Mistakes Hobble Venezuelan Economy, Experts Say
By DIANA JEAN SCHEMO
ARACAS, Venezuela -- With investment holdings flying out of this
country, international market analysts widely agree that Venezuela's
economy has
been crippled by an overvalued currency, government
interference
in monetary policy and irresponsible spending that relies too
heavily on oil
revenues.
Many Venezuelans, however, beg to disagree.
Their political
mood seems to be swinging in precisely the opposite
direction, with
an overwhelming majority apparently convinced that the oil
wealth should
guarantee decent salaries, government services, job
protection and
retirement benefits. Instead, with 80 percent of the
population said
to be living in poverty, the country faces broad suspicions
of market changes,
widely described here as "capitalasmo salvaje," or
"savage capitalism."
The leading candidate
for the presidency by a wide margin is Hugo
Chávez
Frías, 44, a populist retired army colonel who led a coup attempt
against President
Carlos Andrés Pérez in 1992. Andrés Pérez was
the
architect of
a short-lived stab at free-market changes in the early 1990's.
Colonel Chávez
is leading the polls with 46 percent, with his nearest rival,
Henrique Salas
Römer, trailing at 27 percent, according to a polling
service, Datanálisis.
Colonel Chávez,
trading in his uniform and red beret for business suits as
he campaigns,
has raised the specter of protectionist barriers to foreign
trade, hinted
at the possibilities of a one- or two-year moratorium on debt
payments and
pledged to review concessions that the state has granted
foreign oil
companies.
Those measures have been widely seen as hostile to foreign investors.
Colonel Chávez's
populist message, faulting government corruption for
siphoning 15
percent of public revenues, resonates with Venezuelans who
are hard pressed
to reconcile the petroleum wealth with the fiscal
difficulties.
Colonel Chávez has called for a halt to privatization of state
assets, at least,
he says, until the country has some assurance that the
revenues from
the sales of assets are going to the national budget rather
than the personal
accounts of that corrupt officials have in Miami.
"He's a nationalist,"
said Omar Lambaia, 53, a retired military
photographer
who drives a taxicab.
Lambaia retired
11 years ago and collects a pension equal to the full
salary of an
officer on active duty, but he said the Government was
shortchanging
him.
"Of course,"
Lambaia said, "I'm democratic. But when you see that
democracy is
not doing anything for your country, that it's destroying the
country, you
become a nationalist."
A survey by a
poll analyst, Alfredo Keller, found that more than 85
percent of Venezuelans
felt cheated out of the benefits of the oil wealth.
"It's a mining-boom-town
mentality that weakens the notion that one's
well-being is
tied to personal effort," said Robert Bottome, publisher of a
newsletter,
Veneconomy.
Because of its
failure to reduce the Civil Service system and revise its
pension system,
the Government has essentially used the revenues it
gained during
earlier years of high oil prices to pay the salaries of workers
who are not
really needed. More than 30 percent of the government
budget goes
to pay off debt, said Hugo Faría, a consultant at the Institute
of Advanced
Studies in Business.
The price of
oil, responsible for nearly half the country's revenues, has
dropped a third
in recent months, taking the bottom out of the economy.
The stock market
has dropped more than 70 percent this year.
Analysts say
the Venezuelan bolívar is overvalued by up to 40 percent.
Although the
Government has repeatedly denied plans to devalue the
bolívar,
expectations of a devaluation persist. That is forcing the
Government to
spend down international reserves to $13 billion to protect
the bolívar
and to pump up interest rates for short-term bonds to borrow
additional money.
At least $4.1
billion in short-term bond is due in coming months, further
draining dollar
reserves.
"The market is
jumping ahead so fast that nobody is willing to hold
bolívars,
because they don't know when the devaluation will come," said
Bottome.
Lending rates
to consumers are hovering at 100 percent a year, and even
at those rates
the terms are punishing. Banks demand that company
presidents put
up their houses and cars as collateral for business loans.
Yesterday, Standard
& Poor revised its rating of Venezuela's financial
prospects downward,
to negative from stable. The service cited
resistance from
the presidency to the man in the street to "essential
market-oriented
reforms needed to stabilize the economy."
The agency said
that fixed costs like debt service, Social Security and
personnel took
up 75 percent of Government spending and that the main
source of government
financing, oil revenues, was subject to shifts on the
world market.
The agency predicted that the Venezuelan budget deficit
would reach
4 percent of the gross domestic product.