Peruvian Economy

| FACULTAD DE CIENCIAS EMPRESARIALES

PERUVIAN ECONOMY

MONETARY POLICY OF VENEZUELA VS PERUVIAN

ECONOMY

MEMBERS:

HERRERAS BAÑICO, ANA MIRIAN 1521058

RIVERA PEREZ, JULIO JOAB 1510362

LI DAVELOUIS JAVIER RAFAEL 1420228

SALAZAR CASAFRANCA, YULISSA 1520591

2019-01

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INDEX
1. Abstract………………………………………………………...
2. GDP by economic sector………..…………………………..
3. GDP by expenditure………………………………………….
4. Employment…………………………………………………..
5. Monetary policy……………………………………………….
6. Overall Non-financial Public Sector and public debt……..
7. Fiscal policy…………………………………………………..
8. Balance of payments and trade balance………………….
9. Competitiveness……………………………………………..
10. Inflation………………………………………………………..
11. Exchange rate………………………………………………..
12. Poverty………………………………………………………..

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1. ABSTRACT

The following paper presents the monetary policies applied to the case of Peru and
Venezuela have an impact on the development of their names. He also exposes Peru
as a country that overcomes the economic and social crisis that Venezuela is
experiencing, developments the related policies are related and develop a healthy
economy, unlike the Venezuelan case that is dependent economy to be rentier.
The super inflation that Venezuela lives is much higher than the one Peru suffered in
addition to be a country that depended clearly on its raw materials of mineral origin,
however Peru inflation was not so drastic and had other raw materials of animal and
vegetable origin. That is the difference that exists.

2. GDP BY ECONOMIC SECTORS

VENEZUELA

2.1. Primary Sector

Agriculture is not very relevant in the economy, it represents 3% of GDP, and the
results of national agricultural activity have gone through highs and lows in recent
years. At 2017 continued the fall of agricultural production started in 2008. Indeed, of
the twelve items to which FEDEAGRO (the employers of the sector) follows up and
whose contribution to Value of Vegetable Agricultural Production exceeds 70%, eleven
(11) show decreases significant in particular, the cultivation of rice, potatoes and
vegetables. In the crops of the cane of sugar, coffee and sorghum recorded historical
lows that reveal a sharp crisis structural. 2014 reflected a contraction of -3.3%, a result
that worsened in 2015 with a -5.80% registry, according to preliminary results of the
Ministry of Agriculture and Lands, of official figures for 2016 and 2017, it is estimated
that the sector has contracted again by 5%. For the employers of the sector,
FEDEAGRO, this contraction was produced by several events, some attributable to
external factors that are difficult to counteract, such as climate, characterized a
prolonged drought in recent years, rural insecurity due to the boom in crime, difficulty
in accessing foreign exchange for the importation of agricultural inputs and other
related to public policies that have a negative impact on the sector. In 2017 intensified

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the problematic of the supply of agro-inputs, agrochemicals, machinery, cargo

vehicles, spare parts, equipment, rubbers, batteries, lubricants and fuel. These factors
prevented compliance with the planting plans and ended up reducing the cultivated
area.
The result is a fall in production. The state Agro patria (result of the confiscation of the
Spanish Agroisleña), does not cover the demand of the most important producing
areas, and in others have no physical presence. The country depends on imports of
agricultural raw materials for the production of finished products, because the national
production is insufficient.
The main raw materials consumed in the country: rice, corn, coffee, sugar cane and
sorghum; as well as beef and chicken, are imported annually in volumes that range
from 40% and 66% of the national demand.
2.2. Secondary Sector

The industrial sector represents 34% of the GDP, within the same stand out:
a. Hydrocarbons sector
Venezuela is the country with the largest proven oil reserves in the world, 302,228
MMb, 18% of the world's reserves: and it is estimated that it produced an average of
2.1 in 2017 Mb / day (below 3 Mb / day a few years ago), that is, an average equivalent
production to 3% of world production. All oil and gas management are entrusted to the
PDVSA holding company (Petroleum de Venezuela, S.A. and its subsidiaries),
property of the Republic. Created in 1975, attached to the Ministry of the Popular
Power for Energy and Petroleum and is among the first fifty companies in the world by
income.
b. Mining
According to data from the Central Bank of Venezuela, this sector has registered a
sharp decline in the last five years showing thus for the closing of 2015, a contraction
of -3.6%; for 6 2017 it is estimated a slight growth of 2.1% according to Ecoanalitica.
The mining resources of are distributed among iron, gold, nickel, aluminum, coal,
bauxite and diamonds, among others. Among the reasons that have led to these
results are: the fluctuations of international markets, the consequences of periodic
crises economic conditions that depress the demand of the sector, the inefficient
administration of the mining companies with a strong participation of the State, the

