Friday, July 18, 2008

Chavez Pleads for Investment as Falling Output Fuels Inflation

Venezuelan President Hugo Chavez wore a suit for the occasion, and, grinning at about 300 business leaders he usually calls ``oligarchs,'' asked for help relieving a drought in investment.
``Those of you who have money abroad, bring some home,'' he implored company executives gathered June 11 at the former Caracas Hilton, a hotel taken over by the government last year. ``Let's ally ourselves, let's elevate production as much as we can,'' he said to scattered applause.
After squeezing the private sector for almost a decade with nationalizations and foreign exchange controls, Chavez is holding out the lure of lower taxes and $1 billion of loans to spark growth and combat spiraling inflation that only ramped up production can solve. Investment fell for the first time in four years in the first quarter and state spending, the driving force behind four and a half years of economic expansion, is showing diminishing returns as output growth lags behind a boom in oil-fueled consumption. ``The vocabulary the government has used over the past two years, above all the president, includes expropriation, confiscation, and it isn't well-received by the private sector,'' said Alejandro Grisanti, an economist at Barclays Capital Inc. in New York. ``There's less investment, this means less supply, and that's going to keep driving up prices.''

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