The Venezuelan outlook for 2003

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Friday, April 04, 2003 By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: 2003 looks like a very difficult year for Venezuela and Venezuelans. A workshop organized by VenAmCham (the Venezuelan American Chamber), brought together several experts on the financial, economic, political, labor and petroleum areas, who presented their views to over 100 businessmen and women as well as top managers from both the public and the private sectors.

The chief economist of VenAmCham, Jose Gregorio Pineda, presented the key financial indicators for the year, as follows:

1. An external debt payment of some $4 billion,
2. A government moratorium on the payment of the internal debt,
3. A decline of about 15 points in the GDP, some $15 billion,
4. An inflation rate at year's end of about 40%,
5. Devaluation of 100%,
6. A GDP per capita only comparable to the level of 1960,
7. Total Investments representing only 12% of the GDP, as compared to 30% in the 1970´s,
8. Exchange and price controls probably resulting in pronounced economic recession.

Economist Maxim Ross predicted a fiscal deficit of between $12 to $22 billion, depending on the performance of PDVSA during the year, most probably closer to the last figure. He made emphasis on the close relation between economic performance and the evolution f the political process. He claimed that, unless the government changes this year, the economy would collapse, leading to violent social upheaval.

Manuel Diaz and Arelis Diaz predicted an unemployment rate of about 27%. This would be the largest ever recorded in the country. Minimum salary would remain at about $120 per month, lower than in Colombia and Ecuador, the other Andean countries.

I, myself, participated in the event giving the petroleum outlook ... I forecast a daily average production of some 2.3 million barrels for the year, about one million barrels less than during a normal year. The exports of hydrocarbons would be at around 1.5 million barrels per day, of which one million barrels would be crude oils and the rest products. These export volumes would be about one million barrels per day lower than normal. As a result, fiscal participation of the government would only be of about $6 to $7 billion, as compared to the $12 billion obtained last year.

Worse still, the reliability of Venezuela as a reliable oil supplier to international clients has been severely eroded. Our main client, the US, no longer considers us reliable and has had to resort to Mexico and Saudi Arabia to fill the temporary gaps of supply from PDVSA.

These predictions could, of course, be off the mark ... they represent the educated guesses of the speakers concerned. It's interesting to note, however, that a survey taken among the participants did not show significant variations. At any rate this information should be compared to that obtained from other sources.

This outlook is closely dependent on the political process. If Chavez leaves the Presidency before the end of the year, there will be a transition period, with a new government in charge, which would last until 2006. This government would find the country in social, economic and spiritual ruin and would face a very hard task of national reconstruction, one for which very few people will give them credit. The new government can only offer Venezuelans "blood, sweat and tears," giving the sorry conditions existing in the country. An immediate program of reconstruction would have to put in place including, among other items:

The immediate return of the professional managers and technicians to PDVSA ... an opening to private investment ... the end of the romance with Cuba and the Colombian guerrillas ... the end of the hostile attitude towards the US ... the implementation of a large construction program in the public sector ... intensive tourism promotion ... the disarmament of the Bolivarian circles and the dismantling of the corrupt bureaucracy installed by Chavez ... the rapid shift from "buhonerismo" to organized employment ... a deep cleaning of Venezuelan cities ... in short, a major shift of direction in the life of the Nation, which has been in a tragic course for disaster.

Yes, 2003 is going to be a very difficult year for us.

Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983.  In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort.  You may contact Gustavo Coronel at email gustavo@vheadline.com