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exchange policy, the reform of regional mining laws, the absence of policies and,
especially, by nationalizations.
● Aluminum production
Venezuela is the 8th largest producer in the world due to its large reserves of
bauxite. It has one installed capacity of 8.7 million MT / year, equivalent to
2.8% of global capacity. The main companies in the sector are Bauxilum,
Alcasa and Venalum, investees mostly by the public entity Corporation
Venezolano de Guayana (CVG).
● Iron Production
The proven iron reserves are around 14,000 Million MT, of which 13%
correspond to high-grade iron ore. The mineral extracted in Venezuela is
considered as one of the highest qualities in the world, being the tenor
obtained in Cerro Bolívar from a 62%. The main national steel company is
Ferrominera del Orinoco.
● Gold production
Venezuela has huge gold reserves, the third largest in the world, with about
7 thousand TM in estimated reserves but, for various reasons, the
industrialized exploitation of the precious Metal has not taken off.

c. Manufacturing industry
About other sectoral components of GDP, the manufacturing industry reflected the
closing of 2015 a contraction of -6.8% (-8.2 in 2014); In the absence of data, a new
contraction of 21.3% in 2016 and -29.8% in 2017. The behavior of the activity
manufacturing industry responded in 2015 to 0.1% growth in the public component
and the fall in 7.4% in the private sector as a result of the enormous problems that this
sector suffers (there is no disaggregated data for 2016 or for 2017). Fundamentally
affect this industry the following factors: dramatic shortages of raw materials and
intermediate national and Great difficulty to import them due to shortage of foreign
currency, harassment and uncertainty of the legal framework. Some considerations:
various manufacturing industries are especially affected due to the shortage of
supplies to be supplied by the basic companies; the scarcity of foreign currency has
caused the Venezuelan industrialists to maintain a debt with their suppliers foreigners
estimated to be at least $ 9,000 million; the workloads do nothing but go up; price
control restricts business activity; electric rationing until early of July 2016 conditioned

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the productive processes; in 2017, the production due to the political instability that
paralyzed the country between April and July; the inefficiency of ports (the average
time to nationalize the merchandise reaches 31 days) increases the costs.
2.3. Third Sector
The tertiary sector is the most dynamic of the Venezuelan economy: it contributed in
2015, September, 63% of GDP. Among the different sub-sectors, telephony and
internet services They have registered a remarkable boom. This is due to the
liberalization of the sector that has allowed the entrance of different operators to the
market, achieving a competitive situation that has resulting in better service and lower
prices. Tourism is included in this sector (of which discussed in detail later),
telecommunications, banking and commerce.
● Telecommunications:
The activity maintained its rhythm of growth in 2015 in an important way (+
2.7%, up September) for the forty-seventh (47) consecutive quarter, in
response to the
Demand for these services. Under the institutional approach, the public
component rose in 3.2%, while private did it at 1.9%. For 2016, a contraction
of 10.9% is estimated and -11.9% for 2017, which marks a remarkable
change of trend for this sector that had has been growing consistently in
recent years.
● Banking and insurance
The financial institutions and insurance sector represent approximately 8% of
GDP. The preliminary results until III 2015, show for the first time in recent
years a contraction of -14.4% and this contraction doubles for 2016 with an
estimate of -32.8% for that year and -30.4% for 2017. The results of both
sectors measured in Bolivars they are spectacular due to the enormous
growth of liquidity: it increased 159% in 2016 and 1,123% in 2017
exponentially triggering the trend of recent years.
● Commerce
Another heading that is showing a negative behavior in the commercial
activity that at IX-2015 there is a contraction of -11.8%, estimating that for
2016 a new Contraction of 34.6% and of 32.06% in 2017: the decrease in
purchasing power caused by the high inflation, the scarcity of products and
the price law. Commercial for import and production at 30%, calculated on

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structures discretionary costs and penalties of up to 14 years in prison for

non-compliance, can be some of the factors that explain these results.

