4ages -.' #.%

Thereof( Private 7ector -'. #8.'

Thereof( Public 7ector 9#.8 #.

0onsumer Prices 9.- #9.:

0P, ;ood)bever. non.alc :#.' #:.-

0P, Tabac and alc. bev. 8-.< not calc.=grarian goods, non&indust. %8.$ n.c.

=grarian goods, industrial 88.% n.c.

7ource( wn calculations on the /ase of /0V Data

4ages *ept appro>imately pace with consumer price development in the years #$$%&

#$'#, probably allowing the slightly faster growing consumer prices being compensated


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by substitution of other consumer goods. "eal wage growth was around one Percent per

year.

The situations changed dramatically in the last year( overall consumer price change more

than doubled in comparison with the $%)'# period, food prices nearly tripled. "eal wages

shrun* by around #$ + only mentioning the food prices, the food value of nominal

wage sun* by over - +. ?ore in the private sector, less in the obviously privileged

public sector. /ut even the far above average increase of nominal public wages couldnt

nearly compensate the real wage loss induced by fast rising prices. 7o the recent picture

is gloomy.

;igure '( /olivar @>change "ate, fficial and /lac* ?ar*et 37ource( 0ato 1nstitute5

The picture is even more gloomy, when the massive depreciation of the /olivar on the


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blac* mar*et is ta*en into account 3;ig.#5. The import prices of goods invoiced in A7&B

valued in /olivar rose by hefty -$ + during the last year 3;ig.'5. ?eanwhile Venezuela

is apart from Corth Korea the country with the highest distance between official and

blac* mar*et e>change rate, as the mar*et radical cato thin* tan* reports

3http())www.cato.org)research)troubled&currencies&pro!ecttabEvenezuela5.

Probably their customers put the cutlery on the des* in face of this situation.

;igure #( Venezuelan 1nflation rate, official and dollar import prices 37ource( 0ato

1nstitute5

2. Wh+ this situation #o*e %ra*eor4 in Approach to an Anser5

,utsurel+ not the anser itsel

7urely, Venezuelas enemies have any interest in waging economic war against the leftreformist pro!ect F/olivarian revolutionF and in e>ploiting wea*nesses. /ut that cannote>plain the current situation stand&alone. =n attac* can be countered be the rightmeasures sufficient strength given, structural wea*nesses dont occur suddenly, theydevelop more or less slowly.


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1 dont stop wondering about the fact, that Venezuela has regularly large trade surplusesand notable current account surpluses either on one hand and massive problems ofstabilizing its currency on the other hand.=s ;ig. - shows, the oil e>porting sector of Venezuela earns a vast surplus of A7D. nthe other hand, the non oil private sector has a growing A7D&demand. 4here is the

structural problem in swapping the oil dollars to the private sector Cet earned A7D ofthe state oil sector are much bigger than the demand of non oil private importers, sosupplying this sector with A7D as much as it can ta*e should be no Problem. 4hat pointdo 1 miss 0orruption, restrictive gate*eepers, ta*ing their share

;ig. -( Venezuela( Trade /alance 3Goods5 in billion of A7D


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;igures 9 and show, that the tiny non&oil e>ports of the private sector shrun* farther,while the imports of this sector increased strongly, so that the net contribution of thissector to its A7D Demand shrun* from #$+&$+ in the years port diversification and)orimport substitution by putting the economy on a broader industrial and agricultural base.

;ig. 9( Venezuela & @>ports and 1mports, Goods, total and Con il Private 7ector

z

;ig. ( Venezuela & @>ports and 1mports, Goods, total and Con il Private 7ector,logscale


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;ig. 8 "atio of @>ports to 1mports, Goods, Con&il&Private 7ector


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3. 6uestions7 hat could ,e done

The massive real income losses will probably spur growing unrest. The loyalty of thepeople is put to a test, and growing discontent of the public sector employees, combinedwith sin*ing loyalty against their employer, could wea*en the bolivarian governmentwithout decisive economic countermeasures.

& Cationalising the rest of the private trade companies for dealing with the transferfrictions of transferable currency between the state and the private sector & ?a*ing the /olivar an Fil standardF currency instead of a mere Ffiat moneyF currency,for e>ample, '$$$ bolivar eHuals ' barrel of oil of a certain Huality That wouldrevaluate the bolivar in times of high oil prices, giving the chance of financingdiversification in boom times and fostering the e>port non&oil products to develop in

times of devaluation resp. low oil prices& Pegging the /olivar to the 6uan and the "ubel, accompanied with a swap system

Different policy measures are possible. /ut it seems urgent that a coherent economic planbe put in place as soon as possible to put the economy on a stable footing.


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Klaus Bartsch - Venezuela´s economy