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VENEZUELA.

VENEZUELA

 % Change
 Interest
Date CPI M1 Rate (%)

 1990 36.50 20.80 36.80
 1991 31.00 30.50 37.52
 1992 31.90 10.00 41.40
 1993 45.90 20.00 59.00
 1994 70.80 - -
 1995 56.70 12.00 40.00
 1996 103.20 60.00 38.00
 1997 37.60 50.00 -
 1998 29.90 -6.00 44.10

 1999 20.00 23.00 31.89
Jan 2.20 -6.60 38.96
Feb 1.70 -4.40 39.73
Mar 1.20 -4.60 34.38
Apr 1.10 0.50 31.84
May 2.00 2.30 34.22
Jun 1.50 1.70 32.16
Jul 1.60 4.60 31.48
Aug 1.50 -0.90 30.04
Sep 0.90 0.30 29.62
Oct 1.60 4.50 28.60
Nov 1.50 18.70 27.85
Dec 1.70 5.70 28.13

 2000 13.40 31.40 23.91
Jan 1.70 -4.00 29.15
Feb 0.40 -3.80 28.97
Mar 0.90 0.30 25.14
Apr 1.50 3.90 26.00
May 1.00 -4.40 23.10
Jun 1.10 3.00 26.19
Jul 1.00 4.60 23.42
Aug 0.80 -3.10 23.69
Sep 1.70 3.30 23.69
Oct 0.80 1.70 21.09
Nov 0.60 23.80 21.67
Dec 1.00 5.80 21.98

 2001 12.00 8.00 22.00
Jan 0.90 -5.90 22.43
Feb 0.50 -0.80 21.14
Mar 0.80 - -
Column
Number [1] [2] [3]

 (In millions US $)
 Trade Current
Date Imports Exports Bal Acct Bal

 1990 6,765.00 17,587.00 10,822.00 8,279.00
 1991 10,181.00 15,127.00 4,946.00 1,200.00
 1992 12,470.00 14,200.00 1,730.00 -3,720.00
 1993 11,013.00 14,222.00 3,209.00 -1,815.00
 1994 8,000.00 16 467.00 8,467.00 2,450.00
 1995 11,631.00 18 584.00 6,958.00 1,500.00
 1996 9,105.00 22,802.00 12,204.00 6,296.00
 1997 12,311.00 23,711.00 11,400.00 5,860.00
 1998 14,249.00 15,449.00 1,200.00 -1,800.00

 1999 12,669.00 20,915.00 9,164.00 5,500.00
Jan 893.00 259.00 - -
Feb 832.00 263.00 - -
Mar 894.00 344.00 764.00 370.00
Apr 894.00 285.00 - -
May 1,036.00 320.00 - -
Jun 1,117.00 286.00 1,358.00 517.00
Jul 1,294.00 340.00 - -
Aug 1,338.00 325.00 - -
Sep 959.00 306.00 3,213.00 2,318.00
Oct 1,064.00 372.00 - -
Nov 1,389.00 386.00 - -
Dec 960.00 281.00 3,829.00 3,045.00

 2000 16,100.00 33,600.00 17,970.00 13,400.00
Jan 903.00 352.00 - -
Feb 1,044.00 399.00 - -
Mar 1,217.00 372.00 4,330.00 3,505.00
Apr 1,114.00 333.00 - -
May 1,489.00 359.00 - -
Jun 1,184.00 424.00 4,108.00 3,153.00
Jul 1,207.00 403.00 - -
Aug 1,388.00 467.00 - -
Sep 1,167.00 434.00 12,679.00 942.00
Oct - 433.00 - -
Nov - 467.00 - -
Dec - 350.00 - -

 2001 17,000.00 24,000.00 7,000.00 6,000.00
Jan - - - -
Feb - - - -
Mar - - - -
Column
Number [4] [5] [6] [7]

 (In millions
 (US $)
 Exchange Rate
Date Reserves Off/Par

 1990 11,500.00 50.58
 1991 13,232.00 61.65
 1992 14,400.00 79.55
 1993 12,656.00 106.20
 1994 11,900.00 170.00
 1995 8,575.00 290.00 332.00
 1996 15,133.00 475.00
 1997 17,700.00 503.00
 1998 14,849.00 564.00

 1999 15,379.00 649.00
Jan 14,334.00 573.00
Feb 13,857.00 577.00
Mar 13,442.00 583.00
Apr 13,968.00 590.00
May 14,208.00 598.00
Jun 14,342.00 606.00
Jul 14,592.00 612.00
Aug 14,561.00 619.00
Sep 13,989.00 628.00
Oct 14,676.00 631.00
Nov 15,646.00 638.00
Dec 15,164.00 649.00

