The Venezuelan Economy: How to achieve equitable growth (delivered at Rockefeller Center, Cambridge,...

0

Miguel Ángel Santos

Venezuela: Options for the Future

The Economy: How to Get Sustainable and Equitable Growth?

Miguel Angel Santos

[email protected]

David Rockefeller Center for Latin American Studies

November, 2012

1


The Oil Bonanza

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

1959

19

60

1961

19

62

1963

19

64

1965

19

66

1967

19

68

1969

19

70

1971

19

72

1973

19

74

1975

19

76

1977

19

78

1979

19

80

1981

19

82

1983

19

84

1985

19

86

1987

19

88

1989

19

90

1991

19

92

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

Oil Exports per C

apita (dolars 2012) O

il Ex

port

s (m

illio

n do

llars

201

2)

Venezuela Oil Exports (US$ 2012)

Real Oil Exports Real Oil EXports per Capita

Yom Kippur

War

Khomeini Revolution

Begining of Iran-Iraq War

Kuwait Invasion and Gulf War

2007 Financial Crisis

2


-

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

14.000.000

16.000.000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Poverty Evolution in Venezuela (1997-2012)

The end of poverty? Or the end of poverty reduction?

Poverty

Extreme Poverty

Num

ber o

f peo

ple

3


0,35

0,37

0,39

0,41

0,43

0,45

0,47

0,49

0,51

0,53

0,55 0,60

0,80

1,00

1,20

1,40

1,60

1,80

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP and Consumption per Capita (1998=100) and Gini Coefficient (1980-2012)

GDP PC 1998=100 CON PC 1998=100 Gini

Growth and Inequality or Consumption and Inequality?

14.3% CAGR: 0.8%

60.0% CAGR: 3.2%

4


Boom in consumption was mirrored by a boom in imports

0

500

1.000

1.500

2.000

2.500

3.000

0

10.000

20.000

30.000

40.000

50.000

60.000 19

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Imports FO

B per C

ápita (dollars 2012)

Impo

rts

FOB

(mili

on d

olla

rs 2

012)

Venezuela: FOB Imports (US$ 2012)

Real Imports Real Imports per Capita

5


Boom in consumption was mirrored by a boom in imports

0,1

0,2

0,3

0,4

0,5

0,6

0,7 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

Imports/Household Consump2on (measured in US$ 2005)

Imports/Household ConsumpBon

Average 1974-1998: 25% Average 1999-2012: 44%

Fuente: World Development Indicators

2006-2012: 51%

6


Boom in public expenditure and imports exceeded the oil bonanza

28.7

05

28.4

55

29.0

67

26.1

04

25.9

42

27.7

02

28.8

53

28.1

38

30.5

34

26.5

98

38.6

81

50.9

09

67.4

49 85.3

04

98.0

11

105.7

79

106.0

48

0

20.000

40.000

60.000

80.000

100.000

120.000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-II

Deuda Pública Externa(USD Millones)

Fuente: BCV

Foreign Public Debt (US$ Million)

7


•  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”)

In summary: Looking at the mirror

8


Fiscal expansion: Public expenditure reached 51% of GDP and fiscal deficit 18%

9

Miguel Ángel Santos 9

Prin2ng money accelerated infla2on…

10%

20%

30%

40%

50%

60%

70%

80%

ene-

08

mar-

08

may-

08

jul-

08

sep-0

8

nov

-08

ene-

09

mar-

09

may-

09

jul-

09

sep-0

9

nov

-09

ene-

10

mar-

10

may-

10

jul-

10

sep-1

0

nov

-10

ene-

11

mar-

11

may-

11

jul-

11

sep-1

1

nov

-11

ene-

12

mar-

12

may-

12

jul-

12

sep-1

2

nov

-12

ene-

13

mar-

13

may-

13

jul-

13

sep-1

3

Price Index 12-‐Month Moving Average (Jan 2008 -‐ Oct 2013)

CPI Variation (%) Food Prices Var (%)

10


Prin2ng money accelerated infla2on…

10%

20%

30%

40%

50%

60%

70%

80%

ene-

08

mar-

08

may-

08

jul-

08

sep-0

8

nov

-08

ene-

09

mar-

09

may-

09

jul-

09

sep-0

9

nov

-09

ene-

10

mar-

10

may-

10

jul-

10

sep-1

0

nov

-10

ene-

11

mar-

11

may-

11

jul-

11

sep-1

1

nov

-11

ene-

12

mar-

12

may-

12

jul-

12

sep-1

2

nov

-12

ene-

13

mar-

13

may-

13

jul-

13

sep-1

3

Price Index 12-‐Month Moving Average (Jan 2008 -‐ Oct 2013)

CPI Variation (%) Food Prices Var (%)

11


… and put pressure in the parallel market rate

0,00

10,00

20,00

30,00

40,00

50,00

60,00

ene-

08

abr-

08

jul-

08

oct-

08

ene-

09

abr-

09

jul-

09

oct-

09

ene-

10

abr-

10

jul-

10

oct-

10

ene-

11

abr-

11

jul-

11

oct-

11

ene-

12

abr-

12

jul-

12

oct-

12

ene-

13

abr-

13

jul-

13

oct-

13

Official and (Black) Parallel Market Rate (Ene 2000 - Oct 2013)

