Heavy toll taken on Venezuela economy

www.zwire.com February 16, 2003

Wire Report Usually, the economy in Venezuela isn’t of much interest to most people around here. Except now, it’s taking money out of your pocket by contributing to higher prices at the pump. A general strike and lingering recession have taken a heavy toll on the Venezuelan economy, which shrank nearly 17 percent in the final quarter of last year, according to figures released by the central bank on Friday. The nation’s oil sector, which accounts for about a third of gross domestic product, contracted by nearly 26 percent in the fourth quarter as thousands of workers walked off their jobs while the government of President Hugo Chavez worked to restore production. Most of the contraction in the economy was due to reduced oil production, a combination of Venezuela’s adherence to lower production quotas established by the Organization of Petroleum Exporting Countries, followed by the general strike, which began Dec. 2. Venezuela is the world’s fifth-leading oil exporter and is a leading supplier to the United States. The reduced production was one factor in higher U.S. gasoline and heating oil prices this winter. The general strike ended Feb. 4 in all areas except the oil industry. Chavez’s opponents -- a mix of unions, business interests and conservative and leftist political parties -- called for the nationwide work stoppage to press for early elections. The government has restored oil output up to about half of pre-strike levels of 3.2 million barrels per day. Production fell as low as 200,000 barrels per day in December. Meanwhile, Central Bank director Domingo Maza said the government would lift a ban on dollar sales at the end of the month. The freeze was imposed during the strike to protect Venezuela’s foreign reserves, which were reduced by panic dollar buying.