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Poverty Reduction in Venezuela: A Reality Based View

Poverty Reduction in Venezuela: A Reality Based View

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This article looks at economic and social indicators, including economic growth poverty, unemployment and other labor market indicators, in Venezuela over the last decade. It also looks at controversies and misrepresentations surrounding the data. Published in ReVista: Harvard Review of Latin America, Volume VIII, Number 1, Fall 2008.
This article looks at economic and social indicators, including economic growth poverty, unemployment and other labor market indicators, in Venezuela over the last decade. It also looks at controversies and misrepresentations surrounding the data. Published in ReVista: Harvard Review of Latin America, Volume VIII, Number 1, Fall 2008.

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Published by: Center for Economic and Policy Research on Nov 20, 2008
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Center for Economic andPolicy Research
1611 Connecticut Ave, NW Suite 400 Washington, DC 20009tel: 202-293-5380fax:: 202-588-1356 www.cepr.net
 
Poverty
 
Reduction
 
in
 
Venezuela:
 
A
 
Reality
Based
 
View
 
B
 Y 
M
 ARK 
 W 
EISBROT
*
 Venezuela has seen a remarkable reduction in poverty since the first quarter of 2003. In the ensuing four years, from 2003 to 2007,
1
the poverty rate was cut inhalf, from 54 percent of households to 27.5 percent. (See Table 1). Extremepoverty fell even more, by 70 percent – from 25.1 percent of households to 7.6percent. These poverty rates measure only cash income; as will be discussed below, they donot include non-cash benefits to the poor such as access to health care oreducation.If Venezuela were almost any other country, such a large reduction of poverty in arelatively short time would be noticed as a significant achievement. However, sincethe Venezuelan government, and especially its president, Hugo Chavez Frias, areconsistently disparaged in major media, government, and most policy andintellectual circles, this has not happened. Instead, the reduction in poverty was forquite some time denied. Until the Center for Economic and Policy Researchpublished a paper correcting the record
2
in May 2006, publications such as
Foreign  Affairs, Foreign Policy,
the
Washington Post,
the
New York Times,
the
Financial Times,
the
Miami Herald 
, and many others all published articles falsely asserting thatpoverty had increased under the Chavez government.
3
 
*Mark Weisbrot is Co-Director at the Center for Economic and Policy Research in Washington, DC. Thispaper was published in
ReVista: Harvard Review of Latin America 
,
 
 Volume VIII, Number 1, Fall 2008, whichcan be accessed online at <http://www.drclas.harvard.edu/files/revista_fall_08_final.pdf>.
 
1
This is measured from the first half of 2003 to the first half of 2007; data are not seasonally adjusted. As can be seen in Table 1, the poverty rate rose very slightly by one percentage point in the second half of 2007, most likely due to rising food prices.
2
Weisbrot, Mark, Luis Sandoval and David Rosnick. 2006. “Poverty Rates in Venezuela: Getting the NumbersRight,” Washington, D.C.: Center for Economic and Policy Research.http://www.cepr.net/documents/venezuelan_poverty_rates_2006_05.pdf 
 
 ].
3
See Ibid., including appendix, for more detail. A few of these publications eventually ran corrections. While poverty didin fact rise sharply in 2002-2003 (see Table 1), the publications cited above and in the Appendix to Weisbrot
et al 
(2006)all printed false statements about the poverty rate after it had dropped back down and the new data were publicly available.
 
