The Executive Branch is refining the economic measures that will be implemented to alleviate the fall of revenues due to the collapse of oil prices in international markets. Minister of Planning and Development Haiman El Troudi hinted that government authorities may disclose the economic measures in less than two weeks

Economy
February 25

Venezuelan economy may hold steady for three years without sacrifices
During the past 10 years, Hugo Chávez's administration has furthered policies enabling the Venezuelan economy to withstand the shock of the global financial crisis that is hitting many countries, and also guaranteeing that it will remain strong during the next three years, said Finance Minister Alí Rodríguez Araque.

The official stressed that "compared with other countries, Venezuela is in a much better position to address the crisis. However, this does not mean that we are to remain unscathed amidst the crisis. We can sustain the Venezuelan economy during three years without major sacrifices."

In this sense, Rodríguez Araque added that one of the macroeconomic policies implemented to ensure the continuity of the socialist project is the accumulation of resources in several national and binational funds and the international reserves, which has allowed the country to be in a comfortable position despite the financial crisis.

February 26

Finance Minister: Declining oil prices may actually hit Venezuela
Minister of Economy and Finance Alí Rodríguez Araque said Thursday, February 26 just before reading his annual report and accounts before the members of the National Assembly, that it is still too early to forecast the behavior of oil prices in coming years. Rodríguez added that if oil prices continue to plunge, Venezuela "will suffer the consequences."

The official stressed at the National Assembly that so far Venezuela has not been seriously harmed by the world financial crisis because of the strength of the international reserves and of the National Development Fund (Fonden), which has totaled USD 57 billion in five years.

While last Wednesday Rodríguez Araque said that Venezuelan economy may hold steady for three years without sacrifices, on Thursday, the Finance Minister claimed economic performance would depend on the behavior of oil prices, adding that Venezuela may withstand lingering low oil prices in 2009.

"If the global economic crisis persists in the coming years, Venezuela will also suffer the consequences," said Rodríguez Araque. However, the minister stated that "it is too early to make economic forecasts, especially with regard to oil prices, which even in times of volatility have always been difficult to predict."

Venezuelan bonds collapse due to global financial crisis and domestic factors
Amid the crisis that has shaken international markets, both Venezuela's benchmark papers and Pdvsa bonds have reached historic lows, increasing the cost of borrowing and hindering the ability of the Ministry of Finance to curb the black market dollar.

The Global 27, which is the most representative paper of the Venezuelan bond basket, has plummeted to 54.1 percent of its value, the lowest in six years, even lower than the price reached on April 11th, 2002, when despite the coup d'état the Global 27 ended the day at 69.6 percent of its value, and lower than the price reached during the crisis triggered by the oil strike, on January 16th, 2003, when the benchmark paper fell down to 60.7 percent.

The papers of the state-run oil company Petróleos de Venezuela (Pdvsa) have declined sharply. According to a report prepared by Merinvest, as of February 20th, Pdvsa's papers due in 2017 have declined 77.57 percent compared to April 12th, 2007, when the bonds were issued. Meanwhile, the benchmark 2027 bond has plummeted 79.97 percent while the 2037 bond has lowered 76.83 percent.

Finance Ministry weighs fixing the FY 2009 budget
The Ministry of Economy and Finance has undertaken a study through the Economic Board in order to make a decision on a potential adjustment to the average oil price estimated in the national budget for FY 2009.

Finance Minister Alí Rodríguez Araque gave the news in arriving at the National Assembly, where he briefed on his management through 2008.

Asked about the oil price of USD 60 a barrel contained in the current national budget, which should be fixed due to falling oil prices over the past few months, the senior official commented that a study was being conducted with the agencies concerned, reported state-run news agency ABN.

However, he said that no announcement could be made so far. "As soon as there is a finding, we will make it known to the country."

February 27

Private sector slows down; economy nears recession
A report recently published by the Central Bank of Venezuela (BCV) shows that during the fourth quarter of 2008 the private sector of the economy fell 0.6 percent compared with same period in the previous year. Overall, the growth of the private sector slowed significantly, which may herald a further decline and the beginning of a recession.

When assessing the Venezuelan economy as a whole, economic growth in the fourth quarter of 2008 was 3.2 percent, with the public sector expanding 11.5 percent. However, it was the lowest growth recorded ever since 2002, and it represents a sharp decline compared to 8.5 percent growth in the same period of 2007.

Technically speaking, a country slides into recession when it records negative growth for two consecutive quarters. This has not happened yet in Venezuela, but since the private sector has begun to tumble and the public sector has been hit by diving oil revenues, the prospects of the economy in 2009 look gloomy.

Despite high oil prices, Venezuelan economy slowed down in 2008
The Venezuelan economy slowed down in 2008 despite high oil prices during most of the year. As a result, President Hugo Chávez will face a lot of problems, as there will be fewer resources available for social programs.

The Central Bank of Venezuela (BCV) reported on Thursday, February 26 a 4.8 percent increase in the Gross Domestic Product (GDP). This figure is lower than the government's target of 6 percent and significantly lower than the economic growth (8.4 percent) reported in 2007.

The data suggest that the economy is cooling down, following an oil boom that leveraged a strong economic expansion for five consecutive years, which led to blooming consumption of goods and services.

The vital oil sector grew 3.2 percent last year, although it slowed down dramatically in the last quarter of 2008, when it climbed only 0.1 percent, according to the BCV.

Venezuela to announce economic measures in two weeks
The Executive Branch is refining the economic measures that will be implemented to alleviate the fall of revenues due to the collapse of oil prices in international markets.

Minister of Planning and Development Haiman El Troudi hinted that government authorities may disclose the economic measures in less than two weeks. However, he would not elaborate.

The average price the Venezuelan oil basket stood at USD 36 as of February 20, according to the report published by the Ministry of Energy and Petroleum. However, for FY 2009 budget, oil revenues were estimated at USD 60 per barrel. This means that, based on current oil prices, the Treasury will receive USD 24 less per barrel of oil exported.

Meanwhile, Minister of Economy and Finance Alí Rodríguez Araque said that the government is gauging a number of scenarios and stressed that any economic moves would be announced at the right moment.