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VHeadline.com guest commentarist Richard Smith writes: Since the election of Hugo Chavez to the presidency of the Bolivarian Republic of Venezuela for the first time in 1998, economic news reporting in the Venezuelan mass media has invariably been biased to portraying everything, without exception, in a negative way with the aim of discrediting the government and eventually cause its downfall.

In a recent program on Venezuela National Radio (RNV) Edgar Hernandez Behrents, president of CADIVI (the Administrative Commission for Foreign Currency), pointed out to listeners that almost all macroeconomic indices were at all time record levels.

These record figures included foreign currency reserves, tax collection levels, stock market index, crude oil prices, foreign debt yield trading above par and falling inflation and interest rates.

As Oscar Heck has emphasized in recent articles, the foreign exchange reserves accrued at the Venezuelan Central Bank (BCV) are more than … or at least equal to … Venezuela‚s external debt, none of which is owed to the IMF, so there is no meddling in the economy by their financial gurus, since the last quota was paid off on December 6, 2001, for a debt contracted by the Herrera Campins government in 1980!

Besides a solid economic base, the Chavez regime has invested heavily in infrastructure projects such as the second bridge over the Rio Orinoco, four metro projects underway at the same time (Los Teques, Maracaibo, Valencia and an extension to the Caracas system), hydroelectric projects, the construction of a national rail system, to name but a few.

Large amounts of petrodollars have been funneled into social program to educate, train and get people back to work in a way similar to Roosevelt‚s “New Deal‰ in the 1930s, and land reform is underway to defeat idle crop land, with the objective of Venezuela becoming self sufficient in food production, instead of importing 70% of what it consumes.

Thus, Arturo Uslar Pietri‚s idea of “sowing oil‰ is actually taking place, whereas from 1976 to 1998, the national oil company (PDVSA) was run for the benefit of the privileged few condemning the growing poor population to an endemic poverty trap.

To give readers an idea of population growth in Venezuela, there were approximately 11.5 million Venezuelans in 1973, and in 2004 there are around 24 million. With a population more than doubling in 30 years, it was necessary to defuse the ticking time bomb of social unrest and avoid another popular rebellion as was the “Caracazo‰ on February 27, 1989.

The legally-binding minimum wage has risen from Bs.75,000 in 1998 to Bs.321,000 in 2004, which is an increase of some 328% … which virtually offsets the cumulative inflation of the Chavez years (see below), especially if one shops in a government food store, Mercal, and has free medical assistance and schooling from the Barrio Adentro (Into the Neighborhood) primary healthcare mission and your children go to a Bolivarian School where they receive 3 meals a day, free of charge.

Now that the heat has died down somewhat on the national political scene, it is quite sobering to compare what really has been happening in the Venezuelan economy in relative terms, by comparing the present government‚s performance with that of previous ones, after the February 1983 devaluation on the fabled “Black Friday.‰

Two measures have been selected to illustrate relative economic performance: devaluation of the local currency, the bolivar, in relation to the US$ and retail inflation levels.

Devaluation

Performance of Accion Democratica/COPEI/Convergencia 1983 – 1998

Exchange rate to US dollar:

02/83 – 4.3

02/98 – 517.25

Cumulative devaluation: 11,929%

Average annual devaluation: 795%

Average monthly devaluation: 4.42%

Performance of the Bolivarian government February 1998 – October 2004

Exchange rate to US dollar:

02/98 – 517.25

10/04 – 1,920
(parallel market 2,500)

Cumulative devaluation: official market: 271.19%

Cumulative devaluation: parallel market: 383.32%

Average annual devaluation: official market: 40.72%

Average monthly devaluation: official market: 3.39%

Average annual devaluation: parallel market: 57.56%

Average monthly devaluation: parallel market: 4.79%

(Source: Venezuelan Central Bank BCV)

Although the performance of the present government has not been scintillating in holding up the bolivar, it is markedly better then that of the opposition parties‚ performance since 1983, as the figures show.

Inflation comparisons from 1989 onwards are interesting. This specific year has been chosen as a starting point since it is a key date when Venezuela‚s internal market was opened up to all types of imports.

Inflation

Performance of governments of Carlos Andres Perez, Ramon J. Velasquez, Rafael Caldera 1989 – 1998 – inflation (%), annual average.

1989 – 81.0

1990 – 36.5

1991 – 31.0

1992 – 31.9

1993 – 45.9

1994 – 70.8

1995 – 56.6

1996 – 103.2

1997 – 37.6

1998 – 29.9

Average annual inflation: 10 years: 52.44%

Performance of the Bolivarian government 1999 – 2004 (est.) – inflation (%), annual average

1999 – 20.0

2000 – 13.4

2001 – 12.3

2002 – 31.2

2003 – 27.1

2004 – 20.0 (estimated)

Average annual inflation: 6 years: 20.66%

(Source: Venezuelan Central Bank)

The efforts to control inflation would have been much better is there had not been a coup d‚etat in April 2002 and a lock out for two months in December 2002 to beginning February 2003, combined with hoarding of essential food products and the willful sabotage of ports and the oil industry, as well as an attempt to buy up all the US$ in the Central Bank in order to further the economic sabotage.

(It seems incredible 18 months on and with the benefit of hindsight, that Venezuelans could do this to their own country)

This action led by the opposition caused an inflation spike in January and February 2003, and all the work done in 2000 and 2001 to defeat the endemic inflation in the economy was undone.

The comparison with governments since 1989 shows a much greater sense of responsibility and acumen in controlling inflation by Chavez‚ financial team.

The figures speak for themselves.

Finance Minister Tobias Nobrega is steering a prudent course so as not to upset the fragile economy which is now on the mend.

Let‚s wait for the reaction of the economic gurus of the opposition again, predicting “cataclysmic‰ outcomes for the economy, including some who actually predicted a famine at the beginning of 2003.

Readers will be pleased to know that in a survey published by Minister Nobrega in January 2004, he demonstrated that the prophets of economic doom who had thousands of lines in the newspapers, and hours on the radio and TV predicting the inevitable disaster due to the economic policies being instituted, that these “experts‰ were 80% wrong in their forecasts regarding the 2003 economic results.

Inflation was forecast to hit 80%, negative economic growth was predicted at minus 35% after the lock out ended, when in fact the economy shrank by about 14%.

So much for the expertise of Stanford University ex-pupils and their forecasting skills, who form the “upper crust‰ of traditional Venezuelan economists at the Institute for Economic Studies (IESA) in San Bernardino, Caracas!

 Richard Smith is based in La Victoria (Aragua).  He was born 1950 in Wolverhampton (UK), and obtained a Masters Degree from the University of London and the University of Marburg-an-der-Lahn (Germany) forming close contacts with Latin America and more especially Venezuela since 1977. An expert in international marketing, he is a regular contributor to the specialized press directed at the leather industry (Spanish and English), represents a global fair group in Latin America and recently launched the cyber magazine Leather Press. One of his main concerns are the establishment of some form of “social justice‰ in Latin America since: “As I grew up in a post WWII society where free health care, education, jobs and social security were taken for granted, it came as an ugly surprise to discover that these elements do not exist for 90% of Latin Americans. Thus, social organization at the base is essential if the dispossessed are ever to ease their way put of the poverty trap.‰ Richard Smith may be contacted at email mailto:richardsmith98@hotmail.com