lunedì 19 ottobre 2009

Venezuelan Economic Measures Prioritise National Production

Venezuelan Economic Measures Prioritise National Production

Planning and Development Minister Jorge Giordani, centre (EFE/David Fernandez)

Mérida, October 11th, 2009 (Venezuelanalysis.com) - 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.

Economic measures

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.

Economic 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.

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