Tag Archives: inflation

Aug
16
2011
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ICYMI: Analysis – Chavez seeks to contain voter angst over economy

Reuters - August 15, 2011

By Louise Egan

CARACAS – Venezuela’s economy is plagued by shortages, high inflation and crippling currency controls, but a massive spending spree by President Hugo Chavez will likely keep an incipient recovery alive, at least until a 2012 vote.

Polls show support for the charismatic leftist leader has edged up since he announced in June he had cancer. But unless he can generate as much sympathy for his economic stewardship, his re-election bid could be at risk.
In the short term, Chavez can paper over underlying problems with subsidies, price controls and ramped-up spending on his flagship health and housing programs for the poor.

But eventually, falling oil production by the OPEC nation combined with mounting debt will make it harder to finance his socialist “revolution,” analysts say, leading to sub-par growth and possibly another painful currency devaluation.

“We expect Venezuelan growth to lag behind the rest of Latin America over the coming years,” said David Rees, emerging markets economist at Capital Economics in London.

“Of course Chavez, current health concerns aside, will try to pump the economy ahead of next year’s presidential election with strong government spending.”

Venezuela has the world’s largest oil reserves, according to OPEC. Yet it was the last in Latin America to pull out of recession, returning to growth in the fourth quarter of 2010.

The recovery advanced at a healthy clip in the first half of this year and is on track for 4.5 percent annual growth, the U.N.’s regional economic body ECLAC predicts.

High oil prices and public spending are powering the expansion. Since taking office in 1999, Chavez has nationalized large swaths of the economy, scaring off foreign investors and slowing domestic manufacturing, farm and even oil production as companies are reluctant to bet on new projects.

The 57-year-old former soldier’s illness has slowed him, but he has made an effort to show he remains in charge, displaying his characteristic flair during regular phone calls to state television programs. He has undergone two chemotherapy sessions in Cuba as Fidel Castro’s guest and says he is recovering well.

Oil prices may continue to work in Chavez’s favour, rallying since a sharp sell-off last week over the U.S. and European debt crises and fears of another global downturn.

“Even if we see a Lehmann-style sell-off like we saw in 2008 … as long as oil stays above $70 (42.69 pounds) a barrel, they’re in pretty good shape,” said Russ Dallen, head of Caracas Capital Markets.

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Aug
16
2011
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editor
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ICYMI: Analysis – Chavez seeks to contain voter angst over economy

Reuters - August 15, 2011

By Louise Egan

CARACAS – Venezuela’s economy is plagued by shortages, high inflation and crippling currency controls, but a massive spending spree by President Hugo Chavez will likely keep an incipient recovery alive, at least until a 2012 vote.

Polls show support for the charismatic leftist leader has edged up since he announced in June he had cancer. But unless he can generate as much sympathy for his economic stewardship, his re-election bid could be at risk.
In the short term, Chavez can paper over underlying problems with subsidies, price controls and ramped-up spending on his flagship health and housing programs for the poor.

But eventually, falling oil production by the OPEC nation combined with mounting debt will make it harder to finance his socialist “revolution,” analysts say, leading to sub-par growth and possibly another painful currency devaluation.

“We expect Venezuelan growth to lag behind the rest of Latin America over the coming years,” said David Rees, emerging markets economist at Capital Economics in London.

“Of course Chavez, current health concerns aside, will try to pump the economy ahead of next year’s presidential election with strong government spending.”

Venezuela has the world’s largest oil reserves, according to OPEC. Yet it was the last in Latin America to pull out of recession, returning to growth in the fourth quarter of 2010.

The recovery advanced at a healthy clip in the first half of this year and is on track for 4.5 percent annual growth, the U.N.’s regional economic body ECLAC predicts.

High oil prices and public spending are powering the expansion. Since taking office in 1999, Chavez has nationalized large swaths of the economy, scaring off foreign investors and slowing domestic manufacturing, farm and even oil production as companies are reluctant to bet on new projects.

The 57-year-old former soldier’s illness has slowed him, but he has made an effort to show he remains in charge, displaying his characteristic flair during regular phone calls to state television programs. He has undergone two chemotherapy sessions in Cuba as Fidel Castro’s guest and says he is recovering well.

Oil prices may continue to work in Chavez’s favour, rallying since a sharp sell-off last week over the U.S. and European debt crises and fears of another global downturn.

“Even if we see a Lehmann-style sell-off like we saw in 2008 … as long as oil stays above $70 (42.69 pounds) a barrel, they’re in pretty good shape,” said Russ Dallen, head of Caracas Capital Markets.

To read the rest of the article click here

 
Jul
8
2011
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In Case You Missed It… Articles Roundup Week of 7/8/11

In this week’s round up…In the midst of the veil of secrecy around President Chavez’s condition, reports point to colon cancer. Venezuelan presidential contender Henrique Capriles still hopes he will face Chávez in the 2012 presidential elections. As speculations loom over Chavez’s cancer, the military might play a key role in the country’s future, Venezuela becomes the only oil producing country that has increased its debt, the nationwide consumer price index has jumped 2.5% in the month of June and Venezuela’s telecommunications agency began a new investigation of the TV channel Globovision for its coverage of violence in the Rodeo II riots.

Chávez Is Believed to Have Colon Cancer, Wall Street Journal

President Hugo Chávez appears to be suffering from colon cancer, according to two people with direct knowledge of the president’s condition. Mr. Chávez admitted he had cancer last week, but hasn’t disclosed what type.

Challenger for Venezuela Presidency Still Hopes to Face Chávez, Wall Street Journal

A state governor who is a leading contender to challenge the re-election bid of Venezuelan President Hugo Chávez said Wednesday that he hopes the incumbent will remain in the race despite questions about his health.

Venezuela’s military a key player amid uncertainty, AP via Newsday

As Chavez fights cancer, military could be key player in Venezuela’s political future

Venezuela’s military took center stage in the country’s bicentennial celebrations Tuesday, and it likely would be a key player in the country’s political future if Hugo Chavez were to be forced out of the presidency by cancer.

Venezuela is the only oil producer that increases debt, El Universal

Average debt-to-GDP ratio in the Middle East will drop 14.1 percent this year, according to the IMF

After eight years of high oil prices, it has become clear that oil exporters, except for Venezuela, have a consistent policy to save a part of revenues and reduce debt.

Data and projections from the International Monetary Fund (IMF) show that the Middle East and Central Asia petro-states have realized that oil does not escape the law of gravity. Therefore, they avoid the lack of fiscal control during times of booming oil prices.

UPDATE: Venezuela June Consumer Prices Up 2.5% On Month, Dow Jones Newswires via WSJ

Venezuela’s nationwide consumer price index jumped 2.5% in June, the central bank said Thursday, maintaining a quicker pace of inflation after three months of tamer increases.

Government officials have said they were making progress at slowing the country’s inflation rate, which is perpetually among the highest in the world. But many analysts believe consumer prices will likely increase even faster amid the uncertainty surrounding President Hugo Chavez’s illness.

Venezuela launches probe of TV channel’s coverage, Associated Press

Venezuela’s telecommunications agency began a new investigation of the TV channel Globovision on Thursday, this time for its coverage of violence at two prisons where inmates have battled troops.

Globovision takes a strident stance against President Hugo Chavez’s government. It has been the subject of six prior probes, including allegations of tax evasion and investigations of its coverage of protests, an earthquake and on-air remarks about Chavez.