Reply #48: Chavez came into office in 1999. The GDP dropped between 1-2 per cent

[EFerrari]

at the beginning of his tenure.

And his government had to dig out Venezuela starting with a new constitution. The economy started showing growth in 2003. Given that in the interim, we tried to get him killed, his government did a good job of putting his country on track. Let's hope Obama can do as well.

Update: The Venezuelan Economy in the Chávez Years
By Mark Weisbrot and Luis Sandoval

February 2008

Mark Weisbrot is Co-Director and an Economist and Luis Sandoval is a Research Assistant at the Center for Economic and Policy Research in Washington, DC.

Executive Summary

Venezuela has experienced very rapid growth since the bottom of the recession in 2003, and grew by 10.3 percent in 2006 and about 8.4 percent last year. The most commonly held view of the current economic expansion is that it is an "oil boom" driven by high oil prices, as in the past, and is headed for a "bust." The coming collapse is seen either as a result of oil prices eventually declining, or the government's mismanagement of economic policy.

There is much evidence to contradict this conventional wisdom. Venezuela suffered a severe economic growth collapse in the 1980s and 1990s, with its real GDP peaking in 1977. In this regard it is similar to the region as a whole, which since 1980 has suffered its worst long-term growth performance in more than a century. Hugo Chávez Frías was elected in 1998 and took office in 1999, and the first four years of his administration were plagued by political instability that had a large adverse impact on the economy. (See Figure 2). This culminated in a military coup that temporarily toppled the constitutional government in April 2002, followed by a devastating oil strike in December 2002-February 2003. The oil strike sent the economy into a severe recession, during which Venezuela lost 24 percent of GDP.

But in the second quarter of 2003, the political situation began to stabilize, and it has continued to stabilize throughout the current economic expansion. The economy has had continuous rapid growth since the onset of political stability. Real (inflation-adjusted) GDP has grown by 87.3 percent since the bottom of the recession in 2003. It is likely that the government's expansionary fiscal and monetary policies, as well as exchange controls, have contributed to the current economic upswing. Central government spending increased from 21.4 percent of GDP in 1998 to 30 percent in 2006. Real short-term interest rates have been negative throughout all or most of the recovery (depending on the measure—see Figure 4).

The government's revenue increased even faster than spending during this period, from 17.4 to 30 percent of GDP over the same period, leaving the central government with a balanced budget for 2006. The government has planned conservatively with respect to oil prices: for example, for 2007, the budget planned for oil at $29 per barrel, compared to an average price of $65.20 dollars per barrel for Venezuelan crude last year. The government has typically exceeded planned spending as oil prices come in higher than the budgeted price, so it is possible that spending would be reduced if oil prices decline.


http://www.rethinkvenezuela.com/downloads/cepr%20report.htm