Graph N° 1: Main economic indicators (2012-2016)

Source: Bank of Venezuela

PERU
The Central Reserve Bank (BCR) presented its quarterly inflation report (September
2018) and maintained its forecast of growth of the Peruvian economy for this year at
4%, however, it adjusted most of its estimates.
The growth rate of 4% of the Gross Domestic Product (GDP) for 2018 would be driven
by the sectors Fisheries (30%), Construction (6%), Agriculture (6%) and
Manufacturing (5.6%), according to the latest report of the BCR.
"We have revised upwards the growth of agriculture given the mild climate and the
recovery of the sector after the El Niño Phenomenon (FEN) and is now expanding
strongly. In the June report, we expected 4.8% growth this year and now we believe it
will expand 6% in 2018, "predicted BCR president Julio Velarde. "The growth
projection of the Fishing for 2018 remains at 30%. However, the growth projection of
the Mining and Hydrocarbons sector for this year has been reduced. In the case of

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Metal Mining, we expected a 0.5% growth and now we expect a 1.1% drop, "added
Julio Velarde.
Graph N° 2: PBI by sectors

Source: Central Bank of Reserve of Peru (BCRP)

Graph N° 3: PBI by economic sectors

Source: IEDEP, INEI

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3. GDP BY EXPENDITURE

1. GDP by expenditure

VENEZUELA
Public spending in Venezuela in 2017-12-01, decreased 16.278 million, a 24.62%, to
a total of million euros 54.298 million dollars. This figure assumes that public spending
in 2017-12-01 reached 38% of GDP, an increase of 13 points compared to 2016-12-
01, in which public spending was 25% of GDP.
The position of Venezuela against the rest of the world in 2017-12-01, in terms of
spending, has worsened and its position in the table has gone from position 42 to 55.
However, its position in the ranking of spending compared to GDP and in this case
has improved. Venezuela so it ranks 55th out of 189 countries in the Public
Expenditure ranking in relation to GDP, ordered from less to more spending.
In 2017-12-01, public spending per capita in Venezuela was $ 1,698 per capita. On
2016-12-01 it was 2,236 dollars, then public spending per capita has decreased by
538 dollars. If we look ten years ago we see that then the public expenditure per
person was $ 3,253. Currently, according to its public expenditure per capita,
Venezuela is ranked 97 out of 189 published.
It is interesting to know the destination of a country's public spending. Venezuela,
according to the latest published data, devoted to education a 21 of its public
expenditure, a health 2 and a defense 2.

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TABLE N° 1: VENEZUELA- public expenditure

Fecha Gasto Gasto G. Salud Gasto Gasto Gasto

público Educaci (%G. Defensa público público
(M.$) ón Público (%Gto (%PIB) Per
(%Gto Total) Pub) Capita
Pub)

2017 54.298,0 1,54% 37,72% 1.698$

2016 70.576,3 1,86% 1,09% 25,15% 2.236$

2015 97.067,3 4,06% 1,95% 30,31% 3.116$

2014 106.146, 4,28% 2,49% 50,12% 3.453$

3

2013 95.887,2 4,37% 4,18% 39,67% 3.163$

2012 144.925, 4,66% 3,38% 40,29% 4.848$

0

2011 119.361, 6,12% 2,96% 39,36% 4.051$

2

2010 88.205,1 6,22% 3,36% 31,10% 3.092$

2009 67.895,8 20,66% 6,07% 3,70% 33,27% 2.416$

2008 82.731,6 5,37% 5,14% 34,88% 2.988$

2007 88.717,9 10,09% 5,58% 5,25% 35,95% 3.253$

2006 88.765,8 9,34% 4,61% 5,04% 39,27% 3.305$

2005 47.704,5 5,18% 5,46% 33,53% 1.804$

2004 56.138,7 5,55% 4,04% 31,91% 2.156$

Source: Datosmacro

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Graph N° 4: Public expenditure

Source: Datosmacro

PERU
Public spending in Peru in 2017-12-01, grew 3,154 million, an 8.88%, to a total of
millions of euros 48,660 million dollars. This figure assumes that public spending in
2018-12-01 reached 22 of GDP, a rise of 1 point compared to 2017-12-01, in which
public spending was 21 of GDP. Peru's position with respect to the rest of the world in
2018-12-01, as far as spending is concerned, has worsened and its situation in the
table has gone from 56 to 57. However, its position in the ranking of spending
compared to GDP and in this case has improved. Peru maintains a low percentage
compared to the rest of the countries, which places it 153rd out of 189 countries in the
Public Expenditure ranking with respect to GDP, ordered from less to more spending.
In 2017-12-01, per capita public spending in Peru was 1,529 dollars per inhabitant. On
2016-12-01 it was $1,430, then there was an increase in public spending per capita of
$ 99. If we look ten years ago we see that then the public expenditure per person was
825 dollars. Currently, according to its per capita public spending, Peru is ranked 106
of the 189 published. It is interesting to know the destination of a country's public