 
ReVista: Harvard Review of Latin America 
(Fall 2008) • 2
TABLE 1Venezuela: Poverty Rates, 1997-2007Households Population(% of total declared) (% of total declared)Year / Time Period
PovertyExtremePovertyPovertyExtremePoverty1st Half 55.625.560.929.519972nd Half 48.119.354.523.41st Half 49.021.055.424.719982nd Half 43.917.150.420.31st Half 42.816.650.019.919992nd Half 42.016.948.720.11st Half 41.616.748.319.520002nd Half 40.414.946.318.01st Half 39.114.245.517.420012nd Half 39.014.045.416.91st Half 41.516.648.120.120022nd Half 48.621.055.425.01st Half 54.025.161.030.220032nd Half 55.125.062.129.81st Half 53.123.560.228.120042nd Half 47.018.653.922.51st Half 42.417.048.820.320052nd Half 37.915.343.717.81st Half 33.910.639.712.920062nd Half 30.69.136.311.11st Half 27.57.633.19.420072nd Half 28.57.933.69.6Source: Instituto Nacional de Estadística (INE), República Bolivariana de Venezuela
  When it could no longer be denied, the government's opponents – who have a near-monopoly of the debate about Venezuela outside the country -- then tried to put a negative spin on it. An articlein the March/April issue of 
Foreign Affairs 
by Francisco Rodriguez (2008), attempts to argue that “aclose look at the evidence reveals just how much Chávez's 'revolution' has hurt Venezuela'seconomy -- and that the poor are hurting most of all.”
4
I have dealt with these assertions in detailelsewhere
5
and will only treat some of them briefly here. As can be seen from Table 1, the poverty rate fell from 1999-2001, and then rose sharply in 2002-2003. This is to be expected, since the economy was devastated in 2002-2003 by an oil strike (joinedby business owners), losing 24 percent of GDP from the third quarter of 2002 to the first quarter of 2003. In terms of lost income, this is comparable to the U.S. economy in some of the worst years of the Great Depression.
4
Francisco Rodriguez (2008a). “An Empty Revolution: The Unfulfilled Promises of Hugo Chávez”,
Foreign Affairs 
, Vol.87, Issue 2: 49-62.
5
Mark Weisbrot (2008b). “How Not to Attack an Economist (and an Economy): Getting the Numbers Right”, Washington, DC: Center for Economic and Policy Research.http://www.cepr.net/documents/publications/venezuela_2008_04.pdf  ].
 
 
ReVista: Harvard Review of Latin America 
(Fall 2008) • 3
It would not seem logical to hold the government responsible for the economic impact of the oilstrike and business lockout, since that was carried out by its opponents. Indeed, a strong case can bemade that the government could not do much at all about poverty for its first four years (1999-2003). During this time it did not have control over the national oil company – Petroleos de Venezuela, or PDVSA, and there was considerable instability, including a military coup (April 2002)and the strike.
6
 Once the government got control over the oil industry and the major opposition groups agreed topursue their goal of removing Chavez through a referendum (May 2003), the economy began togrow rapidly and poverty was sharply reduced. (See Figure 1). In the five years from the bottom of the recession in the first quarter of 2003, to the first quarter of 2008, the economy grew by aremarkable 88.3 percent.
FIGURE 1Venezuela: Real GDP (seasonally-adjusted)
6789101112131415
   1   9   9   8  Q    1   1   9   9   8  Q    3   1   9   9   9  Q    1   1   9   9   9  Q    3   2   0   0   0  Q    1   2   0   0   0  Q    3   2   0   0   1  Q    1   2   0   0   1  Q    3   2   0   0   2  Q    1   2   0   0   2  Q    3   2   0   0   3  Q    1   2   0   0   3  Q    3   2   0   0  4  Q    1   2   0   0  4  Q    3   2   0   0   5  Q    1   2   0   0   5  Q    3   2   0   0  6  Q    1   2   0   0  6  Q    3   2   0   0   7  Q    1   2   0   0   7  Q    3
   T  r   i   l   l   i  o  n  s  o   f   1   9   9   7   B  o   l   i  v  a  r  e  s
1998Q4:-Chavez wins elections(Dec. 6)-Venezuelan oil pricelowest in 22 years(Dec.)1999Q1:-Chavez takes office (Feb. 2)2002Q2:-Fedecamaras calls foranother general strike(Apr. 9)-April coup d'etattemporarily2001Q4:-Fedecamaras (largestbusiness association)calls for general strike(Dec. 9)2002Q4:-Oil strikecripples theeconomy (Dec.)2003Q1:-Oil strike ends(Feb. 3)2003Q2:-Opposition agreesto seek Chavez'sremoval throughelectoral (recall)referendum (May)2004Q3:-Chavez winsrecallreferendum(Aug.)
Source: Banco Central de Venezuela (BCV) and authors’ analysis.
6
See Teodoro Petkoff (2008), currently one of the most prominent and respected leaders of the Venezuelan opposition, who describes the opposition “strategy that overtly sought a military takeover” from 1999-2003, and its use of the oilindustry for purposes of overthrowing the government.

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