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Volume 59 / Social Sciences

ECONOMICS: VENEZUELA


ROBERT PALACIOS, Economist, World Bank


NOT SURPRISINGLY, MUCH OF THE LITERATURE of the mid-1990s is a reaction to the wrenching structural adjustment during the first part of the decade. Following the massive recession, adjustment, and riots in 1989-90, the Pérez government was ousted and was eventually replaced by the Caldera government. During its first few years, many of the structural reforms begun during the previous administration stalled, but in the final years the country was again at the door of the International Monetary Fund.

Some of the reaction to this latest bout of adjustment can be classified as part of the antiglobalization debate, of which there are several clear examples included here. In addition, much of the material produced during this period focused on the two major economic developments in the 1994-96 period: the banking crisis and subsequent bailout, and the opening of the oil sector to foreign investment. Additional items of research interest include an excellent paper on Venezuela's problematic severance payment system (which was reformed in 1997) by Gustavo Márquez (item #bi 97013255#), and a new data set on economic growth and human development indices for Venezuelan states (item #bi 00001389#).

The literature reviewed shows a widespread consensus about the massive fraud that took place in the banking system as a result of poor supervision and a weak regulatory structure, which led to the worst banking collapse in Venezuela's history (items #bi 00001378# and #bi 00001374#). But most of the coverage of important developments of the period reflects the continued chasm between the ideological poles in economic policy. Moreover, the material continues to be skewed in terms of methodology and analytical framework. At one end, attacks on stabilization packages (item #bi2001001237#) and foreign investment in the oil sector (items #bi 97013791# and #bi 97013768#) tend to be descriptive and philosophical, while market-oriented treatises rely on more traditional economic analysis and arguments (item #bi 00001368#). As a result, the lack of a common language precludes any constructive debate.

There is an interesting and subtle change in the former group, however, compared to the works reviewed for HLAS 57. After having decried "el paquete" in the early 1990s, the attacks on IMF-negotiated adjustment plans have now been cast in the broader context of globalization after the Caldera administration was forced to follow the same path as its predecessor in 1996. Unfortunately, the common causes of the incredible reversals of the electoral positions held by both Pérez and Caldera are ignored and alternative policy paths are not presented.

One result of the failure of economic management by Venezuelan governments over the last three decades is that the pendulum has now swung dramatically in terms of the role of foreign players in Venezuela's economy. Two important manifestations are the increased presence of multinational oil companies and foreign financial institutions. More than half of the banking sector and much of the insurance business are now under foreign ownership. More importantly however, chronic budget deficits and short maturity of its debt will ensure that Venezuela will continue to depend on external financing. To the extent that private sources become unavailable and yet another government must resort to dealing with the Bretton-Woods institutions, the economics of adjustment and the globalization debate may once again take center stage.


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