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spending. Peru, according to the latest published data,devoted 18 of its public

expenditure to education, to health a 16 and to defense a 5.
TABLE N° 2: PERU- public expenditure

Fecha Gasto Gasto G. Salud Gasto Gasto Gasto

público Educació (%G. Defensa público público
(M.$) n (%Gto Público (%Gto (%PIB) Per
Pub) Total) Pub) Capita

2018 48.659,6 21,61% 1.529$

2017 45.506,0 18,11% 4,60% 21,24% 1.430$

2016 40.952,2 17,85% 15,71% 6,19% 21,05% 1.301$

2015 42.853,3 17,60% 14,52% 7,74% 22,38% 1.376$

2014 45.745,8 16,22% 13,74% 7,03% 22,63% 1.485$

2013 43.562,5 15,22% 12,84% 7,59% 21,55% 1.429$

2012 39.164,4 14,37% 12,54% 7,29% 20,31% 1.300$

2011 33.769,7 13,55% 12,22% 6,98% 19,76% 1.133$

2010 31.178,2 13,56% 11,67% 6,98% 20,97% 1.058$

2009 26.036,5 14,60% 11,45% 7,11% 21,42% 894$

2008 23.778,1 14,53% 10,89% 6,32% 19,54% 825$

2007 18.997,9 14,14% 11,13% 7,01% 18,59% 667$

2006 16.759,0 14,04% 11,71% 7,70% 19,07% 595$

2005 15.109,1 14,28% 12,40% 7,95% 20,18% 543$

2004 12.943,3 15,27% 14,02% 7,13% 19,39% 471$

Source: Datosmacro

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Graph N° 5: Public expenditure

Source: Datosmacro

4. EMPLOYMENT

The Venezuelan economy accumulates in the last four years an abysmal fall of the
PBI close to 40%, in a picture of scarcity that affects the population in general For the
year 2018 during the presentation of the report, Nicolas Maduro indicated that the
vacancy rate in Venezuela was located at 6% last year, a figure far from the initial goal
to reduce unemployment to 4.5% through the Plan of Employment Generation and the
Public Works Plan. The latest official publication on employment figures, provided by
the National Institute of Statistics (INE), occurred in 2016. By then, the agency reported
that the country had an economically active population integrated by 14,124,319
people. Of this figure, 13,089,081 people were doing work and 1,035,238 people were
unemployed. That is, the unemployment rate stood at 7.3%. The total of inactive
grouped 8,396,288 people (37.3%).

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Graph 6: unemployment rates by ages -2018

Source: conflict observatory

The research highlighted that there was less participation economic growth at the
same time demand grew of the population that seeks to insert itself in the market. For
Encovi, said unemployment figure last year it was not greater due to forced migration
to which Venezuelans have been subjected in search of better development
opportunities.
Contraction of employment formal
The companies form an important role since these have led the sources of
employment in the country. Based on the official figures, until three years ago, 79% of
the labor force was working in the private sector. Specifically, 37.5% it was part of a
company's payroll; 32.4% did so on their own account and the rest was distributed
among employers and employers, cooperative members, partnerships of people and
family assistants.

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Graphic 7: Distribution of unemployment in the private sector

Source: conflict observatory

Only in 2018, according to the Venezuelan Confederation of Industrialists

(Conindustria), some 700 industries closed their doors. This situation translated into
fewer job opportunities. It is estimated that they have stopped generating more than
1,500,000 direct and indirect jobs. "For the workers it was a black year, not only
because of the loss of the purchasing power of the salary, but because of the absolute
loss of employment," said Maryolga Girán, president of the Labor Commission of
Conindustria.
On the other hand, youth work has been affected since employment in the public
sector is not sustainable, as happened with the young people of the Plan youth work,
who were hired for a determined time for the restoration of public works.

