Venezuela faces racing inflation, slowing growth

Interview // William Contreras, Minister of Light Industries and Trade."Inflation does not hit everybody, only a sector". ...The Venezuelan economy is to face a troubled year in view of falling oil revenues, in addition to substantial macroeconomic distortions over the past years and economic slowdown in 2008.  Nevertheless, "despite the crisis of global capitalism, Venezuela has not stopped moving ahead. Anyone could think that the growth during 2008 was in the red, but it was not. An upward trend that was struck by an external event, instead of a particular domestic economic reality, is still effective," reasoned Minister of Light Industries and Trade William Contreras. In 2008, the Gross Domestic Product (GDP) was almost half of that in 2007. How is economy doing?  Venezuela has not stopped growing in ten years. As appears from the 2008 vs. 2007 numbers, there was a relative decline in growth, which is related to several facts. Beginning 2008 we faced a food crisis, a hike in the prices of foodstuffs or input for the agricultural industry. This made an impact on the cost structure of certain domestic production sectors. As a result, there was a problem with growth. The northern coast hub mostly depends on import of input and intermediate commodities, which are now more expensive.  In addition, we still use tools to measure growth in capitalist terms. We ought to use a tool to measure other production areas, which most of the time are not taken into account in those statistics. What are the plans to measure the GDP otherwise?  One of the goals of the Economic Census is that the National Statistics Institute (INE) was to collect data from the whole industrial yard. This will show the status of the oil and non-oil production apparatus. We need to devise tools to look at this reality. All our production projects are in the medium term. Therefore, we cannot expect that they will be mirrored in nowadays' numbers. President (Hugo) Chávez has told us that we should devise mechanisms to apprise people of what we are doing.  Despite price control, the rising Consumer Price Index (CPI) goes hand in hand in regulated and non-regulated commodities, and inflation is almost 30 percent.  I wonder which sectors are shocked by inflation: the automotive industry, private hospitals, private education and food. The automotive sector is sort of speculative and affects the middle class. Rising rates in private hospitals, hotels and restaurants also has an impact on the middle class. Now, therefore, who are the economic parties behind each business?  In the case of vehicles, we found that by 2009, the import bill climbed by 40 percent, and we will not allow it. In private hospitals, larger national trusts control the private insurance sector and inflate prices. As for restaurants and hotels, we have taken action with the Law of Access to Goods and Services.  We need to explain that inflation does not strike everyone to the same extent, does not evenly affect Venezuelans, but a sector of the people, and action is taken accordingly. There is a sector shielded from inflation when it has access to (government-sponsored food markets) Mercal or Pdval. Saying that inflation affects everyone is to deny the existence of missions (social welfare programs). Fortunately, a sector is being served by the revolution.  However, Mercal and Pdval distribute only about 20 percent of foodstuffs; the remainder is in private chains. And precisely, there has been an annualized hike of food prices over 50 percent.   The government has faced the challenge of fighting speculation in food distribution. There are about 2,900 stores and only the National Association of Supermarkets and Self-Services (ANSA) distributes about 40 percent out of the total amount for private trade. Now, therefore, I wonder why, if there are commodities under price control, there are speculative actions. I am not saying that inflation does not make an impact, but it does not affect everyone to the same extent.  We have succeeded in making private chains to supply information on production and marketing; which has helped us to curb speculation.  For one and a half years, a lot has been said about speculation in vehicles and private hospital.  We are working on it. However, measures cannot be coercive only, but also preventive, like management of the monetary policy. The consumer attitude that still prevails among Venezuelans exerts pressure on inflation. Note that many of those who criticize us try to spread an agenda of neoliberal measures, to disqualify us by saying that we are not revolutionary. We will not sacrifice social investment, although we are aware that inflation makes an impact on purchasing power.   What is the scenario for imports in 2009? There will be devaluation of the local currency?  Devaluation has been never an issue. Rather, we have pondered a more effective use of foreign exchange for reserves. Cadivi (Foreign Exchange Management Committee) has been one of the best choices, as it has enabled us to accumulate reserves to create facilities, such as (the National Development Bank) Fonden.  We must rank imports and make emphasis on those needed to meet the people's requirements, provided that there is lack of production or production is not enough. We should ascertain which is more relevant: either the import of food or perfumes; either 300,000 vehicles, as in 2007, or capital goods for manufacturing; either cell phones or medicines. The point at issue is the effective use of measures without sacrificing fundamental things. We cannot continue importing goods that we can manufacture, like food.