By the end of the first quarter, Venezuelan authorities began to accelerate public spending, and government disbursements exceeded ordinary revenues
Recession results in fewer employers and more street vendors
Venezuela's economic downturn has completely reshaped the labor market. Against a backdrop where the private sector is sapped by recession, lack of formal jobs is the first symptom of the economic crash.
While the unemployment rate has not significantly heightened, despite a sinking Domestic Gross Product (GDP) at 3.5 percent in the first half of 2010, the informal sector of the economy has soared indeed. This shows that people's own initiative has been lately the only driving force able to create jobs.
National Statistics Institute (INE) found that the informal sector of the economy climbed by one percent in one year to 45 percent in July, compared with 44 percent in July 2009. At July, 5,370,797 people were working in poor conditions.
Micro-enterprises froze their employing capacity and, instead, they are vanishing, according to the data. The number of employers at this sector plunged 8.5 percent over the past 12 months, from 331,493 in July 2009 to 303,306 ending last month.
Not only does the amount of enterprises diminish, but also their share in the labor market. According to the INE, employers of informal businesses -those with less than five employees- accounted for 2.5 percent of the country's labor force in July, compared with 2.8 percent last year.
The workers of such enterprises have been adversely affected as well. From July 2009 to July 2010, the payroll of informal sites dropped by 4.5 percent to 1,251,556 people below 1,310,476 one year ago.
Like in the case of employers, there are fewer employees -from 11 percent in July 2009 down to 10.4 percent same month, this year.
As appears from the data supplied by the INE these employees moved to even a more informal reality. The group of non-professional people working on their own rose 8.2 percent over the past 12 months. That is, from 3,464,619 in July 2009, to 3,751,335 in July 2010.
These workers do not depend on a monthly wage, but on fees in order to survive. Theirs are the most untoward conditions in the labor market. The INE considers that only non-professional people working on their own form part of the informal sector of the economy. Free-lance professionals are regarded as part of the formal sector of the economy.
Venezuela's retail sales fall 12.4 percent in the first half of the year
In an environment where rising prices have left behind the purchasing power of wage, Venezuelan families have reduced consumption. In fact, the Central Bank of Venezuela (BCV) has reported that in the first half of the year, wholesale and retail sales tumbled 8.96 percent.
Sales in the first half of the year went down to its lowest level since 2006 and have fallen 15 percent compared to 2008, when Venezuela still enjoyed a consumer's boom.
As far as retail sales are concerned, the fall in the first half of 2010 was 12.4 percent, while wholesale sales barely increased by 1.11 percent.
The analysis of retail sales highlights that food, beverages and tobacco sold in specialized stores crumbled 29.6 percent; textile products fell 19.6 percent, pharmaceutical products, medicine and toiletries shed 30.4 percent and vehicles plummeted 36.9 percent.
Meanwhile, the sale of spare parts for cars hiked by 2.4 percent in the first quarter, whereas the sale of household appliances and equipment increased by 1.9 percent.
Sinking sales is a logical result in an economy where the purchasing power of wages falls each month because of the inflation rate which jumped 18 percent at the end of July, the highest in Latin America
Capital flight up to USD 8.69 billion in the first half of 2010
Hugo Chávez has made it clear that exchange controls will be a permanent measure to prevent "the oligarchy from taking the US dollars and depositing them in banks around the world."
However, based on official data, capital flight has continued at a rapid pace no matter exchange controls.
The asset and liability accounts and the item entitled "errors and omissions" of the balance of payments prepared by the Central Bank of Venezuela have enabled Ecoanalítica, a Venezuelan research firm, to determine that in the first half of the year, the outflow of capital stood at USD 8.69 billion, an amount 10 percent higher than the figure reported in the same period of 2009.
How there can be a capital flight of such an extent amidst an exchange control process?
Basically, the government sells dollar-denominated bonds that companies and individuals buy in Venezuelan bolivars and later sell abroad to get US dollars that fuel their accounts.
However, in the first half of the year, the Central Bank of Venezuela (BCV) only sold bonds amounting to USD 1 billion. In May the government closed brokerage houses and restricted the parallel foreign exchange market.
"It is true that the BCV issued USD 1 billion bonds, but there is not official information for the rest of the outflow of capital," Asdrúbal Oliveros, a director of Ecoanalítica, said.
"This year, the service of both domestic and foreign debt has increased from 4.5 percent of GDP to 7 percent of GDP this year," Oliveros added.
Venezuela's public deficit at USD 4.88 billion in five months
By the end of the first quarter, Venezuelan authorities began to accelerate public spending, and government disbursements exceeded ordinary revenues.
According to the monthly bulletin issued by the Central Bank of Venezuela, in a 5-month period Venezuela's fiscal deficit amounted to USD 4.88 billion.
Between January and May, ordinary revenues stood at USD 13.13 billion, whereas ordinary expenditures amounted to USD 18.14 billion, which led to a fiscal gap.
During the period, government spending increased by 25 percent in nominal terms, as the government began to speed up the execution of the budget, which was restrained in the first quarter.