Andean Group - 8 February 2005

The surge in oil prices has heartened consumers. The consumer-confidence index is now at its highest level for 24 years, according to a report commissioned by the Venezuelan-American chamber of commerce. Edmond Saade, the president of Datos Information Research, which carried out the report, said that the consumer confidence index had risen because there were more jobs, spending power was rising and the political situation was clearer. He said that 98% of Venezuelans were feeling better off: this, he said, was a direct result of the government's policy of subsidising food, health and education.

OUTLOOK

This optimism is likely to continue. Oil prices ended January US$7 a barrel higher than they started the month, at US$38.8 a barrel. Between 1998 and 2004, the average export price of the country's oil increased by 214%. In 2004 the state-owned oil company, Petróleos de Venezuela, handed over a record B$22.9 trillion (US$11.9bn) to the government. This was 60% more than the government had budgeted. The government has kept a lid on inflation by controlling a lot of prices and providing subsidies for staples though the network of 12,000 government markets, known as Mercal. Inflation came down from 27% in 2003 to 19.2% in 2004, even though the money supply increased by 50%.
Inflation: The rate for January was 1.9%, the central bank reported. This brought the lagging 12-month rate down to 18.5%. The central bank said that the increase was due to substantial rises in unregulated food prices (principally vegetables).