Download Opening Remarks at the Forum on Public Policy Reforms in

Opening Remarks at the Forum on Public Policy Reforms in Venezuela
Jose Sojo, Minister Counselor and Advisor on Economic Affairs
Embassy of the Bolivarian Republic of Venezuela
Washington, D.C.
The Venezuelan economy has shown a remarkable tendency towards recuperation after
the sabotage of the oil industry. Economic growth in Venezuela over the course of 2004
was the highest in the world, coming in at 17.3 percent—and that’s a fact.
The Venezuelan economic model seeks to balance growth with equity. Latin America is
the region of the world with the most inequitable distribution of income, a fact which
implies that when the economy grows over the course of various years it becomes both
harder to reduce poverty and promote further growth due to the limitations that exist in
incorporating human capital. To effectively combat poverty it is necessary to elaborate
and implement policies oriented towards incorporating the poor and allowing them to
participate in the creation and implementation of solutions to their own problems. The
concept of empowerment must be more than a slogan in economic reports or within
multilateral development institutions.
Venezuela has recently been advancing in granting the poor more power through
participatory democracy. The Venezuelan model has taken the poor into consideration,
through programs aimed at education, health, and micro-credit, fundamental aspects of
which will be discussed here today.
Venezuela has also advanced a reformulation of the country’s laws so as to better develop
constitutional mandates. Among these was the use of the Enabling Law (Ley Habilitante),
whose primary purpose was the creation of a more humanistic economy, the promotion
and protection of human rights, the achievement of sustainable development, the
guaranteeing of private property rights, the development of cooperative production
means, the protection of the environment, the creation of a system that ensures equality of
opportunity, and the promotion of regional integration.
In this sense, the preoccupation of the Venezuelan government has not been only
economic growth, but also economic development that incorporates diverse sectors of the
population that have traditionally been excluded from the political, economic, and social
system.
It’s a notable fact that our economy has a strong energy component and that the energy
sector will be the primary base of economic and social development. Revenues from oil,
by virtue of being a non-renewable source, must be invested in the creation of human
capital through programs focused on education, health, and the infrastructure needed to
best develop society’s productive capacities. In that regard, oil will be at the center of the
country’s social transformation. At the same time, those same revenues are being used to
develop plans of growth for the industry itself.
Moving to another point, isolated economic development is not possible for any country
of the region. Economies of scale impose the necessity of a market large enough to
adequately develop many of our economic activities. New technologies create
opportunities where none existed before, always where institutions allow the growth of
large-scale markets, for which regional integration in Latin America is a necessity.
The efforts to increase non-oil sector fiscal revenues have been very successful, for
reasons including the establishment of clear rules governing the use of non-oil revenues,
the recent growth of the economy, and the improvement of the efficiency of the country’s
tax agency, the SENIAT. The fiscal contribution of the non-oil sector increased to 12.6
percent of the GDP from 11.3 percent of the GDP in just one year, while the fiscal deficit
decreased to 1.9 percent of the GDP from 5.9 percent of the GDP from 2003 to 2004. We
can also observe that the ratio of debt to GDP decrease 5 points to 35.9 percent, a ratio
considered acceptable by investment firms and risk analysts.
Controls on foreign exchange not only stemmed the outward flow of capital, but also
encouraged businesses to normalize their tax obligations and increased the collections by
the Institute of Social Security by 93 percent over the course of the year. Likewise,
businesses have once again started fulfilling their financial obligations to the National
Institute for Cooperative Education (Instituto Nacional de Cooperación Educativa,
INCE), an institution of great use in building human capital through the Mission
“Vuelvan Caras,” which seeks to promote local economic initiatives and development.
Emerging economies have shown positive results in recent years, included among those
is Venezuela. The Venezuelan stock market has grown continuously since the
culmination of the sabotage of the oil industry—since February 2003 growth has
averaged 271 percent. The Venezuelan stock market has shown some of the largest
increases in growth in the region.
The numbers show a positive economic forecast for the years 2005 and 2006, with real
economic growth estimated at between 5 and 7 percent. These estimates benefit from a
favorable market for oil, with prices of oil remaining above $30 per barrel. The results of
the government’s educational and health programs, which have been an indisputable
success, will also bear fruit. The credit market of the Venezuelan financial sector
increased over 110 percent in 2004. Statistics also indicate an extraordinary level of
growth of over 155 percent in micro-credit programs, a positive development that reflects
the role of micro financing in serving as an alternative to economic sectors that never had
access to credit.
Venezuela believes that economic integration must begin with the integration of the
South American economies, much like NAFTA integrated the economies of North
America. Such integration is possible without implying a weakening of the traditional
and historic links our country has had with other countries of the world. Commercial
relations between Venezuela and the United States must be closely evaluated due to the
strong links that exist between the two countries. Venezuela is the third largest
commercial partner of the United States in the Latin American region, behind Mexico
and Brazil and the trade between the two countries more than doubles the U.S. trade with
Colombia and Chile. Globally, the fact that Venezuela is the sixteenth most important
commercial partner of the United States might be a surprise to some, but these
commercial links exceed those of the U.S. with Saudi Arabia, Belgium, Spain, India, and
Australia. The recovery of the Venezuelan economy allowed a 70 percent expansion of
U.S. exports to Venezuela in 2004, an increase whose total value equaled roughly $5
billion. At the same time, non-oil exports from Venezuela to the world increased 40
percent from 2003 to 2004 for a total value of $6 billion, 39.6 percent of which was
directed to the U.S. market.
It is time to understand that economic progress in an economy with the potential of
Venezuela’s cannot be seen as a zero-sum game where some are winners and some are
losers. The economic integration of Latin American countries will provoke growth and an
increased exchange with countries in other regions of the world, that which will provide
an environment for sustained growth and the development of economies of scale in the
regional context.
Esteemed friends and colleagues, I welcome you to this event where public policy
reforms initiated and advanced by the Venezuelan government will be discussed.