Some GOOD NEWS...
Merill Lynch report says Venezuela
has biggest growth rate in the region.
-- report by VHeadline/VENews c correspondent Patrick J. O'Donoghue --
VHeadline/VENews: Tuesday, December 16, 1997 -- Merrill Lynch is optimistic about Venezuela's economic growth,
predicting a fall in the inflation rate, a 2% fiscal deficit and currency devaluation after the 1999 elections.
Joyce Chang, head of the emerging economies desk of the Council of the Americas investment bank, says Venezuela will show
the biggest growth rate (6% for 1998) among the world's emerging economies.
Chang presented the commissioned Merill Lynch report at the Council of the Americas office and added her own impressions
gained during a recent visit to Venezuela. "We believe Venezuela will have the biggest growth rate in the region -- 6%
compared to an average 3.8% of the other countries. Oil activity and stable oil prices are chiefly responsible for this growth
because they represent $1.2 billion for each dollar increase on the barrel, that is, 1.3% of the GNP."
Although Chang predicts Venezuela will finish 1997 at a 4.4 % growth rate, she says the report expresses cause for concern.
For one thing, she says, despite the fall in the inflation rate from this year's 40% to 20% in 1999, it will still be double the
expected rate for Latin America.
In 1998, the investment bank foresees an inflation rate of 7.2% in Latin America, 13.7% in Central Europe and the East, and
4.4% in all Asiatic countries except China.
"We're also worried about the fiscal deficit -- due to prices of goods and services -- which will be 2% of the GNP in 1998 but
could be more. Increases in oil prices could continue to finance the fiscal deficit."
The third major concern is the exchange rate which, Chang believes, is overvalued, predicting the next administration will have
to delve into a macro-devaluation. "As long as the strong flow of dollars bolsters currency value, fiscal deterioration during
1998 could lead to a maxi-devaluation. In fact, in 1999 a new stabilization program will be necessary, once the elections are
over."
Miriam Kornblitch, special guest at the Council of the Americas press conference, held forth on the electoral panorama,
predicting the possibility of an independent assuming the presidency, and highlighting the weakening of Accion Democratica
(AD) as a major force in Venezuelan politics.
Kornblitch says Parliament will also lose strength as a result. "Parliament will not be an important force -- as AD is at the
moment. The result will be a scattering of forces and the emergence of complex political negotiations to determine alliances
within Congress."
The electoral process itself, she thinks, won't be exempt from conflicts because there is no guarantee that, given the political
climate, things will go off smoothly. |