PERU
According to the Permanent Employment Survey of INEI, during 2017 the employed
population in Lima Metropolitan grew 1.5 percent, slightly lower than the rate of 2016
(1.8 percent. In contrast, employment fell in the construction and manufacturing
sectors, (-4.3 and -1.4 percent, respectively). This evolution occurred in a context of
increased production in the sectorstrade (1.0 percent) and services (3.4 percent) and
a slight drop in manufacturing (-0.3 percent).

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Magnitude and growth of the Working Age Population

For the year 2017, according to results of the National Household Survey, the
Population in Working Age reached the 23 million 771 thousand 700 people, of which,
79.7% (18 million 936 thousand 300 people) reside in the Area Urban and the
remaining 20.3% (4 million 835 thousand 400 people) in the Rural Area. On the other
hand, the Costa concentrates the 57.5% of the total population in Working Age (13
million 668 thousand people), the Sierra, 30.3% (7 million 206 thousand people) and
the Jungle, 12.2% (2 million 897 thousand 700 people).

TABLE N° 3: Active population

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Graphic 8: participation of people of working age

Economically Active Population (EAP)

By 2017, the Economically Active Population nationwide reached 17 million 215
thousand 700 people and records an average annual growth rate of 1.5% between
2007 and 2017.In terms of Absolute, has meant an increase of 231 thousand people
per year. On the other hand, the Urban Area it concentrates 77.8% of the PEA, while
the Rural Area the remaining 22.2%.The PEA increased by 1.9% in 2017 compared
to the previous year, in the Urban Area there is a 2.5% increase; while in the Rural
Area it decreased by -0.5%.

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TABLE N° 4: Active population according to geographical area

5. MONETARY POLICY
The monetary financing of the BCV of the deficits of public management has
contributed to increase liquidity monetary value by 158% until week ending on March
16, 2018, and to the monetary base in a 153%. In a coming economy suffering a sharp
fall in his offer, this cannot but highlight the general price rise. The Finance
Commission of the AN register increases in the Index of Consumer Prices of 84.2%
and 80% for January and February of this year, respectively, an inflation accumulated
of 231.6% in what goes of the year.
Graphic 9: Monetary Variables

Source: Central bank of Venezuela

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The relationship between monetary variables and the level of international reserves
highlights the precarious support that has the bolivar at the official rate of change. The
price of the dollar in the called parallel market rose from Bs 111,413 at the beginning
of the year, a Bs. 215,753 for Friday the 16th of March, having reached Bs. 266,630
on January 28. Such volatility is explained by this being a marginal market, given the
severe rationing of currencies at the rate official, very influenced by expectations
adverse to the reluctance of government rectify its policies.

PERU
In September and December 2018, the monetary policy of the BCRP matured an
expansive position, with the objective of guaranteeing that inflation and its
expectations remain within the target range, in a context of economic activity that
continues below its potential. Where the reference interest rate remained at 2.75
percent between September and December.
On the other hand, the real interest rate was around 0.3 percent in this period, below
its neutral level estimated at 1.75 percent hundred and one level of inflation around
2.0 percent.
Graphic 10: Reference interest rate

Source: Central Bank of Peru

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6. Overall Non-Financial Public Sector and public debt.

TABLE N° 5: Operations of the Non- Financial Public Sector

Shows the flow of operations of the non-financial public sector with a trimestral
periodicity. Among the main components, the following may be reflected: Current and
capital income, in which the flows are constituted by tax and non-tax revenues. Current
and capital expenses. Current expenses and in turn they are divided into financial and
non-financial. Primary result, by not considering financial expenses provides a better
evaluation of the management of the period presented. Economic result, a deficit
implies the increase of public debt.

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Graphic 11: Public Expenditure

Source: BCRP

Graphic 12: Public Expenditure by Millions

Source: BCRP

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In 2017, Peru reached the highest fiscal deficit level in this millennium, obtaining a
result of 3.1% of GDP, according to figures from the Central Reserve Bank of Peru
(BCRP). With regard to income, these fell to their lowest levels since 2002, which
shows a serious problem of tax collection, linked to the economic slowdown in recent
years.Broadly speaking, it is necessary to resort to the issuance of public debt. For
example, according to the Ministry of Economy and Finance, 31% of reconstruction
works will be financed through the issuance of debt; however, as happens to
individuals, the government has a budget constraint and should not in debt indefinitely.

Graphic 13: Public expenditure to third trimester

According to figures from the BCRP, the first quarter of 2018, the balance of non-
financial public sector debt amounted to S / 168,825 million (23.7% of GDP), an
increase of 10.1% over the same period of 2017 (S / 153,393 million, 22.9% of GDP).
Of this total, S / 61,298 million (36%) corresponded to external public debt and S /
107,527 million (64%) to internal public debt.

