Venezuelan industry stagnated despite economic growth

 
A 4% growth of the Gross Domestic Product (GDP) last year cannot cover a tired Venezuelan industry.

Sure enough, the domestic economy has left recession behind thanks to high oil prices. However, manufacturing remains stagnated.

Based on the end-of-year message from Nelson Merentes, the president of the Central Bank of Venezuela (BCV) manufacturing heightened 3.5%. This number points to recovery after the shrinking in 2009-2010.

A breakdown of official data shows that such growth was below the domestic economy, but also is far away from the hikes of 6.6%, 5.7% and 7.6% recorded in trade and repair services, transportation and storage, and communications, respectively.

"Manufacturing is moving slower than the rest of the economy. Other sectors are moving faster," explained Efraín Velázquez, the chair of the Venezuelan National Economy Council.

The economist added that a look at the expansion of manufacturing over the past five years displays a tiny annual average of 1.3%. Compare trade, for instance, which averages 4.7%.

Experts call it "poor-quality" growth because oil revenues are not utilized to diversify the economy and create productive jobs. Instead, the growth is the result of larger consumption.

Deindustrialization

No matter last year outcome, Velázquez is afraid of deindustrialization in the country in the last decade, as manufacturing has lost its clout on the GDP makeup.

As matter of fact, a breakdown of the GDP reveals that in 10-year period, manufacturing went from almost 18% of the GDP to somewhat over 14%. Non-oil exports are another evidence of a dwindling industrial activity.

As reported by the BCV, last year revenues on this account stood at USD 4.5 billion; a surge of 31.4% versus 2010, yet almost at the same level as in 1999.
In the judgment of the chair of the National Economy Council, the gist of the matter is that the domestic industry is the "direct effect" of a mistaken economic policy marked by an overvalued local currency and dependence on imports.

"With such an exchange rate lagged behind, the economy suffers and demand is met with imports," Velázquez remarked.

Industrial density is yet another pointer to comprehend the weakening production apparatus.

Based on the case studies authored by Víctor Álvarez, former Minister of Basic Industries and Mining, and presently a researcher at the Miranda International Center (CIM), there are in Venezuela 0.3 industries per 1,000 inhabitants; too much behind, for instance, 1.2 and 1.7 in Colombia and Mexico, respectively.

The Venezuelan Confederation of Industries (Conindustria) has warned time after time about the need to shift the economic policy, particularly regarding harassment of the private sector and the investment environment in the country.

Conindustria estimates that the national government seized 497 companies for a total number of 1,087 since 2002.

"Talks between the public and private sector are needed to enhance production and employment," Conindustria's president Carlos Larrazábal recommended ending last year.

By the same token in a recent interview with private TV news channel Globovisión the BCV head pointed to the convenience of "pushing up production" so as to offset demand and supply and curb inflation in this way.

Translated by Conchita Delgado