Official statistics show that Latin America overcame the impact of the global crisis and as of the fourth quarter of 2009 resumed economic growth, while Venezuela fell into a recession that tends to worsen.

In the third quarter of 2009, the main Latin American economies showed slight declines that reflect the end of the crisis.

Colombia virtually halted the fall with a 0.2 percent decline; Brazil recorded a negative result (-1.2 percent); Argentina (-0.3 percent) and Peru (-0.6 percent), while Venezuela plummeted 4.6 percent in the year, following a 5.8 percent decline in the fourth quarter of 2009.

The Economist Intelligence Unit said that Venezuela is the only country in the world that expects a GDP contraction in 2010 and 2011.

The Economist projects that in 2010 the Venezuelan economy will decline 5.6 percent amidst an electricity rationing and rising unemployment.

Spanish BBVA group, which runs Banco Provincial in Venezuela, said that "by 2010, we expect an economic activity with significant challenges to overcome, which could lead to a second consecutive year of negative growth (-2.5 percent)."

"First of all, the effects on real income of the devaluation of the Venezuelan bolivar announced in January, could lead to a 2.6 percent fall in private consumption, and could provoke moderate effects on the competitiveness of tradable sectors," BBVA said.

These forecasts are at odds with Brazil's projections. Although Brazilian economy was affected by a recession early last year, it recovered and stood at 4.3 percent in the fourth quarter of 2009.

ECLAC projections show that Latin America averaged a 1.8 percent decline in 2009, while Venezuela fell 3.3 percent.

Unlike the economic prescription used in most countries of the region which is based on tax cuts, increased public spending in investment programs, and job creation incentive programs, Hugo Chávez's administration implemented a recessive adjustment.

The first phase of the economic package, although it was never announced as such, included an increase of the Value Added Tax (VAT) from 9 percent to 12 percent in March 2009; cuts in public spending (central government expenditures declined 18 percent) and the devaluation of the Venezuelan bolivar.

The Foreign Exchange Administration Commission (Cadivi) restricted the allocation of foreign exchange and in the first nine months of 2009, the authorizations of foreign exchange for private sector imports fell 47 percent and part of the economy began to use the dollars sold in the swap market.

These government measures have led to a recession worsened by other factors such as the fall in private investment, capital outflows and the impact of electricity rationing (20 percent) in the industrial sector.
vsalmeron@eluniversal.com

Translated by Gerardo Cárdenas