[lbo-talk] Booming Venezuela

[Marvin Gandall]

The redirection of higher oil revenues by the Chavez government to benefit
the poor as a matter of social justice has received much attention. But the
related positive effect of these expenditures on Venezuela's economic
development is sometimes overlooked, and mostly regarded as a "wasteful"
drag by  pro-business Western commentators, sustainable for only so long as
oil prices stay high. The latest economic statistics show, however, how
public spending is developing the economy and driving it forward by boosting
mass purchasing power. "Poor Venezuelans managed to spend more due to a host
of social programs that offer health, education, and subsidized foor
prices", according to the Dow Jones report below. Capital controls
instituted in 2003 have also "helped boost economic activity", the report
notes. Meanwhile, foreign investment, the neoliberal perscription for
development, is sharply down since last year.

MG
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Venezuela Posts Robust Growth For 2nd Quarter

DOW JONES NEWSWIRES August 19, 2005

CARACAS, Venezuela -- Venezuela's economy expanded 11.1% in the second
quarter compared with the year-earlier period, signaling it is on a robust
growth path this year.

Accumulated growth for the first six months of 2005 reached 9.3%, exceeding
the government's estimate of a 5% growth expected for the year, the central
bank said late yesterday.

The nonoil sector recorded second-quarter growth of 12.1%, the bank
reported, while the oil industry climbed 2.5% from the year-earlier quarter.
Manufacturing posted 12.4% growth, construction climbed 20.3% and government
services rose 7.4%, the bank said. Venezuela's economy, which is dependent
on oil exports, has benefited from high crude prices of late.

Demand has been boosted by increased government spending, while poor
Venezuelans managed to spend more due to a host of social programs that
offer health, education and subsidized food prices.

Aggregate demand rose 20.8% during the period, private consumption climbed
18% and government consumption rose 6.7%, bank data showed.

The government imposed capital controls in early 2003 to prevent capital
flight after a bout of political upheaval. The controls trapped liquidity
within the economy, which in part led to reduced interest rates and helped
boost economic activity.

Meanwhile, imports of goods amounted to $5.8 billion, or a 52.2% jump from
the same period a year ago. Foreign direct investment, meanwhile, sat at
$145 million, down from $608 million a year earlier.