Better access to credit unlikely to guarantee increased exports

On July 31, Venezuela's entry into the Common Market of the South (Mercosur) will become official. Beyond the long-term benefits this adhesion may involve, concerns prevail among domestic businesspeople.

The Venezuelan government has not elaborated on the strategies it will adopt to compete with the economies of Brazil or Argentina. Initially, Minister of Industry Ricardo Menéndez highlighted the reduction of imports as an advantage, while President Hugo Chávez announced the creation of a fund to boost exports.

"A fund of some million dollars (will be established) to support exporting private companies," Chávez said. He asserted that Venezuela has the ability to export food, apparel, building materials and telephones. "There is a wide range of possibilities; Venezuela's membership is wonderful," he added.

Chávez's view stands in sharp contrast to the diagnosis that can be made based on official numbers and entrepreneurs' complaints.

According to the estimates of the Venezuelan Association of Exporters (Avex), this year private non-oil exports will decline to the level of the 1960's. "This year, we are going to break the ground of less than USD 1 billion in exports. This had not happened in Venezuela since the 1960's," said Avex former president Francisco Mendoza.

Similarly, data disclosed by the Central Bank of Venezuela (BCV) also show a decline in domestic companies' competitiveness. In 1998, a year before Chávez took office, non-oil exports added to USD 5.52 billion. Thirteen years later, they amount to USD 4.47 billion only, almost 20% lower.

With regard to the performance of the private sector only, the fall is even bigger. In 1998, the private sector exported USD 4.09 billion and at the end of 2011 private exports barely hit USD 2.42 billion a drop of 40.68%.

Against this backdrop, a fund to finance exports seems to be insufficient. Carlos Larrazábal, the president of the Venezuelan Confederation of Industries (Conindustria), summarized the real situation of the manufacturing sector recently.

"We need to push domestic production up, and this is not a matter of funding. This is a matter of dismantling the siege on the domestic productive sector. If the government does not understand this, the results are not going to be any different."

Once and again

In the past, the Venezuelan government created different funds, but they failed to reactivate the domestic production apparatus. In January 2010, after confirming currency devaluation, President Chávez announced the creation of the Bicentennial Fund and the phone line 0-800 Exporta, intended to boost exports.

"This is very important because we have to leave the rent-seeking oil model behind. Venezuela has to be a country that exports many other products, not just oil," Chávez stated back at that time.

Two years later, on the threshold of Mercosur, the Venezuelan government will try again a similar move. But the experience indicates that the Venezuelan bolívar's overvaluation, the lack of raw material and the obstacles to get foreign currency are elements that could threat any financing plan.

Translated by Karina Salas