RemittancesGateway.org

Venezuelan Finance Minister Says High Inflation Not Chavez's Fault

Wednesday, 02 March 2011 16:02

Sourece: Wall Street Journal (from Dow Jones)
By: Ezequiel Minaya

Venezuela has posted average annual inflation of 21.7% under President Hugo Chavez, an improvement over previous administrations when the rate hovered near triple that number, Venezuela's finance minister said Thursday.

Planning and Finance Minister Jorge Giordani added that inflation remained a "complicated issue," in Venezuela, with rising consumer prices persisting due to the policies of past presidents.

The problem was not the fault of the Chavez administration, he said. Chavez took office in 1999.

Giordani delivered his comments during an address before a national parliament review of his department's performance in 2010.

Venezuela's inflation rate ranks among the world's highest. And in spite of price controls on several staples, the surging food prices continue to drive the country's double-digit inflation.

Giordani said Thursday that along with rising global food prices, a recent currency devaluation has also contributed to the lingering problem.

Critics of Chavez say that the government's widespread nationalization of private industry has scared away capital and sent productivity tumbling, while large-scale social programs seeking the favor of voters have further contributed to lofty inflation.

Deutsche Bank said in a recent report that it expects Venezuela's 2011 inflation to be 27% or 28%, above the Finance Ministry's 22% estimate, because the "food price shock and the impact of the currency devaluation" maintain pressure on prices.

The consumer price index was up 2.7% in January compared to the previous month, bringing the 12-month trailing inflation rate to 28.5%, according to Venezuela's central bank. The annualized rate was recorded at 27.2% at the end of December.

During his address, Giordani also said that Venezuela's gross domestic product growth in the fourth quarter was evidence of an improving economic outlook.

The Venezuelan economy grew by 0.6% in the fourth quarter from a year earlier, snapping a streak of six consecutive quarters of economic contraction.

Still, South America's largest oil producer saw GDP decline 1.4% in 2010, the second straight year of contraction after a 3.3% fall in 2009.

Giordani said Venezuela faced economic challenges in 2010 brought on by the global financial crisis and a drought that starved the country's hydropower plants, causing an electricity shortage.