Industry is seen slowing down; manufacturers face an uncertain outlook

Caracas Daily Journal (Jeremy Morgan): Figures from the Venezuelan Central Bank (BCV) suggest that industrial output may have slowed down after hitting a peak in August last year despite booming consumer demand.

Industrial production fell last September by about 10 points to 130.14 points from 140.45 points in August on an historical index basing 100 in 1997. While output was still 2.72 percent higher in September on a year before, this marked a deceleration from the 12.22 percent annualized increase recorded in the same month of 2006.

All this said, it's early days yet to establish whether this was a blip on the radar or the beginning of a downturn in a sector of the economy that has struggled to recover from the deepest recession in modern Venezuelan history earlier this decade.

"We probably won't know until we have the figures for the rest of last year," said an economist in the state sector. But signs that Venezuela's already much-reduced industrial base may be slowing down come at a less than auspicious moment for the economy as a whole. Resurgent inflation has prompted another wave of warnings that soaring prices threaten to throttle the improvement in the performance of the economy.

If the global economy is heading towards a recession, and world oil demand with it, economists warn that Venezuela might not be able to rely on oil to see it through harder times.

Not to mention the fall-out, unknown as of yet, of the battle between the state oil corporation, Petróleos de Venezuela (PDVSA) and ExxonMobil. While the jury's still out on the prospects for non-oil industry, orthodox economists and business leaders are in little doubt were the fault lies if industry is indeed heading downwards. They blame government controls on prices and foreign exchange, among other factors.

José Guerra, an economist who was formerly head of research at the central bank, pointed the finger at price controls, "over-valued" money, and an "anti-business climate" with President Hugo Chávez saying he'll take over companies deemed to be hoarding supplies amid a tide of shortages.

Venezuela's biggest business organization, the Federation of Chambers of Commerce and Industry, Fedecámaras, has rejected expropriation by the state as a solution of the shortages. Punitive measures would not work and could violate constitutional rights to private property, Fedecámaras President José Manuel González recently warned.

Fedecámaras and other business organizations have held talks with the government on tackling food shortages, but signs are not going well. Noel Álvarez on Thursday expressed doubts about the government's proposals, and said the government hadn't had much success so far. Álvarez questioned whether the government was talking to the right entrepreneurs.