The Venezuelan Economy: How to achieve equitable growth (delivered at Rockefeller Center, Cambridge, MA 22/22/2013)

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

The Oil Bonanza

1

Venezuela Oil 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


Real Oil EXports per Capita

0

Oil Exports per Capita (dolars 2012)

Oil Exports (million dollars 2012)

80.000

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


1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

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


2003

2004

2005

2006

2007

CON PC 1998=100

2008

2009

Gini

2010

2011

2012

0,55

14.3%
CAGR:
0.8%

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


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

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

5

Boom in public expenditure 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

2006

2007

2008

2009

2010

2011

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”)


7

Fiscal
expansion:

Public
expenditure
reached
51%
of
GDP
and
ﬁscal
deﬁcit
18%


8

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%


9

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%


10

…
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


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

…
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


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

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


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%

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


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

Venezuela:
The
product
space


15

15

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


16

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.

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


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

19

Thanks!


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

20
12

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z
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ue

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20
11

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ru

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ru

ua
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a

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om
bi
ol
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le
C
hi

zi
l
Br
a

Bo
liv
ia

Ar
g

en
t

in
a

0.0

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%


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%

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


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