Friday, August 10, 2007

Trade evolution

El Universal published yesterday a graph where the imports and exports of Venezuela are compared for the first trimester, according to the Central Bank figures. As is often the case I saw something interesting that the presentation of the data did not allow to underline. So I did calculate the percentile difference between imports and exports, that is, (Exports-Imports)/Imports. OK, well, the title is not quite what I want it to mean, but bear with me for a second because the graph below will enlighten you.

Observe the arrows.

The number 1 points out to the very low oil prices of 1998, the year Chavez was elected in the middle of a small recession. And that year, non oil exports were still proportionally significant. We actually had a trade deficit for 1998 and 1999.

The number two arrows point out to the so called recession induced by the oil strike of 2002-2003. What do we see? In spite of a generalized recession of internal production, lesser non traditional exports and a big drop in oil production, Venezuela in fact had comparable exports to 2001!!! Courtesy of course of the spectacular increase in oil prices. In other words, Chavez income was not that perturbed in 2003 in spite of all his anti
opposition speeches accusing it of sabotage. Chavez had enough money, FROM THE START, to get going on his Misiones programs (that he could have started much earlier, by the way). Observe also that 2002 was a drop, but that these numbers refer to the first semester, BEFORE the April "coup".

The very least we can conclude from this way to present Venezuelan economic results is that the dark legend that Chavez weaves around 2002-2003, is not as dark as this one would like us to believe, considering that the bulk of his income comes from oil trade surplus, a trade surplus that was, by the way, comparable in percentile amount to the one from 1997.

Finally the third arrow. The comfortable surplus of 2004-2005-2006 that allowed Chavez to have the grandest time around the world, bearing presents to whomever wanted to bow to his glory has dramatically fallen. What the graph does not show because of its format is that importations went from 3227 million of USD in the first quarter of 2004 to 9108 million USD in the same period of 2007. Almost three times as high!!! The average annual increase of imports during that period is, according to that data of the BCV, 46%!!!! Now, tell me how the Venezuelan production resisted such an inflow of importations. No wonder that private investment for new industries remained stagnant, local business preferring to operate at full capacity without expansion, least additional subsidized imports wrecked their ability to recover their investment.

Finally, what does that drop in 2007 mean? The reality of PDVSA falling production? The arrival of all the imports blocked during the second half of 2006 as CADIVI was slow in granting currency, the government preferring to send the state income to supply the social programs to buy votes? Whatever that drop is it is quite ominous. And we do not see with the announced constitutional measures how the trend to more and more importations will be reversed or at least stabilized: the private sector is simply not going to invest and foreign investors will not come in a country where private property is seized at will (RCTV, CANTV, EDC, Avila Magica, Orinoco Oil belt).

Meanwhile the front page of El Universal yesterday showed the harbor of Puerto Cabello clogged with ships full of imports that customs cannot process fast enough. A sign of increased Venezuelan production? Not!

-The end-

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