From the Editors of VenEconomy

This week, the Central Bank issued a report on the economy’s performance in the third quarter of the year, announcing that the balance of payments posted a surplus of $2.95 billion. This “positive” result has nothing to do with the strength of the external sector of the economy, but to irresponsible borrowing.

As for the economy, the Central Bank reports that it is on the slippery slide with a contraction of 4.5% in the third quarter, confirming that the country has entered into a full-blown depression.

The Central Bank’s report indicates that the non-oil economy experienced a contraction of 3%, 1.4 points more than in the previous quarter, attributable to the fact that the production of tradable goods fell by 8.2% and import duties shrank by 9.5%. This contraction is reflected in the most important areas of the economy, to whit: manufacturing, which plummeted by 9.2%, and mining, with a nosedive of 18.3%. The contraction was not bigger thanks to growth in communications (11.4%), construction (4.3%), and government services (2.3%).

The oil economy shrank by 9.5%, due mainly to the fact that fewer barrels are being produced and that production costs are constantly rising. Unfortunately, instead of confronting this situation responsibly and proposing credible, sustainable policies to overcome the economic crisis, the Venezuelan Government is evading the issue.

On the one hand, it is putting the blame on everyone and everything, except the communist path on which it has set the productive system, among them:

1. the world crisis, even though President Chávez had sworn that Venezuela would not be affected by it;
   
2. the private sector, which it has besieged with its anti-private enterprise policies; and
   
3. the production cuts imposed by OPEC.

On the other hand, as it did with the National Statistics Institute when it changed the method for calculating unemployment and inflation, now it is toying with the possibility of making “adjustments” in the measurements of Gross Domestic Product in order to adapt them to the socialist economy. According to Central Bank Director Bernardo Ferrán, production should be weighted on the basis of the employment it generates, not on its true contribution to the creation of value. Moments later, this criterion was tacitly endorsed by President Chávez at an event in the Teresa Carreño Theater, when he questioned the mechanisms for measuring GDP, since, as he understands it, “they obey capitalist logic and, therefore, are not appropriate for an economy that is moving towards socialism.”

But no matter how hard the government tries, it will find it extremely difficult to cover up the economy’s red figures, as that is something the people feel in their empty pockets.

And if the government continues implementing policies of state takeovers, imposing controls right and left, and legislating the private productive sector out of existence, the distortions that this generates will continue to thrive and intensify the economic crisis into which it has plunged Venezuela.

VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.

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