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External Debt in Venezuela remained unchanged at 0 USD Million in September from

0 USD Million in August of 2018. External Debt in Venezuela averaged 258.44 USD
Million from 1996 until 2018, reaching an all-time high of 2189 USD Million in
September of 2013 and a record low of 0 USD Million in June of 2007.

Graphic 14: External debt of Venezuela

Source: BCV

PUBLIC DEBT OF VENEZUELA

Venezuela’s Public Debt: Total data was reported at 148.707 USD bn in Dec
2016. This records a decrease from the previous number of 171.999 USD
bn for Dec 2015. Venezuela’s Public Debt: Total data is updated yearly,
averaging 44.103 USD bn from Dec 1996 to 2016, with 21 observations.
The data reached an all-time high of 171.999 USD bn in 2015 and a record
low of 27.401 USD bn in 1997. Venezuela’s Public Debt: Total data
remains active status in CEIC and is reported by Ministry of Economy,
Finance and Public Banking. The data is categorized under Global
Database’s Venezuela

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Graphic 15: Public Debt of Venezuela

Source: CEIC

Source: CEIC

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7. FISCAL POLICY.

Venezuela has carried out the nationalization of the industry and its impact on fiscal
policy has generated distortions over time as government officials allocated huge
amounts of disparate resources and policies and not those that market forces actually
showed. .
The fiscal policy applied in Venezuela, has been poorly managed over the years, as a
consequence today the country presents one of the highest fiscal deficits in Latin
America and is in a process of stagnation and inflation which is difficult, more not
impossible to leave. Fiscal has been badly taken by many governments and have tried
to implement economic packages that reactivate the Venezuelan economy. But has
not been able to control the Public Expenditure and much less has created a tax
culture in the Venezuelan citizens and companies.
When there was a prosperous growth in the oil area, the governments had a large
public expenditure due to a large number of subsidies and royalties and a too risky
debt policy. While oil export revenues were enough to cover public spending, no
efficient economic or tax policy has ever been developed.
The fiscal instruments used in economic policies were few, poorly implemented and
uncontrollable.
In Peru, the central bank had the usual function of granting credit to state sectoral
banks with the apparent objective of promoting growth. These lines of credit were a
usual source of base money creation. The banks would then lend to private and public
companies. Most of the central bank's credit ended as a credit to the non-financial
public sector.
Fiscal policy in Peru has been characterized by being pro-cyclical, which tends to
generate greater macroeconomic volatility.

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Graphic 16: Fiscal deficit and financing

Source: BCRP
Only in recent years, Venezuela is suffering a more standard period among Latin
American economies of hyper-inflation, fueled by a substantial and systematic process
of government deficits that in the absence of external credit are being financed by
seignior age and the inflation tax. Figure 3 documents the government deficit as a
proportion of GDP from 1960 to 2016, it also reports the primary deficit which excludes
interest payments on public debt.

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Graphic 17: Real GDP

Source: Economics

8. BALANCE OF PAYMENTS AND TRADE BALANCE

The trade balance of Peru recorded a deficit in 2014 (-1,509 million dollars), 2015 (-
2,916 million dollars) and as of 2016 registered a surplus (1,888 million dollars) with
an upward trend.
Thus, the issuing entity projects a surplus of 5,609 million dollars for this year and
7,136 million dollars for 2018 and 7,092 million dollars for 2019.
Velarde said that the effect of the growing surplus on the balance of trade will be the
pressure on the dollar to the downside.
On 2017-12-01 Venezuela recorded a surplus in its commercial balance of 18,505
million euros, 15% of its GDP, higher than the surplus reached in 2016-12-01, of
10,047 million euros, 11,121 million dollars, the 4 % of GDP. The variation of the trade
balance has been due to an increase in exports from Venezuela, accompanied by a
decrease in imports
If we take as a reference the trade balance with respect to GDP, in 2017-12-01
Venezuela has gained positions. It has moved from position 35 that occupied in 2016-

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12-01, to be placed in position 14 of said ranking, then its surplus is high compared to
the rest of the 190 countries in the ranking.
If we look at the evolution of the balance of the trade balance in Venezuela in recent
years, the surplus has increased compared to 2016-12-01 as we have seen, as it
happens with respect to 2007-12-01, in which the surplus it was 17,427 million euros,
which represented 11% of its GDP.
In the lower part of the page you can see the table and the map of Venezuela's trade
balance with respect to each of the countries with which it trades. In green, the
countries with which the trade balance is positive for Venezuela, exports with more
value than imports, and in red the countries with which the balance is negative, imports
from that country greater than Venezuela's exports at the same.

