Considering how things are, the country has not been doing too badly. It had the highest growth in the region last year (around 9 %,the final figure is due on February 16), and boldly expects 5 to 6 % this year. It ended 2008 with inflation at 6.7 % and a trade surplus of U$ 3.16 bn, which was only down because exports 8+ 13 %) grew slower than imports (+ 45.1 %). External reserves were at U$ 30.2 bn as of end January 2009, the only 2009 figure we have to date (apart from the 0.11 % inflation for the same month). At the end of January, a U$ 1.4 bn stimulus package was announced. Oil and gas output are increasing, poiting to the ability to maintain self sufficiency in the former and have an exportable surplus in the latter, though there is controversy as to whether it should not be better used at home, if only as feeder for petrochemical plants. There have been no new finds for some time.
The country managed to increase its fiscal surplus by 34.3 % last year (to about U$ 2.6 bn). It achieved that by receiving 5.7 % more income and spending 4.8 % more on non-financial items, with the interest bill dropping by 7.2 %.
Politics are less rosy, with corruption scandals galore, but overall the picture is pretty positive in the circumstances.
VENEZUELA Whenever I have mentioned
Venezuela in recent years, I always insisted that the main vulnerability of Hugo Chavez was the oil price, as no other country in the region depended so much on oil revenue for its trade and treasury. The 2009 budget was drawn on the basis of a U$ 60 oil price, whereas the Venezuelan export mix ended 2008 at U$27.10.
The oil price having come down with a bang, the man obviously has a problem. How is he facing it? In the short-term, he might be OK as he has a number of funds set aside which have been raided and can continue to be so for a little while, including Central Bank reserves. He is also reducing his profligacy in helping the neighbourhood, though reduction does not mean ending. Reserves ended 2008 at U$ 42.2 bn, with a public debt of U$ 44 bn, of which U$ 29.5 bn is external, with 2009-11 maturities of U$ 10 bn. For the moment, it is manageable, but some more action is needed.
In all likelihood, this could take the form of devaluation. The ("Strong") Bolivar has been fixed since 2005, with inflation in the following three years accumulating 88 %. Devaluation would immediately boost the Bolivar value of dollar oil exports, but with inflation already above 30 %, it may also affect price levels, at a time when the minimum wage only covers 40 % of a basic basket of goods and services. The price of fruit and vegetables is said to have gone up 30 % in the past two months alone, with demand 50 % down.
2008 ended with growth of 4.8 %, and the initial 2009 forecast (6 %) is going to be revised downwards. The economy was slowing down before the crisis, despite a 45 % increase in government spending. Car sales for the whole of 2008 plunged by 44.8 %, and imports were up only a modest 4.7 %.
On the political front, next Sunday sees another attempt by the president to amend the constitution towards allowing his re-election. If he wins, that is democracy and nobody should complain. If you don't like Chavez, remember Carlos Andr閟 P閞ez.
No less than 83.7 % of Bolivians took part in the referendum which approved the new constitution with a 67.4 % backing. The result is unappeasable, and if that is what the majority want, no foreign journalist, analyst or pupil of some Ukrainian immigrant professor at an Ivy League university has any right to complain. It is not your country.
Bolivia will suffer from lower gas export prices and some production problems, but its future may be saved by Lithium, which is essential to produce clean car engines and where it controls half of the world's reserves. Meanwhile, expect a few difficult years.
Ecuador is another victim of the oil crash, but its president shares with Lula the award of most popular president, with also a 70 % backing. He will stand again and win easily next April, despite the problems, the partial debt moratorium and the drop in emigrant remittances.
Though the new president of
Paraguay is a former bishop, it will need a lot of divine intervention to solve the problems of poverty, corruption, conflict on Itaipu revenue share with
Brazil, the U$ 1 bn of legal claims against the government, etc..
Uruguay has not been doing too badly in the circumstances. Despite double digit inflation which the government is trying to fight with a plan involving negotiated price freezes and reductions, unemployment ended 2008 around a record low, and fiscal accounts also did well.
