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The Venezuelan Economy: How to achieve equitable growth (delivered at Rockefeller Center, Cambridge, MA 22/22/2013)
The document analyses the economic situation in Venezuela from 2012, highlighting the impact of oil exports on poverty, public spending, and inflation. It details the consumption boom and its financing through foreign debt while indicating a significant fiscal deficit and declining international reserves. Future challenges include demographic changes and the need for social programs to support youth and aging populations amidst economic instability.
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The Venezuelan Economy: How to achieve equitable growth (delivered at Rockefeller Center, Cambridge, MA 22/22/2013)
- 1. 0 Venezuela: Options forthe 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
- 2. The Oil Bonanza 1 VenezuelaOil Exports (US$ 2012) 100.000 5.000 90.000 4.500 Yom Kippur War Khomeini Revolution 4.000 70.000 3.500 Begining of Iran-Iraq War 60.000 3.000 50.000 2.500 Kuwait Invasion and Gulf War 40.000 2.000 2007 Financial Crisis 30.000 1.500 1.000 10.000 500 0 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 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 20.000 Real Oil Exports Miguel Ángel Santos Real Oil EXports per Capita 0 Oil Exports per Capita (dolars 2012) Oil Exports (million dollars 2012) 80.000
- 3. The end ofpoverty? 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 Inequalityor 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 consumptionwas 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 consumptionwas 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
- 7. Boom in publicexpenditure and imports exceeded the oil bonanza 6 Deuda Pública Externa Foreign Public Debt (USD Millones) (US$ Million) 120.000 100.000 26.104 25.942 27.702 28.853 28.138 30.534 1999 2000 2001 2002 2003 2004 2005 98.011 85.304 106.048 29.067 1998 50.909 28.455 1997 38.681 28.705 20.000 26.598 40.000 67.449 60.000 105.779 80.000 2012 2013-II 0 Fuente: BCV Miguel Ángel Santos 2006 2007 2008 2009 2010 2011
- 8. In summary: Lookingat 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
- 10. Prin2ng money accelerated infla2on… 9 Price Index 12-‐Month Moving Average (Jan 2008 -‐ Oct 2013) 80% CPI Variation (%) 70% Food Prices Var (%) 60% 50% 40% 30% 10% ene-08 mar-08 may-08 jul-08 sep-08 nov-08 ene-09 mar-09 may-09 jul-09 sep-09 nov-09 ene-10 mar-10 may-10 jul-10 sep-10 nov-10 ene-11 mar-11 may-11 jul-11 sep-11 nov-11 ene-12 mar-12 may-12 jul-12 sep-12 nov-12 ene-13 mar-13 may-13 jul-13 sep-13 20% Miguel Ángel Santos 9
- 11. Prin2ng money accelerated infla2on… 10 Price Index 12-‐Month Moving Average (Jan 2008 -‐ Oct 2013) 80% CPI Variation (%) 70% Food Prices Var (%) 60% 50% 40% 30% 10% ene-08 mar-08 may-08 jul-08 sep-08 nov-08 ene-09 mar-09 may-09 jul-09 sep-09 nov-09 ene-10 mar-10 may-10 jul-10 sep-10 nov-10 ene-11 mar-11 may-11 jul-11 sep-11 nov-11 ene-12 mar-12 may-12 jul-12 sep-12 nov-12 ene-13 mar-13 may-13 jul-13 sep-13 20% Miguel Ángel Santos 10
- 12. … and put pressure in the parallel market rate 11 Official and (Black) Parallel Market Rate (Ene 2000 - Oct 2013) 60,00 50,00 Official Rate Parallel Black Market Rate M2/RIN 40,00 30,00 20,00 Miguel Ángel Santos 11 oct-13 jul-13 abr-13 ene-13 oct-12 jul-12 abr-12 ene-12 oct-11 jul-11 abr-11 ene-11 oct-10 jul-10 abr-10 ene-10 oct-09 jul-09 abr-09 ene-09 oct-08 jul-08 abr-08 0,00 ene-08 10,00
- 13. … and put pressure in the parallel market rate 12 Official and (Black) Parallel Market Rate (Ene 2000 - Oct 2013) 60,00 50,00 Official Rate Parallel Black Market Rate M2/RIN 40,00 30,00 20,00 Miguel Ángel Santos 12 oct-13 jul-13 abr-13 ene-13 oct-12 jul-12 abr-12 ene-12 oct-11 jul-11 abr-11 ene-11 oct-10 jul-10 abr-10 ene-10 oct-09 jul-09 abr-09 ene-09 oct-08 jul-08 abr-08 0,00 ene-08 10,00
- 14. Parallel market premiums above 500%: Massive apprecia2on in the official market and massive deprecia2on in the black market 13 Real Exchange Rate Index (Jul 1994 = May 1996 =100%) 300% 250% RER Official RER 100% RER Parallel 200% 150% RER = 100% 100% Fuente: BCV, Cálculos Propios Miguel Ángel Santos 13 jun-13 jul-12 ago-11 sep-10 oct-09 nov-08 dic-07 ene-07 feb-06 mar-05 abr-04 may-03 jun-02 jul-01 ago-00 sep-99 oct-98 nov-97 dic-96 0% ene-96 50%
- 15. Interna2onal reserves are at a minimum (US$1.500 million in cash) 14 Reserva Internacionales (BCV + FEM) 45.000 40.000 (MM USD) 35.000 30.000 25.000 20.000 21.750 15.000 Fuente: BCV Miguel Ángel Santos May-13 Sep-12 Ene-12 May-11 Sep-10 Ene-10 May-09 Sep-08 Ene-08 May-07 Sep-06 Ene-06 May-05 Sep-04 Ene-04 May-03 Sep-02 Ene-02 May-01 Sep-00 Ene-00 May-99 Sep-98 Ene-98 10.000
- 16. Venezuela: The product space Miguel Ángel Santos 15 15
- 17. In summary: Wherewe 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… Almosta 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 programsby 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
- 20.
- 21. 20 Venezuela(registra(así(el(gasto(público(más(alto(de(América(La:na( Latin America: PublicExpendituredel 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 ne z ve ez ue la ue la 20 11 gu ay Ve n U ru Pe ru ua y Pa ra g ex ic o M r ad o R ta os C Ec u ic a a om bi ol C le C hi zi l Br a Bo liv ia Ar g en t in a 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 productionper 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