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TABLE N° 6: Balance of Payments

Source: BCRP

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Graphic 18: Balance of Payments- trade balance by millions

Source: BCRP

9. COMPETITIVENESS
Venezuela is ranked 188 out of 190 nations; The World Competitiveness Ranking of
the International Institute for Management Development (IMD) places the country in
the 63rd position out of 63 countries, and among the 149 countries that the Global
Competitiveness Report of the World Economic Forum takes into account, it appears
in position 127.
In the first measurement, Venezuela is located with the country with the worst
conditions of all to start a business, in position 152 in relation to the ease to process a
construction permit and in 186 in terms of the conditions to get electricity; to register
properties, another of the basic conditions for the generation of a company, the
difficulties place it in position 138 among the 190 countries.
In the measurement of the IMD, on the other hand, the country occupies the worst
position in the four categories that are taken into account: behavior of the economy,
government efficiency, efficiency of business and infrastructure, while in the World
Economic Forum its qualification in macroeconomic stability is zero over 100, and in
other factors such as Institutions (27), business dynamism (28) and innovation
capacity (31) does not have the best results either.

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The Peruvian economy is ranked 63th globally (out of a total of 140 countries,
accounting for 90% of world GDP) and sixth in Latin America, according to the recent
Global Competitiveness Report 2018 prepared by the World Economic Forum - WEF.
It is worth mentioning that this year the WEF presents the Global Competitiveness
Index 4.0, a renewed edition with structure and indicators different from previous
years. Therefore, the WEF emphasizes that the results of this year are not comparable
with previous reports.
The need to update it was highlighted by the combination of the persistent effects of
the great recession of 2008 and the increasing pace of the Fourth Industrial Revolution
(4IR), which is producing, among other effects, an acceleration of the innovation cycle
and making business models obsolete at a faster pace, explained the WEF.
Position 63 worldwide The Global Competitiveness Report 2018 indicates that the
main strength of Peru is Macroeconomic Stability. Meanwhile, the main weaknesses
in indicators of the pillars remained: Institutions, Infrastructure, Education, Labor
Market and Innovation Capacity.

Graphic 19: Competitiveness about Peru

Source: World Economic Forum

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Graphic 20: Competitiveness about Venezuela

Source: World Economic Forum

10. INFLATION

The hyperinflation in Venezuela began in November 2017, when a monthly inflation of

56.7% was registered and 1370%; in that period the creation of the 100 000 bolivars
bill was announced. According to estimations of the Monetary Fund International
(IMF), inflation in Venezuela will reach 10 000 000% by 2019. It is considered the worst
hyperinflation in American history. During the first administration of Nicolás Maduro,
accumulated inflation in the country was 5 395 536 286%. The situation that has led
Venezuela to out-of-control inflation has evolved rapidly since 2013 as a domino effect
after the death of then President Hugo Chávez. The economic policies,
which the country would follow under the mandate of the new president of socialist
profile Nicolás Maduro, and the fall in prices and oil production led the country to an
economic recession.
In 1990, at the end of the first government of President Alan García, inflation reached
7,200%, reaching a South American record at that time. The cause was the same, an
increase in demand for excess public spending, without generating sufficient income.

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Some Peruvians remember with terror that time, because a serious conceptual error
was committed, trying to control the symptom with price regulation and not the cause
itself (the imbalance), so that only the problem worsened and shortages were
generated, affecting especially to lower income families the case of Venezuela, with
an inflation of 2,600% last year and an expectation of 13,000% for this year.
The Chavez government blames hyperinflation on business speculation. He claims to
be a victim of a planned economic war from Washington. The opposition, on the other
hand, blames the hyperinflation and the shortage on the controls model established
by the ruling party and denounces that in Venezuela it is not profitable to produce.
Maduro also accuses the increase in prices to people who send products purchased
in Colombia to Venezuela.

