February 1, 2008
Venezuelan Economy is Prepared to Withstand the Effects of Decline in Oil Demand
Contact: Dan Beeton, 202-293-5380 x104
Washington, DC: The Center for Economic and Policy Research has updated its overview of the Venezuelan economy, “The Venezuelan Economy in the Chávez Years,” including the latest available data for growth, employment, poverty, budget information, and other data. The paper notes continued progress in economic growth, poverty reduction, employment, and health and education indicators. The paper also underscores a key point made when the original was released in July 2007: the Venezuelan economy does not fit the mold of an "oil boom headed for a bust," as frequently described by observers and analysts.
“The Venezuelan economy seems on course to continue its expansion,” said Mark Weisbrot, CEPR Co-Director and lead author of the paper. “Neither a U.S. recession nor a dip in oil prices seems likely to cause much harm.”
Noting that a decline in oil prices of 20 percent or more could be absorbed from official international reserves, which were $34.3 billion at the end of 2007 (enough to pay off all of Venezuela's foreign debt), the updated study finds that Venezuela’s economy remains strong enough to weather shocks related to a looming U.S. recession and a possible decline in global oil demand.
The paper also notes that Venezuela’s poverty has been cut in half from its peak of 55.1 percent in 2003 to 27.5 percent in the first half of 2007, as a result of the very rapid economic growth during these years. Employment as a percentage of the labor force has increased by six percentage points since the first half of 1999.
As before, the updated study finds that the main challenges facing the economy are in the areas of the exchange rate and inflation.
The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University.