martes, 17 de febrero de 2009

Venezuela's economic woes cast pall over Chavez win


By Brian Ellsworth - Analysis - CARACAS (Reuters) - Venezuelan President Hugo Chavez's victory in a referendum that ended limits on his term in office will be overshadowed by a tough year of painful austerity measures in the the OPEC nation. As oil prices collapse under the global financial crisis and cripple Venezuela's finances, the leftist leader faces a slowing economy, galloping inflation and the need to cut government spending on social programs that form the backbone of his self-styled revolution. The difficult panorama may reduce the influence of the most outspoken critic of the United States in Latin America even strengthening his grip on power in Sunday referendum that lets him run for a new six-year term in 2012 and beyond. "No matter how I look at it, I can't see much that is positive for the future," said Alvise Marino, an analyst with IDEAglobal in New York. "The further out we go, the more we see the bad effects of the economic downturn." A drop in oil prices of more than $100 per barrel since last year spells the end of five years of booming growth, though few Venezuelan have felt the effects yet, with shopping malls still full and traffic unrelenting in the capital of Caracas. Economists say the necessary policies are precisely the ones Chavez has avoided for years: spending cuts, a devaluation and tighter fiscal policy to combat the highest inflation rate on the continent that closed 2009 at 31 percent. Though he may have an easier time enacting cuts after Sunday's vote, which he won by 54.4 to 45.6 percent, Chavez frequently passes such policies off as "neoliberal" capitalism contrary to his socialist vision. "The results of the referendum do nothing to change the economic tsunami the country is going to face this year," said one local financial analyst, who asked not to be identified. FEW OPTIONS - Chavez's political options may have grown on Sunday, but his economic alternatives are shrinking. Falling oil prices mean trouble for Venezuela, which relies on the oil industry for 93 percent of its hard currency. In the current global crisis, borrowing on capital markets would be difficult and exceedingly expensive. A currency devaluation would open opportunities for local industry, strangled by currency controls that lock the bolivar at an overvalued 2.15 bolivars per dollar. But this would also spur inflation, a principal complaint of Chavez's supporters. "He will still have to deal with extremely challenging economic imbalances, but with more political capital he will have more leeway to tackle those imbalances," said Patrick Esteruelas of the Eurasia Group in New York. Nonetheless, he said Chavez will not make the decisions needed to avoid "full-scale fiscal crisis in 2010." Instead of devaluing, economists say Chavez could restrict dollars for imports to protect shrinking reserves, though this risks boosting product shortages similar to those that hurt his image among supporters in 2007. The crisis has already hit some oil sector workers, with some 5,000 out of work and another 5,000 that are going unpaid due to a cash crunch at state oil company PDVSA -- possibly a sign of what could happen throughout the economy. And tumbling oil revenues mean Chavez will not be able to prime the pump with government spending, which grew 32 percent during the first ten months of 2008 versus the previous year, according to the Central Bank. Venezuela's debt and currency, which trades near 6 per dollar on a legal parallel market, have lost ground as the crisis drags on. "His strategy has been to bet on high oil prices and that's not working anymore," said Jose Guerra, an economist and former central bank director critical of the government.

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