by MARK WEISBROT and JAKE JOHNSTON
Executive Summary
For most of the past 13 years, most of the discussion of Venezuela’s economy has either assumed or concluded that it was headed for some type of collapse. During the first four years of the Chávez administration, when the government did not control the national oil company (PDVSA), there was indeed a great deal of economic instability. This culminated in the military coup of April 2002, and then an economically crippling oil strike (December 2002-February 2003). The oil strike caused an extremely severe recession, with a loss of 29 percent of GDP. However, even after the strike was over, analysts predicted a dire future and a slow, difficult recovery.
International Monetary Fund (IMF) forecasts repeatedly underestimated GDP growth by a gigantic 10.6, 6.8, and 5.8 percentage points for the years 2004-2006.1 Instead, the recovery was very rapid and the economy grew at a record pace over the next five years, with real GDP nearly doubling from the end of the oil strike (first quarter 2003) through the fourth quarter of 2008.
When oil prices collapsed in the fourth quarter of 2008, many analysts concluded that Venezuela’s day of reckoning had finally come. A recession began in the first quarter of 2009, and forecasts remained dire well beyond the beginning of the recovery in the second quarter of 2010. In 2011, the Venezuelan economy defied most forecasts by growing 4.2 percent, and is up 5.6 percent for the first half of 2012.