Much of the achievements in poverty and inequality reduction do not respond to Hugo Chavez social programs, but rather to higher public expenditure, fueling an import consumption boom. OIl was not enough, foreign debt increased fourfold. This presentation evaluates current state of Venezuelan economy under Maduro and draft some guidelines to achieving equitable growth
Business Principles, Tools, and Techniques in Participating in Various Types...
The Venezuelan Economy: How to achieve equitable growth (delivered at Rockefeller Center, Cambridge, MA 22/22/2013)
1. 0
Venezuela: Options for the Future
The Economy:
How to Get Sustainable and Equitable Growth?
Miguel Angel Santos
miguel_santos@hks14.harvard.edu
David Rockefeller Center for Latin American Studies
November, 2012
Miguel Ángel Santos
3. The end of poverty? Or the end of poverty reduction?
2
Poverty Evolution in Venezuela (1997-2012)
16.000.000
Poverty
14.000.000
Number of people
12.000.000
10.000.000
Extreme
Poverty
8.000.000
6.000.000
4.000.000
2.000.000
1997
Miguel Ángel Santos
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
4. Growth and Inequality or Consumption and Inequality?
3
GDP and Consumption per Capita (1998=100) and
Gini Coefficient (1980-2012)
1,80
0,35
0,37
1,60
60.0%
CAGR:
3.2%
0,39
0,41
1,40
0,43
1,20
0,45
0,47
1,00
0,49
0,51
0,80
0,53
0,60
1995
1996
1997
1998
1999
2000
2001
2002
GDP PC 1998=100
Miguel Ángel Santos
2003
2004
2005
2006
2007
CON PC 1998=100
2008
2009
Gini
2010
2011
2012
0,55
14.3%
CAGR:
0.8%
5. Boom in consumption was mirrored by a boom in imports
4
Venezuela: FOB Imports
(US$ 2012)
60.000
3.000
40.000
2.000
30.000
1.500
20.000
1.000
10.000
500
Miguel Ángel Santos
2012
2011
2010
2009
2008
2007
2006
Real Imports per Capita
2004
2003
2002
2001
2000
1999
1998
0
1997
Real Imports
2005
Imports FOB (milion dollars 2012)
2.500
0
Imports FOB per Cápita (dollars 2012)
50.000
6. Boom in consumption was mirrored by a boom in imports
0,7
Imports/Household
Consump2on
(measured
in
US$
2005)
0,6
0,5
0,4
0,3
0,1
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0,2
Average 1974-1998: 25%
Average 1999-2012: 44%
2006-2012: 51%
Imports/Household
ConsumpBon
Fuente: World Development Indicators
Miguel Ángel Santos
5
8. In summary: Looking at the mirror
• Improvements in poverty and inequality driven by consumption boom
• Consumption boom financed via oil (price) boom and massive foreign debt
• Oil bonanza vs. Magic social programs (“Misiones”)
Miguel Ángel Santos
7
9. Fiscal
expansion:
Public
expenditure
reached
51%
of
GDP
and
fiscal
deficit
18%
Miguel Ángel Santos
8
17. In summary: Where we are?
• Massive fiscal deficit financing via printing money
• Public budget broken into five pieces with only 50% relatively accountable
• Minimum historical level of international reserves (4 months of imports):
Government have approached investment banks, soon will start selling gold
• Private investment down to a minimum
• Current account deficit in the range of 2-3% of GDP
• Decreasing oil production
Miguel Ángel Santos
16
18. Looking forward… Almost a quarter of our bonus is gone!
17
110,0
100,0
90,0
Dependency
Ratio
80,0
70,0
15 a 59
60,0
Bono Demográfico
50,0
Demographic bonus:
Relación de dependencia
Dependency ratio < 2/3
inferior a 2/3
40,0
60 years
or more
30,0
20,0
0-14
10,0
0,0
1961
1971
1981
0
a
14
1991
2001
15
a
5 9
2011
60
y
m ás
Aspectos relativos a la evolución de la relación de dependencia (RD)
2021
2031
2041
2051
R D
15
a
5 9
Período en que la RD se mantiene
Período de reducción de la RD
inferior a 2/3
Valor máximo
Año VM
Valor mínimo
Año Vm
Duración
Intensidad % Año Inicial Año final Duración
103,5
1966
61,0
2020
54
41,1
2003
2045
42
Fuente: INE. Proyecciones de población. Cálculos de G. Zúñiga.
Miguel Ángel Santos
19. Adjusting social programs by demographic change….
Issue
Youth: (Post)
secondary school /
training programs
Urban
Living Standards
Population aging
Lack of an
appropriate public
safety network
Miguel Ángel Santos
Programs oriented to:
• Preventing and preparing secondary school drop outs
• Training programs targeted to facilitate insertion in labor
markets
• City planning and urbanism to face increase in new
•
•
families/households
Crime prevention
Contingency plans for (predictable) natural disasters
• Adapt public health system to new pattern of diseases
• Day care programs
• Pensions
• Programs to compensate households for consumption
•
falling beyond certain thresholds
Prevent the system to end in massive increase of women
and youth to the labor market
18
21. 20
Venezuela(registra(así(el(gasto(público(más(alto(de(América(La:na(
Latin America: Public Expendituredel PIB)
Gasto Público Consolidado (% (% of GDP)
60.0
51.3
50.6
47.2
50.0
38.8
40.0
34.6
32.5
28.7
30.0
22.1
20.0
41.9
40.0
18.2
26.2
23.3
19.1
10.0
Fuente: Ministerio de Planificación y Finanzas, CEPAL
Miguel Ángel Santos
20
12
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0.0
22. 50%
of
public
expenditure
is
executed
away
from
central
government
21
Public'Expenditure'
(%'of'GDP)''
Central%Government%
51,5%%
Consolidated%Public%Sector%
45,4%%
41,6%%
38,9%%
37,7%%
31,9%%
28,8%%
26,1%%
21,4%%
1998%
19,8%%
1999%
Miguel Ángel Santos
28,3%%
25,1%%
31,0%%
26,1%%
32,2%%
27,8%%
31,9%%
25,9%%
38,4%%
36,0%%
29,8%%
25,9%%
25,6%%
25,7%%
26,5%%
2001%
26,5%%
27,0%%
23,0%%
21,8%%
2000%
36,6%%
2002%
2003%
2004%
2005%
2006%
2007%
2008%
2009%
2010%
2011%
21
2012E%
23. Venezuela: Oil production per capita
22
Oil Production per Capita
4,000000
0,450000
3,500000
0,400000
3,000000
0,350000
2,500000
0,300000
2,000000
0,250000
1,500000
0,200000
1,000000
0,150000
0,500000
0,100000
0,000000
0,050000
Miguel Ángel Santos