Andean Group - December 2007 (ISSN 1741 4466)

The central bank, still independent thanks to the result of the referendum on constitutional reform on 2 December, increased interest rates by one percentage point on 3 December to try to slow down the economy. It is now paying banks 11% for one-month money and 12% for two-month money. The central bank is also going to allow commercial banks, who are swimming in Bolí­vares thanks to the strength of oil prices and the effects of exchange controls, to deposit Bolí­vares in dollar denominated accounts from 21 January 2008. This may be the first step at easing exchange controls and should allow excess Bolí­vares in the domestic economy to escape, thus reducing inflation. Currently the black market rate for the dollar is B$6,000. The official rate is B$2,150.

Inflation: Consumer prices rose by 4.4% in November, the highest monthly rate for four and a half years. This pushed the annual inflation rate to over 20.7%.

GDP growth: The economy grew by 8.7%, year-on-year in the third quarter, according to the central bank. The country's total GDP is now around US$200bn. The central bank noted that the public sector is growing much faster than the private sector. In the third quarter growth in the private sector was 5.5% while the pubic sector expanded by 12.7% year-on-year. The non-oil sector expanded by 9.7%.