Official Rate Parallel Black Market Rate M2/RIN

12


… and put pressure in the parallel market rate

0,00

10,00

20,00

30,00

40,00

50,00

60,00

ene-

08

abr-

08

jul-

08

oct-

08

ene-

09

abr-

09

jul-

09

oct-

09

ene-

10

abr-

10

jul-

10

oct-

10

ene-

11

abr-

11

jul-

11

oct-

11

ene-

12

abr-

12

jul-

12

oct-

12

ene-

13

abr-

13

jul-

13

oct-

13

Official and (Black) Parallel Market Rate (Ene 2000 - Oct 2013)

Official Rate Parallel Black Market Rate M2/RIN

13


Parallel market premiums above 500%: Massive apprecia2on in the official market and massive deprecia2on in the black market

0%

50%

100%

150%

200%

250%

300%

ene-

96

dic

-96

nov

-97

oct-

98

sep-9

9

ago

-00

jul-

01

jun

-02

may-

03

abr-

04

mar-

05

feb-0

6

ene-

07

dic

-07

nov

-08

oct-

09

sep-1

0

ago

-11

jul-

12

jun

-13

Real Exchange Rate Index (Jul 1994 = May 1996 =100%)

RER Official RER 100% RER Parallel

RER = 100%

Fuente: BCV, Cálculos Propios

14


Interna2onal reserves are at a minimum (US$1.500 million in cash)

21.750

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000E

ne-

98

Sep

-98

May

-99

En

e-00

Sep

-00

May

-01

En

e-02

Sep

-02

May

-03

En

e-04

Sep

-04

May

-05

En

e-06

Sep

-06

May

-07

En

e-08

Sep

-08

May

-09

En

e-10

Sep

-10

May

-11

En

e-12

Sep

-12

May

-13

(MM

US

D)

Reserva Internacionales(BCV + FEM)

Fuente: BCV

15


Venezuela: The product space

16


•  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

In summary: Where we are?

17


Valor máximo Año VM Valor mínimo Año Vm Duración Intensidad % Año Inicial Año final Duración103,5 1966 61,0 2020 54 41,1 2003 2045 42

Fuente: INE. Proyecciones de población. Cálculos de G. Zúñiga.

Aspectos relativos a la evolución de la relación de dependencia (RD)Período de reducción de la RD

Período en que la RD se mantiene inferior a 2/3

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

110,0

1961 1971 1981 1991 2001 2011 2021 2031 2041 2051

0 a 14 15 a 59 60 y más R D 15 a 59

Bono DemográficoRelación de dependencia

inferior a 2/3

0-14

60 years or more

15 a 59

Dependency Ratio

Looking forward… Almost a quarter of our bonus is gone!

Demographic bonus: Dependency ratio < 2/3

18


Adjusting social programs by demographic change….

•  Preventing and preparing secondary school drop outs •  Training programs targeted to facilitate insertion in labor

markets

Issue

Youth: (Post) secondary school / training programs

Programs oriented to:

•  City planning and urbanism to face increase in new families/households

•  Crime prevention •  Contingency plans for (predictable) natural disasters

Urban Living Standards

•  Adapt public health system to new pattern of diseases •  Day care programs •  Pensions

Population aging

•  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

Lack of an appropriate public

safety network

19


Thanks!

20


Venezuela(registra(así(el(gasto(público(más(alto(de(América(La:na(

Gasto Público Consolidado (% del PIB)

18.2 19.122.1 23.3

28.732.5

34.6

38.8 40.041.9

47.250.6

26.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Argenti

na

Bolivia

Brazil

Chile

Colombia

Costa

Rica

Ecuad

or

Mexico

Paragu

ayPeru

Urugua

y

Venez

uela

2011

vene

zuela

2012

51.3

Fuente: Ministerio de Planificación y Finanzas, CEPAL

Latin America: Public Expenditure (% of GDP)

21


21,4%%19,8%%

21,8%%

25,1%% 26,1%%27,8%%

25,9%% 25,9%%

29,8%%

25,6%% 25,7%% 26,5%%

23,0%%

26,5%% 27,0%%28,8%%

26,1%%28,3%%

31,9%% 31,0%%32,2%% 31,9%%

37,7%%

41,6%%38,9%%

36,0%%38,4%%

36,6%%

45,4%%

51,5%%

1998% 1999% 2000% 2001% 2002% 2003% 2004% 2005% 2006% 2007% 2008% 2009% 2010% 2011% 2012E%

Public'Expenditure'(%'of'GDP)''

Central%Government% Consolidated%Public%Sector%

50% of public expenditure is executed away from central government

22


Venezuela: Oil production per capita

0,050000

0,100000

0,150000

0,200000

0,250000

0,300000

0,350000

0,400000

0,450000

0,000000

0,500000

1,000000

1,500000

2,000000

2,500000

3,000000

3,500000

4,000000

Oil Production per Capita

The Venezuelan Economy: How to achieve equitable growth (delivered at Rockefeller Center, Cambridge,...

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