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Caracas, Wednesday December 28 , 2005  
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Planning Ministry forecasts sustained growth over the next decade
Government estimates GDP at 9% in 2005
Planning Minister Jorge Giordani sees inflation under 15 percent and oil prices above USD 40 next year (File Photo)
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Private investment for USD 10 billion a year is required. "If you (Venezuelan private entrepreneurs) do not invest, others will come to invest. You are going to lag behind," said the official


Planning Minister Jorge Giordani claimed that Venezuelan economy has entered a clear highway leading to sustained growth over the next decade and consequently to a substantial increase in wealth.

In an interview with official TV channel Venezolana de Televisión, Giordani asserted: "We do not have a pretension to reach a yearly growth rate of nine percent or 10 percent during 10 years, but we do envisage sustained growth at five, six or seven percent. At those levels, (Gross Domestic) Product may double in almost 10 years. Therefore, the size of the cake increases twofold."

Giordani based forecasts on Venezuelan economic expansion over the last eight quarters. He ensured that official estimations put GDP in 2005 up at "around nine percent. We have to wait and see the figures the Central Bank of Venezuela is to disclose, but it is the highest growth rate for a Latin American country for the second consecutive year. This is a relief."

The outlook for 2006 is positive. "If this year was a year of economic consolidation, next year will be a year of good perspectives. Growth is to range from five to six percent. Inflation may be below 15 percent at 12 percent. Oil prices will be above USD 40," he said, adding that international reserves currently amount to some USD 29 billion.

Regarding inflation, Giordani explained: "If inflation rate in December this year is lower than 1.6 percent recorded in the same period last year, yearly inflation in 2005 will be below 15 percent, which is our target. Let us see the figures the Central Bank is to announce."

The man in charge of economic planning in Venezuela conceded that sustained high inflation rates are attributable to increased food prices and transportation fares.
He added, however, that Mercal -a government-run network of low-price food retailers- has helped offset such an impact.

"Mercal is doing great efforts in this particular area. Mercal has extended its scope. It supplies food not only at controlled prices, but also below regulated prices. This allows us to stop inflation. Mercal is growing up, thus letting us to prevent prices from continuing to soar, which is our major concern."

Investment needed
One of the major structural problems facing Venezuelan economy is meager private investment. "It has been decreasing over the last 20 years or more. Venezuela has been decapitalized, and now we require capitalization. The public sector is not the only one to undertake this effort."

Public investment in 2006 is expected to amount to some USD 20 billion from non-oil funds. Together with state-run oil holding Pdvsa scheduled investments, public investment next year "is not to reach seven, eight or nine percent of GDP. We need private investment, both domestic and foreign, in a way to stop this decline we have experienced over the last 20-25 years."

"If some firms do not invest, others will come to invest," Giordani said confidently. "If Venezuelan entrepreneurs do not take action, they are going to lag behind. This is a message for people in (major business, industry and trade association) Fedecámaras. During meetings with President Hugo Chávez, I told them: 'If yearly public investment is around USD 10 billion, the private sector has an obligation to invest at least other USD 10 billion, or rather USD 20 billion a year, in order to have a 1:1 ratio, not a 2:1 ratio."

"Of course, some of them (domestic private investors) have started assessing business opportunities and have begun to invest. If they are real entrepreneurs, they are ready to take risks, right?" said the minister.

Translated by Maryflor Suárez R.

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