Download The Monetary and Fiscal History of Venezuela 1960-2005 Diego Restuccia

The Monetary and Fiscal History of
Venezuela 1960-2005
Diego Restuccia
University of Toronto
Becker Friedman Institute, Chicago – April, 2014
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Venezuela’s Relative GDP per Capita
1
0.9
Real GDP per capita VEN/USA
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
1900
1910
1920
1930
1940
1950 1960
Years
1970
1980
1990
2000
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Real GDP per Capita
6
2.3
x 10
2.2
Real GDP per Capita (Millions of Bs.)
I
Volatility of output
increased substantially
after 1974
I
Std of de-trended GDP:
2.1% 60-74, 5.4%
75-05
I
Typical volatility for the
US in annual frequency
around 1%
I
Most fluctuations in
non-oil GDP
Data
HP trend
2.1
2
1.9
1.8
1.7
1.6
1.5
1.4
1.3
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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Government Revenue to GDP
0.35
Total
Oil
Non−Oil
Government Revenues to GDP
0.3
0.25
0.2
0.15
0.1
0.05
0
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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Government Expenditure to GDP
0.35
Government Expenditures to GDP
0.3
Total
Primary
Interest
0.25
0.2
0.15
0.1
0.05
0
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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Government Deficit to GDP (%)
8
Total
Primary
Government Deficit to GDP (%)
6
4
2
0
ï2
ï4
ï6
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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Importance of Oil
I
Oil GDP represents about 20% of total GDP
I
Oil represents a very large fraction of exports (95%),
supply of foreign currency, and total government revenues
(60%)
I
Most oil income goes to the government in the form of
taxes and other indirect taxes, leaving a small fraction for
investment in oil related projects
I
Oil prices very volatile since 1970s
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Debt Definition and Classification
I
Public Debt includes Central Government and public
enterprises whose debt is guaranteed by the Central
Government such as ALCASA, BAUXILUM, CADAFE,
CAMETRO, EDELCA, etc. It does not include PDVSA,
BCV, and other financial public enterprises.
I
Debt is classified as internal and external depending
whether the debt is with residents or non residents and
whether registered in international financial markets
I
Maturity classification: short term (less than a year) and
long term
I
Long term debt is the majority of debt, with average
maturity of 10 years
I
There is no indexed debt and no zero coupons, bonds pay
coupons every semester
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Debt to GDP (%)
100
Total
Internal
90
80
Debt to GDP (%)
70
60
50
40
30
20
10
0
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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External Debt, International Reserves, and Exports
50
45
External Debt
International Reserves
Exports
40
Billions of US$
35
30
25
20
15
10
5
0
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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Rate of Inflation (%)
110
100
End of Period CPI Inflation (%)
90
80
70
60
50
40
30
20
10
0
1960
1965
1970
1975
1980
1985
Years
1990
1995
2000
2005
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Budget Accounting
Budget constraint of the government (nominal domestic
currency):
∗
∗
Bt + Et bt∗ + Mt = Rt−1 Bt−1 + Et rt−1
bt−1
+ Mt−1 + Dt + Tt
In terms of real GDP and changes:
1
=
− mt−1 ) + mt−1 1 −
gt πt
∗
rt−1
Rt−1
θt−1
− 1 + ξt θ∗t−1
− 1 + dt + tt
gt πt
gt πW
t
(θt − θt−1 ) + ξt (θ∗t − θ∗t−1 ) + (mt
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Accounting Results
61-74
75-86
87-05
61-05
Sources:
(1) Internal debt
(2) External debt
(3) Money issuing
(4) Seigniorage
Total
0.01
-0.02
-0.04
0.57
0.53
0.64
3.11
0.13
1.43
5.31
-0.04
-1.73
-0.13
2.07
0.17
0.16
0.09
-0.03
1.43
1.65
Obligations:
(1) Internal return
(2) External return
(3) Primary deficit
(4) Transfers
Total
-0.17
-0.12
-0.91
1.71
0.53
-0.46
0.97
-0.45
5.25
5.31
-1.09
0.66
-0.85
1.45
0.17
-0.63
0.50
-0.76
2.55
1.65
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Final Remarks
I
Currently Venezuela has the highest probability of default
and the highest 10-year government bond yields
I
There is an accelerated rate of expropriation of private
enterprises
I
External and internal debt has been rising fast in the last 6
years
I
Much of the new debt not accounted in official statistics,
loans in exchange of future oil (e.g. China)
I
Real GDP is contracting at a fast rate
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Table: GDP per Capita in Latin America
Country
Relative GDP
per capita
1960 2009
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Uruguay
Venezuela
Latin America
USA
0.48
0.14
0.19
0.38
0.22
0.20
0.27
0.26
0.45
0.82
0.30
1.0
0.33
0.09
0.20
0.42
0.22
0.15
0.25
0.16
0.31
0.32
0.23
1.0
Annualized
Growth
(%)
1.32
1.15
2.17
2.32
2.11
1.61
1.94
1.03
1.37
0.17
1.53
2.10
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