The redirection of higher oil revenues by the Chavez government to benefit the poor as a matter of social justice has received much attention. But the related positive effect of these expenditures on Venezuela's economic development is sometimes overlooked, and mostly regarded as a "wasteful" drag by pro-business Western commentators, sustainable for only so long as oil prices stay high. The latest economic statistics show, however, how public spending is developing the economy and driving it forward by boosting mass purchasing power. "Poor Venezuelans managed to spend more due to a host of social programs that offer health, education, and subsidized foor prices", according to the Dow Jones report below. Capital controls instituted in 2003 have also "helped boost economic activity", the report notes. Meanwhile, foreign investment, the neoliberal perscription for development, is sharply down since last year.
MG -------------------------- Venezuela Posts Robust Growth For 2nd Quarter DOW JONES NEWSWIRES August 19, 2005 CARACAS, Venezuela -- Venezuela's economy expanded 11.1% in the second quarter compared with the year-earlier period, signaling it is on a robust growth path this year. Accumulated growth for the first six months of 2005 reached 9.3%, exceeding the government's estimate of a 5% growth expected for the year, the central bank said late yesterday. The nonoil sector recorded second-quarter growth of 12.1%, the bank reported, while the oil industry climbed 2.5% from the year-earlier quarter. Manufacturing posted 12.4% growth, construction climbed 20.3% and government services rose 7.4%, the bank said. Venezuela's economy, which is dependent on oil exports, has benefited from high crude prices of late. Demand has been boosted by increased government spending, while poor Venezuelans managed to spend more due to a host of social programs that offer health, education and subsidized food prices. Aggregate demand rose 20.8% during the period, private consumption climbed 18% and government consumption rose 6.7%, bank data showed. The government imposed capital controls in early 2003 to prevent capital flight after a bout of political upheaval. The controls trapped liquidity within the economy, which in part led to reduced interest rates and helped boost economic activity. Meanwhile, imports of goods amounted to $5.8 billion, or a 52.2% jump from the same period a year ago. Foreign direct investment, meanwhile, sat at $145 million, down from $608 million a year earlier.
