CARACAS, Monday November 19, 2012 | Update

Venezuela's industry slumps to levels recorded fifty years ago

Manufacturing accounted for 14% of the GDP, the same level registered in 1965

A fixed foreign exchange rate spurs economic downturn (File photo)
Monday November 19, 2012  11:46 AM

Venezuela's oil boom hides the downfall of the country's production apparatus. Oil revenues have so far concealed the country's reality. Just like under previous administrations, the Government led by President Hugo Chávez has not taken advantage of oil revenues to expand the national industry.

Imports have been the only way to meet growing demand. Moreover, official data shows signs of a weak industry. According to data recorded by the Central Bank of Venezuela (BCV), the country's gross domestic product (GDP) matches that of 50 years ago.

In 1965, manufacturing accounted for 14% of the GDP, the same figure recorded in the first half of 2012. Economist José Guerra asserted that said indicator shows that the national industry's production is similar to that of five decades ago.

"We have lost everything we had achieved," said Guerra on Wednesday during an event entitled Perspective 2013, hosted by the Venezuelan Confederation of Industries (Conindustria).

Although he remarked deindustrialization did not begin during Hugo Chávez's Government, he noted, "The trend has been clear" since he first took office in 1999. 

By 1998, manufacturing accounted for 17.4% of the country's total economy. Since then, there have been negative results, including the 14.2% recorded in the first half of this year.

"The participation of the industry in the GDP has declined as well as exports (...) Production capacity has been seriously damaged; we are generating new jobs abroad while they are being shed at home," Guerra underscored.

Indeed, imports are fulfilling domestic demand. According to estimates, purchases will amount to USD 50-52 billion this year, the country's highest record. Meanwhile, non-oil exports will stand at USD 4 billion only.

Venezuela's economic downturn is attributable to multiple reasons, namely legal uncertainty for investments, price regulations with little flexibility causing losses in many sectors, difficulties to obtain raw material or US dollars, and most importantly, a fixed foreign exchange rate that keeps local currency overvalued.

Translated by Jhean Cabrera
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