Why Venezuela will grow by 12% in 2022 after 10 years of decline

Venezuela will be one of the countries with the highest economic growth in 2022 in Latin America, and the expectation is that it will register one of the major expansions of GDP (gross domestic product, total goods and services) also in 2023, according to the Economic Commission for Latin America and the Caribbean (ECLAC). ECLAC).

According to the organization linked to the United Nations, the Venezuelan economy will grow by 12% this year and 5% next year. For comparison purposes, the Brazilian economy is expected to grow 2.6% this year and 1% in 2023, according to the Economic Commission for Latin America and the Caribbean. Argentina, in turn, is expected to grow by 3.9% this year and 1% next year.

The Venezuelan economy loses the lead in this ranking only to Guyana, also located in South America, which in 2022 will see a jump of 52% and in 2023 another jump of 30%. In both cases, Venezuela and Guyana, oil is mainly responsible for the results, according to analysts – Guyana recently discovered huge reserves of this raw material.

Venezuela, a neighboring country bordering Brazil, has one of the largest oil reserves in the world and a tradition in the field. In Guyana, in turn, the history of oil exploration is recent and has contributed to the strong increase in its GDP for two years. Another difference is the size of the two countries’ populations – Venezuela has a population of about 28.5 million and Guyana does not have a population of 1 million (about 800,000).

In an interview with BBC News Brasil, economist Ramon Pineda, of the economic development division of the Economic Commission for Latin America and the Caribbean, based in Santiago, Chile, said it was “the first time” that Venezuela’s economy had grown since 2013-2014.

“It’s 12% growth. In 2023, we also expect there will be 5% growth in economic activity as oil production picks up,” says Pineda.

According to him, despite expectations of lower oil prices, expansion next year will be possible given the “withdrawal or easing of some sanctions (economic sanctions)” against Venezuela and the increase in activity in the oil sector.

“This increase will compensate for the drop in oil prices in 2023,” he said.

fuel

This year, the pillars of the 12% expansion of the Venezuelan economy are an increase in oil production by about 20% in 2022 compared to 2021 and producer prices.

“The increase in oil prices generates a great deal of resources for tax administration and for financing Venezuelan imports. Imports in terms of inputs and final goods as well. This allowed agribusiness and the pharmaceutical industry to also strengthen during 2022,” says ECLAC. economic.

With more money, the Central Bank of Venezuela and President Nicolás Maduro’s government have more resources for the imports needed to make the economy – and the daily lives of Venezuelans? The job.

“For example, in the case of fuels, especially gasoline, resources can also be imported from petroleum activities,” Pineda said.

chevron

Last week, the US government allowed Chevron to resume production and export of Venezuelan oil after three years.

The agreement will be for a period of six months, with the possibility of renewal, and will include the Venezuelan state company PDVSA, according to the specialists who analyzed the negotiations.

The announcement of the understanding and the easing of US sanctions came after the resumption of dialogue between the Maduro government and the Venezuelan opposition, during which the two parties agreed to establish a fund run by the United Nations to finance food programs. ., Health and Education in Venezuela.

Another fact that favors “less isolation” for Venezuela is the resumption of dialogue between the Maduro government and Colombia, after Gustavo Petro took office last August in Bogota.

But despite these understandings and the economic growth this year, social indicators and daily life for Venezuelans remain challenging.

‘that’s not good’

Venezuelan political and economic analyst Luis Vicente León, of Datanálisis Consultancy, points out that Venezuelans see the country’s economic improvement when comparing the current situation to “the most recent worst” – the “excessive crisis” of 2018, when there were widespread shortages and long lines.

“But even today many people suffer from a lack of energy, water and the ability to consume,” Lyon analyzes. “Now, the country is not well because we have lost 75% of GDP in seven years and we are far from recovery,” he says.

According to a survey conducted by his consulting firm, “only 40% of the population understands that the country is doing well or very well.”

In an interview with a local radio station, economist Asdrubal Oliveros, of consulting firm Ecoanalítica in Caracas, said economic growth is there and is being driven mainly by the private sector.

But he added, “We were at minus 12 and now we’re at 8. Economic growth is real, but the majority of Venezuelans haven’t caught it yet.”

Blackouts

In Venezuela, electricity and fuel shortages are among the main challenges faced by the country’s residents, according to local economic experts.

The Venezuelan Association of Electrical, Mechanical and Related Professionals (AVIEM) noted that for the past 20 years, “Venezuela was a fully electrified country (97% coverage) and had a robust system which was an example in Latin America. Now, dealing with an electrical system lives in an operational state of collapse , degraded, difficult to restore, ”according to the latest information from the German broadcaster DW.

Venezuelan economist Daniel Cárdenas, professor of macroeconomics at the Central University of Venezuela (UCV) and Metropolitan University in Caracas, told BBC News Brasil that oil production between 2021 and 2022 increased from 300,000 barrels per day to about 700,000 barrels per day.

However, that number is nothing compared to production in the 1990s, when the country produced more than 3 million barrels a day.

Cárdenas believes that the performance of the Venezuelan economy can continue to improve, based on greater easing of economic sanctions against the country.

But, in his opinion, the “determinants” of Venezuelan growth are still “extremely fragile.” He cites the average salary of Venezuelans as between $120 and $130 (630 and 680 R$).

“We’re not talking about the minimum wage. We’re talking about the average wage. And the minimum wage here is in bolivars (the national currency), and it’s about $12 which is a far cry from the $300 to $400 you pay in other countries in America.” Latin. But companies don’t pay these 12 dollars because no one will accept work, “he said.

Cárdenas sees consumption in Venezuelan homes as still very low, despite the recent “modest recovery”.

with the inflation It’s still high and it’s hard for consumption to go up.”

He notes that Cárdenas computes estimates for the country’s economy based on indicators such as tax collection, industrial production and the commercial sector, since no other official data is released periodically.

For him, the Venezuelan economy should grow about 9% in 2022 – far from the 12% projected by the Economic Commission for Latin America and the Caribbean.

“The rates are high and unexpected, but the growth comes after the pandemic and the quarantine,” he says.

The Venezuelan central bank’s estimates were the most optimistic yet. BCV reported that the country’s economy will expand by 18% this year, the highest rate in the region.

inflation

At the beginning of 2022, Venezuela officially left the period of hyperinflation that marked four consecutive years, starting in 2017 and reaching four annual figures.

But this week, the Venezuelan Observatory of Finance (OVF) reported that the price increase in November was 21.9% and the cumulative value for the year is nearly 200% (195.7%).

The expectation was that the country could maintain the single-digit monthly inflation rate recorded in early 2022.

Measured in dollars, the price hike this year amounts to 50%, according to economist Asdrubal Oliveros on his social networks.

Luis Vicente León concludes that Venezuela’s challenges remain “enormous”.