More Bad Omens in Venezuela

From the Editors of VenEconomy, July 2nd, 2010

Figures are still floating around that tell of the debacle in Venezuela thanks to the half-backed revolution headed up by Hugo Chávez.

This time the red figures come from the Economic Situation Poll conducted quarterly by Consecomercio, the organization that represents the formal commerce and services sector in Venezuela through 200 chambers countrywide.

The poll, which measures the behavior of some 19 sectors, reflects that they all posted a significant decline in retail sales of 29.4% in the first quarter of the year.

Some of the worst hit sectors were customs services (-38%), equipment, telecommunications, and supermarkets (-37% each), mechanical shops and education services (-35% each), vehicle parts (-34.1%), and the automotive sector (-32%). The least affected were pharmacies and medicines (-20%) and bakeries (-8%).

Some of the factors that most impacted commerce, according to Consecomercio President Fernando Morgado, were the present economic recession and inflation, which have forced people to reduce their consumption. On top of that, there are the foreign exchange and price controls and the impossibility of obtaining dollars at the official exchange rate, administered by CADIVI, the lack of legal certainty and personal security, violation of private property, and the political environment, all of which inhibits investment.

Morgado told the press that none of Consecomercio’s member companies that have registered with the new Foreign Currency Security Transactions System (SITTME after its initials in Spanish), have been allocated the foreign currency they need. Since it went into force on June 9, SITTME has granted an average of $27 million a day versus projected expectations by independent analysts of $80 million a day.

Of the companies polled, 83.5% said that they had not applied to CADIVI because of repeated delays in handing over the foreign currency, and only 27% of the 16.5% that did apply obtained the foreign exchange they had requested.

The poll also provides some results that should serve as a warning:

1. 63% of the commerce and services sector did not invest and the remaining 37% only invested to replace inventories or in technology, fixed assets, furniture and fittings, or equipment. Even more worrisome is the fact that 71% of the merchants polled said that they would not be making investments of any kind in the coming months.


2. 65.5% of those polled consider that sales will continue to drop, which bodes ill for the future, as the coming months are perhaps those that traditionally post a revival in sales.


3. 56% think that unemployment will increase.


4. 94% think that the government’s economic measures are negative.

These results augur ill as, unless the Chavista revolution changes course, stagflation could be just around the corner.