Thursday, February 23, 2006

Who put the country in debt? 

One of the cries of the opposition has been that Chavez has been running up debt to unprecedented levels. Currently Venezuela's total debt, internal and external, is around $45 billion dollars. Certainly having this level of debt is not good as just paying the interest on it eats up a lot of resources. So it would be good to see this debt be reduced.

However, there was an interesting article in Panorama newspaper where the former Venezuelan Finance Minister, Tobias Nobrega, gave some historical perspective to Venezuela's debt (and if there is one thing the opposition shills avoid like the plague it is historical perspective).

Nobrega pointed out that the key measurement of debt is its size in relation to GDP. Measured that way Venezuela's debt currently stands at 39% of GDP and is expected in the current year to fall to 32% of GDP. By way of comparison the average debt ratio in the European Union is 60% and in the U.S. it is 75%.

Moreover, historically speaking this debt ratio is lower than it was under the proceding Venezuelan governments. Here is the historical data given in the article:

From 1958 to 1968, the first decade of democracy in Venezuela, the debt load averaged 6.5% of GDP and in 2000 dollars averaged $2.3 billion (all dollar terms will be in constant 2000 dollars)

During Calderas first administration it doubled to $5.2 billion dollars and 11% of GDP

During Carlos Andres Perez's first term it went up 500% to $25 billion or about 30% of GDP.

During the government of Luis Herrera Campins it went up in dollar terms to $28.6 billion but fell in relation to GDP to 26%.

During the Lusinchi administration it hit $48.75 billion and was 74% of GDP.

During CAPs second term it aveaged 67% of GDP and with a peak of 85% in 1989.

During Calderas second term the debt averaged $33 billion and 50% of GDP with a high point of 69%

During Chavez's first few years, 99 to 2001, the debt averaged 29% of GDP and $32 billion. During the period 2002-2003 (with the coup and strike) it went up to 46% of GDP. As the economy recovered it fell again to 39% of GDP.

So looking at it from a historical perspective under Chavez has had a LOWER debt load than under some previous administrations and the debt is fairly stable, tending now to 32% of GDP after being 29% during his first years in office. A pretty good record and anything but the worst government Venezuela has ever seen as we so often hear the opposition propogandists say. The reality is the famed fourth republic (the period when the opposition was runnign the country) inheritted from the Perez-Jimenez dictatorship a country with minimal debt and had it balloon on their watch to unprecedented proportions. And in spite of that sorry record they have the audacity to criticize Chavez. They are nothing if not shameless.


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