 2000 15,781.00 699.00
Jan 15,223.00 655.00
Feb 14,491.00 661.00
Mar 14,419.00 670.00
Apr 14,942.00 675.00
May 14,375.00 684.00
Jun 15,094.00 682.00
Jul 15,785.00 687.00
Aug 15,879.00 689.00
Sep 16,545.00 690.00
Oct 17,167.00 693.00
Nov 17,570.00 696.00
Dec 15,883.00 699.00

 2001 14,000.00 730.00
Jan 16,668.00 700.25
Feb 15,854.00 703.25
Mar 14,646.00 707.25
Column
Number [8] [9] [10]

FOOTNOTES BY COLUMN: Annual figures for 2001 are projections.
[1-2]: Annual figures represent January-December increase.
[3]: Average preferential borrowing rates of top six commercial
banks. Annual figure represents average for year. [4-9]: Monthly
export figures are non-traditional only. Government not
providing monthly oil export figures. Quarterly figures include
oil exports. Annual figures are values at year-end including oil
exports. [8]: Reserves figures do not include monies allocated
to the macroeconomic stabilization fund (FIEM, not supposed to
be used to defend the currency), which range from at least
$4.5-$6 billion more per month. [9]: The official rate
floats and equals the parallel rate.

SOURCES BY COLUMN: 1-9: Central Bank, as of fourth-quarter
1998. Prior to that, Central Bank and Instituto de Comercio
Exterior.


FINANCIAL OUTLOOK

* Inflation for first-quarter 2001 stood at 2.2%, down year-on-year from 3%, as President Hugo Chavez's government continued to slow currency depreciation. So far, the policy has proved moderately successful. Annual inflation closed 2000 at 13.4%, its lowest level since 1991. Inflation for the 12 months to March stood at 12.5%, just above the government's 10%-12% target for 2001. Despite quickening economic growth, spare industrial capacity and high unemployment continue to ease inflationary pressures.

* Interest rates on deposits have not budged since late last year. Average borrowing rates stood around 23% in March, slightly up from close to 22% at the end of 2000, according to central bank figures. However, commercial lending rates charged by some major banks still remained as high as 35% in some cases. Meanwhile, short-term deposit rates sank slightly to an annual rate of around 12%, barely in line with inflation. Despite some consolidation last year, Venezuela's overcrowded banking system remains reliant on government debt to boost earnings and has been too inefficient to lower borrowing rates to stimulate private-sector growth.

* This year's current account surplus will probably slip from last year's gigantic $13.4 billion, given that oil prices are slipping slightly and that imports are on the rise. Some economists predict it could drop to about $2 billion, depending on how further OPEC cuts affect oil production. Official figures for the first quarter of 2001 are not yet available. For the year to date, the price of Venezuela's oil basket has averaged $22.53 a barrel, compared with $25.98 for all of 2000. Venezuela has also trimmed its production levels by 9% since the start of the year, suggesting oil exports could be considerably lower in 2001.

* Reserves fell to $14.646 billion at the end of the first quarter, down from $15.883 billion at the end of 2000. The slump was due principally to a withdrawal of $1.108 billion during the last week of March as the government transferred hard currency from oil exports into its Macroeconomic Stabilization Fund (FIEM), which ended the first quarter at $6.036 billion. The government has dismissed warnings from the IMF that a slump in oil prices could jeopardize monetary policy and destabilize fiscal accounts.

* The bolivar slumped 1.1% in the first quarter of 2001, compared with inflation of 2.2%. It closed March at Bs.707.25:$1. During 2000, depreciation against the dollar had slowed to 7%, compared with 13% in 1999. Healthy oil prices have lent credibility to the bolivar's exchange rate band, and the central bank has been able to rein in the currency's depreciation despite the widespread belief that it is overvalued by more than 20%. The bolivar ended 2000 at Bs.699:$1. The latter rate served as the central parity for the government's modified exchange rate band, which took effect January 2. The bolivar continues to trade in a 7.5% band on either side of central parity, but the rate of slope on the band has been slowed to 7% this year from around 12% in 1999.

ECONOMY MONITOR

* Growth Outlook: GDP should grow 4.6% in 2001, according to official forecasts. Private economists forecast a slightly more modest 4%. Most growth is expected to come from the non-oil sector, which accounts for some two-thirds of economic activity. Predicted to top 5%, it will benefit from strong government spending.

