Venezuela: oil slump stalls economic growth

Venezuela’s gross domestic product (GDP) grew by just 0.3% in the first quarter of 2009 compared to the same period the year before, the Central Bank of Venezuela (BCV) reported on May 19. Miguel Carpio, an economist at Banco Federal CA in Caracas, projected a zero growth rate for the year. Finance Minister Ali Rodríguez attributed the situation to the global economic downturn, which has cut the price of Venezuelan oil from an average of $87 per barrel last year to an average $42 per barrel so far in 2009; oil accounts for more than 90% of the country’s exports.

The last time the GDP failed to grow was in 2003 during a shutdown of the oil sector by the political opposition to President Hugo Chávez Frías. The economy grew by 18.6% in 2004, 10.3% in 2005 and 2006, 8.4% in 2007, and 4.8% in 2008, according to the BCV. In March the government announced a 6.7% reduction in the national budget. (VenezuelAnalysis, May 21; Bloomberg, May 19)

As growth stalls, Chávez’s leftist government seems to be tightening its control over the economy. On May 22 the government announced a deal to pay the Spanish banking multinational Banco Santander $1.05 billion for the nationalization of its local subsidiary, Banco de Venezuela. “We are working in all areas related to economic development,” Vice President Ramón Carrizalez explained. Plans for the nationalization were announced in July, but negotiations dragged on for months over the purchase price. (AP, May 22 via Forbes)

On May 21 President Chávez announced plans to nationalize several steel and iron companies. This was the beginning of “a process of nationalization to create an industrial complex,” he said in a televised address. “Venezuelan workers are going to give a lesson to the world on how the working class has been resuscitated to make a revolution.” (AFP, May 21)

Meanwhile, the Venezuelan government is seeking up to $4.3 billion in loans from Brazil’s state development bank, according to the Brazilian daily Folha de Sao Paulo. Some of the loans would be used to pay for work by Brazilian companies in Venezuela. The companies include Braskem (BRKM5.SA), Andrade Gutierrez and Odebrecht SA, Brazil’s largest construction group, which is expanding the Caracas subway system. The loans may be announced when Chávez visits Brazil on May 26. (Reuters, May 22)

From Weekly News Update on the Americas, May 24

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