Venezuela Macroeconomic Outlook
The document provides an overview of Venezuela's macroeconomic outlook, emphasizing the impact of oil exports on poverty and inequality reduction from 1997 to 2012. It highlights the interconnectedness of consumption, import booms, and public expenditure growth, which led to rising foreign and domestic debt and hyperinflation. The discussion concludes with concerns about record international spreads and diminished international reserves, suggesting significant economic pressures ahead.
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Venezuela Macroeconomic Outlook
- 1. 0 Venezuela: Macroeconomic Outlook MiguelAngel Santos miguel_santos@hks14.harvard.edu David Rockefeller Center for Latin American Studies March, 2014 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 20,000 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 0 Real Oil Exports Miguel Ángel Santos Real Oil EXports per Capita 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 0.39 60.0% CAGR: 3.2% 0.41 1.40 0.43 1.20 0.45 0.47 1.00 0.49 0.51 0.80 0.53 0.60 0.55 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 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 Imports FOB (milion dollars 2012) 2,500 500 Real Imports Real Imports per Capita Miguel Ángel Santos 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 0 1997 0 Imports FOB per Cápita (dollars 2012) 50,000
- 6. Boom in consumptionwas mirrored by a boom in imports 0.7 Imports/Household Consumption (measured in US$ 2005) 0.6 0.5 0.4 0.3 0.2 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 0.1 Average 1974-1998: 25% Imports/Household Consumption Fuente: World Development Indicators Miguel Ángel Santos Average 1999-2012: 44% 2006-2012: 51% 5
- 7. Idea #1 • Thereduction in poverty and inequality was fueled by a consumption boom, which in turn had a mirror in an import boom Miguel Ángel Santos 6
- 8. Fiscal expansion: Public expenditurereached 51% of GDP and fiscal deficit 18% Miguel Ángel Santos 7
- 9. What is theplan? Miguel Ángel Santos 8 8
- 10. 9 Venezuela: The largetpublic expenditure in LATAM Gasto Público Consolidado (% del PIB) 60.0 51.3 50.6 50.0 47.2 38.8 40.0 41.9 40.0 34.6 32.5 28.7 30.0 22.1 18.2 20.0 26.2 23.3 19.1 10.0 Miguel Ángel Santos 20 12 ue la 20 11 ve ne z el a gu ay U ru Pe ru ua y ex ic o Pa ra g Ve ne zu Fuente: Ministerio de Planificación y Finanzas, CEPAL M ad or Ec u a os t C ol o C R m bi ic a a le hi C zi l Br a Bo liv ia Ar g en t in a 0.0
- 11. Boom in publicexpenditure and imports exceeded the oil bonanza 10 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
- 12. Domestic debt growingat 65% (financed via inflation) 11 65% 66% 71% 70% Fuente: Ministerio de Finanzas – Saldos al 30/09/2014 Miguel Ángel Santos
- 13. Debt to GDPratios… Miguel Ángel Santos 2013: @6,30 12
- 14. Debt to GDPratios… Miguel Ángel Santos 2012-2013: @11,40 13
- 15. Debt to GDPratios… Miguel Ángel Santos 2012-2013: 20,00 14
- 16. Debt to GDPratios… Miguel Ángel Santos 2012: 20,00 - 2013: 30,00 15
- 17. Debt to GDPratios… Miguel Ángel Santos 2012: 20,00 - 2013: 40,00 16
- 18. Además del endeudamientofinanciero documentado, el Estado venezolano ha venido acumulando deudas (atrasos) en divisas… Miguel Ángel Santos 17
- 19. El spread deVenezuela alcanzó 1407 puntos, el mayor entre los mercados emergentes del mundo (detrás viene Argentina 1062) Miguel Ángel Santos 18
- 20. Idea #2 • Thereduction in poverty and inequality was fueled by a consumption boom, which in turn had a mirror in an import boom • Large increases in public expenditure (consumption) outpaced the oil bonanza, forcing the government to increase foreign and domestic debt… and print money Miguel Ángel Santos 19
- 21. Printing money acceleratedinflation… 20 Price Index 12-Month Moving Average (Jan 2008 - Dic 2013) 90% CPI Variation (%) Food and Non-Alcoholic Beverages Prices Var (%) 80% 80.52% 70% 60% 56.14% 50% 40% 30% 20% Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 10% Miguel Ángel Santos 20
- 22. Printing money acceleratedinflation… 21 Price Index 12-Month Moving Average (Jan 2008 - Dic 2013) 90% CPI Variation (%) Food and Non-Alcoholic Beverages Prices Var (%) 80% 80.52% 70% 60% 56.14% 50% 40% 30% 20% Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 10% Miguel Ángel Santos 21
- 23. … and putpressure in the parallel market rate 22 Official and (black) Parallel Market Rate (Ene 2000 - Dic 2013) 65.00 55.00 Official Rate 45.00 Parallel Black Market Rate M2/RIN 35.00 25.00 15.00 Miguel Ángel Santos Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 -5.00 Jan-08 5.00
- 24. … and putpressure in the parallel market rate 23 Official and (black) Parallel Market Rate (Ene 2000 - Dic 2013) 65.00 55.00 Official Rate 45.00 Parallel Black Market Rate M2/RIN 35.00 25.00 15.00 Miguel Ángel Santos Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 -5.00 Jan-08 5.00
- 25. International reserves ata minimum (+/- US$2.000 million in cash) 24 International Reserves (US$ million) 45,000 40,000 35,000 30,000 25,000 20,000 21.481 15,000 Miguel Ángel Santos May-13 Sep-12 Jan-12 May-11 Sep-10 Jan-10 May-09 Sep-08 Jan-08 May-07 Sep-06 Jan-06 May-05 Sep-04 Jan-04 May-03 Sep-02 Jan-02 May-01 Sep-00 Jan-00 May-99 Sep-98 Jan-98 10,000
- 26. Idea #3 • Thereduction in poverty and inequality was fueled by a consumption boom, which in turn had a mirror in an import boom • Large increases in public expenditure (consumption) outpaced the oil bonanza, forcing the government to increase foreign and domestic debt… and print money • Record international spreads forced the government to sheer printing of money and switch debt strategy to the domestic market… Inflation and scarcity skyrocketed… international reserves are at the minimum Miguel Ángel Santos 25
- 27. 26 And now what? MiguelÁngel Santos
- 28.
- 29. 28 Latin America: PublicExpenditure (% of GDP) Miguel Ángel Santos
- 30. 50% of publicexpenditure is executed away from central government 29 Public Expenditure (% of GDP) Central Government 51,5 Consolidated Public Sector 45,4 41,6 38,9 37,7 31,9 28,8 28,3 26,1 21,4 1998 25,1 32,2 31,0 26,1 38,4 36,6 36,0 31,9 29,8 27,8 25,9 25,9 25,6 25,7 26,5 26,5 27,0 23,0 21,8 19,8 1999 Miguel Ángel Santos 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 29 2012E
- 31. Ideas on Growthand Inequality 30 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