11. EXCHANGE RATE

The currency market is the one that regulates the purchase and sale of these and also
allows a normal flow of foreign currency, the exchange rate and how they are sold is
determined by the Central Bank of Venezuela along with the National Executive.
The growing dependence of the Venezuelan economy on imported products has
ended up being a terrible bet of the government. With the fall in the price of oil and the
drastic decline in its revenues, the government has had to resort to external
indebtedness. Venezuela increased its external debt since 2008 by US $ 78,266
million and decreased international reserves by almost US $ 13,700 million in the last
4years.

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 Peruvian Economy

Graphic 21: Value of currency

Venezuela has official zed on Tuesday the devaluation of its currency 95.8% after the
official exchange rate passed from 2.49 to 60 sovereign bolivars, the new national
currency that came into effect on Monday and will be anchored to the petro, what is
the government cryptocurrency called? As announced by the head of state, Nicolas
Maduro, each petro has a value of 3,600 sovereign bolivars, which yields a resulting
change of 60 bolivars to the dollar. The IMF said that the serious Venezuelan
economic crisis, added to the fall of the forecasts in Mexico and Brazil, reduced the
forecast of development in Latin America in 2019, which will grow 1.4% this year and
2.4% in 2020.
12. POVERTY

The crisis in Venezuela leaves horrible consequences in society. This is indicated by

the Living Conditions Survey 2018, which shows alarming figures: poverty grew 10%
in three years, 90% of Venezuelans do not have enough income to buy food and in
the country now life expectancy is 3, 5 years shorter.
"In the last three years, multidimensional poverty grew by 10 points and in 2018 it
reached half of households (51%), while 80% of households are at risk of food
insecurity, because 90% of the population has no income enough to buy food, "said
the director of the Institute of Economic and Social Research of the UCAB and

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coordinator of the Encovi, Anitza Freitez, at an event on February 27 to present the

results of the survey.
Taking into account also all that has happened corresponding to the marches and
revolts given by the militants of the opposition party, which has suffered a lot of
repression and abuse, such as beatings, insults and even death leaving a country
totally devastated and on the edge of the collapse, making people who are poor in
Venezuela become increasingly poor, without any kind of alternative to get ahead or
to leave the country.

Graphic 22: Poverty in Venezuela

Source: El Pais

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Peru
In the graphic 22 shows the value of the extreme poverty line for the period 2007-
2017. For this last year it is S /. 183 soles per month for each person who makes up a
household, that is, the value of food from a socially accepted basket, necessary to
cover a minimum of energy requirements. Between 2016 and 2017, the extreme
poverty line shows a growth of 3.5%, from S /. 176 soles at S /. 183 soles

Graphic 23: Poverty in Peru

Source: INEI
Comparing the results by area of residence, between 2016 and 2017, the line of
extreme poverty in the urban area is the one that registered an increase of 3.7% and
in the rural area 2.4%. The extreme poverty line in the rural area represents 80.1% of
the line of extreme poverty of the urban area.

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CONCLUSION

Venezuela is immersed in an economic, social and political crisis without the

public policies that have produced greater poverty, violence and friction
between different groups of society. History shows that collectivist ideologies
implemented in human societies must, in turn, from authoritarian or total
regimes to put them into practice. In contrast, a political, economic and social
system is based on the rights to life, freedom and individual property, are
favorable to all dreams and quality of life. Likewise, an institutional order that
does not protect property rights, the exercise of highly discretional power and
that grants privileges over one another with high degrees of corruption is the
true exploitation of man by man.
If you add the average annual value of foreign currency that did not enter the
blockade (19,200 million), plus what the country had to pay average each
year corresponding to external debt (3,300 million), it can be concluded that
the economy and the company suffered an international asphyxiation of 22.5
billion dollars a year resulting from a deliberate international strategy of
financial isolation. Evidently this financial pressure intensified since 2015
with the fall in the price of crude oil. And the current account deficit fell rapidly
from 4.8% of GDP in 2015 to 1.1% in 2017. Net international reserves
remained at a stable level and, by August 2018, amounted to 27% of GDP.
Average inflation stood at 2.8% in 2017, within the target range of the Central
Bank.

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REFERENCES
Recovered by: http://www.bcrp.gob.pe/politica-monetaria.html
Recovered by: http://www.bcrp.gob.pe/publicaciones/reporte-de-inflacion.html
Recovered by: http://www.bcrp.gob.pe/estadisticas/graficos-dinamicos.html
Recovered by: http://www.bcv.org.ve/politica-monetaria/lineamientos-de-pol-tica-monetaria
Recovered by: http://www.bcv.org.ve/estadisticas/tasas-de-interes

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