* Political Factors: Oil remains king, but is increasingly buffeted by such global factors as OPEC's solidarity in the face of wavering oil prices, and the possibility of the first worldwide recession since the 1974 oil crisis. The government remains more reliant than ever on high oil prices to fund ambitious spending plans and social projects. But Venezuela's private sector still appears cautious in the face of President Hugo Chavez's fiery rhetoric. A law that would redistribute some agricultural property, as well as a reform of social security legislation, has many investors concerned about potential property confiscation and a more inflexible labor market. Venezuela's supreme court extended President Chavez's term from July 2006 to January 2007, to agree with new constitutional rules that set the start of presidential terms in January.

* Fiscal Situation: The administration plans to increase spending by more than 10% during 2001, to Bs.23.2 trillion ($32 billion). This has set off alarm bells among many economists, who warn the government could be left scrambling for cash should the price of Venezuela's oil basket fall below the plan's assumed $20/ barrel. Regulations governing the macroeconomic stabilization fund (FIEM) bind the government to saving half of oil revenues above $9/barrel. Economists expect a fiscal deficit of around 3%-4% of GDP.

* Major Sectors: PDVSA's 9.4% OPEC production cut, which could be reversed, may be difficult to comply with as private investors begin to ramp up production from the three huge Orinoco heavy oil upgrading projects. PDVSA predicts investment will slip by $500 million next year to $6.4 billion, mainly because the three Orinoco projects are finished. Telecoms grew 14.7% in 2000 and could grow 10%-15% this year after fixed-line service opened to competition, concluding in late February with the auction of 15 Wireless Local Loop (WLL) licenses for $20.2 million. Venezuela's fixed-line penetration is among the region's lowest, at just 10.5 lines/100 inhabitants. Regulator Conatel expects growth to 12-13 lines/100 inhabitants this year, and to 30-40 lines within six years. The biggest WEE winners were BellSouth's Telcel and Genesis Telecom. Both won five regional contracts giving them full national coverage. Telcel paid $10.1 million, while Genesis paid $6.82 million.

* Employment: Unemployment stood at 15.8% in January, unchanged year-on-year despite a modest recovery during 2000. The percentage spiked from December's 10.2%, due mainly to post-Christmas-season slump. More than half of Venezuela's workforce remains in the informal sector, in companies with five or fewer employees.

* Stock Market: Caracas' IBC stock index ended the first quarter at 7,357.19 points, up 7.8% in nominal terms from end-December. The market was boosted by local industrial group Polar's takeover of Mavesa, and by rumors of several other possible acquisitions. Trading volumes remain mired around $ 2 million a day, as investors remain anxious about President Hugo Chavez's incendiary leftist rhetoric. So far, nothing has come of the government's much-touted scheme to strengthen the struggling bourse by creating a fixed-income market.

COMPANY MONITOR

* Seguros Caracas, the Venezuelan subsidiary of US-based Liberty Mutual, snapped up local rival Seguros Panamerican for $56 million from Chile's Quiroga group in early March, creating Venezuela's biggest insurance firm and ousting rival Seguros La Seguridad, a unit of Spain's Mapfre, from its current top spot.

* The merger between leading savings and loan Caja Familia and fifth-largest retail bank Banco Union will create Venezuela's fourth-largest financial institution. It will be known as Union Caja Familia, with the retail brand name of Unibanca, controlling 13% of Venezuela's total deposits and 11.1% of loans.

* Telecom Italia Mobile subsidiary Digitel plans to increase investment in Venezuela by 40% to $250 million this year, to more than triple Digitel users to 857,000 by year-end and triple sales to $600 million.

* Empresas Polar in late March acquired 98% of local consumer goods company Mavesa for just over $500 million, making it the biggest takeover ever in Venezuela's food sector. Financing included a $200 million syndicated loan led by the Andean Development Fund (CAD.

* Smurfit Carton de Venezuela, a unit of Ireland's Jefferson Smurfit Group, signed a letter of intent in mid-March with Venezuelan paper maker Venepal to buy 64% of the struggling company. US diaper and tissue giant Kimberly-Clark is said to be in similar discussions with Venezuela's Manpa.

* Venezuela's iron producer IBH was left scrambling for financing for its giant $900 million Orinoco iron plant after partner BHP of Australia announced it would take a $410 million charge on its investment and not commit any further funds. State industrial holding giant OMC has said the government is committed to keeping the plant in production, and could provide financial aid.
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Title Annotation:economic aspects
Publication:America's Insider
Geographic Code:3VENE
Date:Apr 30, 2001
Words:2340
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