Weekly Report - 24 February 2004

VENEZUELA | Rebound in late 2003. In the last quarter of 2003, GDP was 9% higher than a year earlier. This was largely driven by a 25% expansion of the oil economy, boosted by improved world prices as well as the recovery in output levels (still below pre-crisis levels). The non-oil economy grew by 3.9%, largely thanks to a 16% expansion of manufacturing offsetting a 15% fall in construction. The latter has meant a slower-than-expected improvement of the unemployment rate, which stood at 16.8% at the end of the year, 2.4% lower than at end-June.

It must be kept in mind that the baseline for these figures was very low: GDP in the last quarter of 2002 was 17% lower than a year earlier, mainly because of the early impact of the opposition's strike-cum-lockout. For 2003 as a whole, GDP was down 9.2% (a slightly steeper fall than the 8.9% recorded in 2002). For this year the government is predicting a growth rate of 6.5%. Full recovery remains a fair distance away: per-capita GDP is currently at the same level as back in 1958.

BOLIVIA | Business divided over Mesa plan. Business associations are divided over President Carlos Mesa's fiscal plans, which include austerity in the public sector, eliminating the subsidy on fuel prices, tightening taxation of the oil sector, and introducing two taxes (one of 0.3% on financial transactions and one of 1.5% on assets of more than US$50,000).

The umbrella private-sector body, Confederación de Empresarios Privados de Bolivia (CEPB), has expressed support for the plan but one of its most important members, the Cámara de Industria, Comercio, Servicios y Turismo (Coinco) of Santa Cruz, openly voiced its dissent, claiming that its effects will be recessive and describing it as part of `a plot by the Altiplano [the highlands] against the productive regions' of the country. The Cámara Nacional de Comercio, for its part, criticised the two new taxes as having a dampening effect on growth.