CARACAS, Friday September 24, 2010 | Update
Socialization of Venezuelan economy hinders recovery of private sector

According to the Venezuelan Council of Industry (Conindustria), the domestic market requires an investment-friendly climate

Economist Pedro Palma, the President of the National Academy of Economics, estimates a 1.7 percent contraction in gross domestic product (GDP) in 2010 (File photo: Reuters)
Friday September 24, 2010  10:46 AM

The "socialization" of the economy promoted by the Venezuelan government prevents investment and private economic activities from rebounding in the short term, said economist Pedro Palma.

"Patently, in such a hostile environment, one cannot expect the private economic activity will thrive; one cannot expect an environment boosting private investment, so that private sector's investment may rebound," said Palma, the President of the National Academy of Economics.

In a national meeting of the Federation of Trade and Industry Chambers (Fedecámaras), hosted by the Venezuelan business chamber, Palma stressed that the economic model promoted by the Executive Office only seeks to give the State the control of the means of production, at the expense of private initiative.

"The government is engaged in open confrontation with the private sector. Private economic activities are under siege, seizures of businesses continue, threats are lingering. Absurd controls on prices, production volumes, distribution of products are in place."

Increased government controls and moves against private property have led Venezuela to rank 138 out of 141 countries in economic freedom according to an index called "Economic Freedom of the World: 2010 Annual Report," prepared by the Fraser Institute, a Canada's public policy think-tank, along with Venezuelan NGO Center for the Dissemination of Economic Knowledge for Freedom (Cedice Libertad), which was published last Tuesday.

According to Palma, Venezuela's economic outlook suggests a downturn for the second consecutive year. In fact, he estimated that Venezuela's economy may shrink 1.5-1.7 percent at the end of 2010, while inflation may hit some 30 percent.

"Based on the official figures released by the Central Bank of Venezuela (BCV), there will be a major economic downturn by year's end, that is, Venezuela will report an economic recession for the second consecutive year," Palma added.

Translated by Gerardo Cárdenas

The end of a cycle

Hundreds of thousands of demonstrators took to the streets of Brazil on March 13 to demand the ouster of embattled President Dilma Rousseff, carrying banners expressing anger at bribery scandals and economic woes. A banner read "We don't want a new Venezuela in Brazil." Estampas
Alianzas Estampas