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  HOME | Venezuela (Click here for more Venezuela news)

Venezuela Industry Sees Downturn Getting Worse Before Economy Gets Better

By Jeremy Morgan
Latin American Herald Tribune staff

CARACAS – A consensus appears to be emerging that Venezuela’s oil-based economy will contract this year by only about 3% in reaction to the worldwide downturn in economic activity and energy demand.

Conindustria, which represents small and medium-sized companies – many of them manufacturers, who were hard hit during the last recession earlier this decade – forecast that its members would face a 3.3% decline this year.

Industrial production had fallen by 3.1% during the first quarter of this year, said Conindustria President Eduardo Gómez Sigala. The full-year forecast implied that Conindustria felt the downturn was going to get worse before the economy got better.

Gómez Sigala, who like large swathes of the Venezuelan business community has little time for the government and its economic policies, put the blame on those very same policies: state interventions in private sector companies, and a general “harrasment” of business interests.

Sectors already having problems with the slowdown included auto assembly, packaging, metalworking, the graphic arts and even the food processing industry, Gómez Sigala said.

Once again, there were problems in obtaining sufficient hard currency in order to pay for materials, machinery, components and other needed imports. Business leaders heap the blame for this on the Foreign Exchange Administration Commission (Cadivi), which after briefly relaxing some of the rules last year is enforcing them all over again on orders from President Hugo Chávez.

Inevitably, a sagging economy has an impact on individual consumers. Abelardo Daza, an economist, echoed Gómez Sigala’s overall forecast by warning that average per capita consumption in Venezuela was set to fall by between 3% and 4% this year.

Consumers’ problems in Venezuela are exacerbated by inflation, still by far the highest rate of any country in Latin America. Unofficial forecasts for the rise in prices this year range from around 30% to perhaps as much as 40%. Daza endorsed the higher figure.

However, unlike many of his colleagues, Daza did not think the government was set to carry on state spending at levels similar to last year. Instead, he warned that lower state spending would contribute to the decline in demand and economic activity.

As to foreign exchange controls, Daza evidently felt that the government was not going to be budged from its refusal to lift them or even ease them in the near future. He noted that Finance Minister Alí Rodríguez Araque had recently remarked that “correcting” the Exchange rate was “not a viable action” because it would boost the cost of food and medicine – both of which Venezuela imports in considerable volumes.


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