Saturday, February 07, 2009

Some numbers that would make Tosh smile 

There has been a running debate on this blog for over a year between a reader named Tosh and myself regarding Venezuela's economic policies. While it has covered many different aspects of economic policies it boils down to my concern that Venezuela is not investing enough and production is stagnating. Tosh things they are investing a lot and that in due time production will increase.

Up until now I think the proponderance of data has supported my position. However, today a snippet of data came out which was both good for Venezuela and supportive of Tosh's beliefs.

I am referring to Venezuela's automobile sales for January 2009. First, they are down compared to 2008 by 43%. That in itself is neither good nor bad. Given the economic realities the country is facing it is probably to be expected and cutting down on excessive consumption is probably necessary.

However, it is the break down of that number that is interesting. Namely, sales of imports vehicles declined 65% while sales of domestically manufactured vehicles went up 33%. That is, the overall market declined but the domestic output still increased as domestic production substituted imports - exactly as it needs to do if Venezuela is to industrialize.

Of course this is only one number for one month. Further, we don't know how much progress they are making in terms of having more locally produced content for those vehicles.

BUT, this is undeniably a good number and if we start to see this sort of development not just with automobiles but with other products as well Venezuela could make substantial progress even in the face of a recession, exactly as I said it could. I still believe they are not investing enough nor following other policies that would favor industrialization. But data like this bears watching.


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