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Chávez political allies also performed strongly in regional elections,
obtaining 13 of the 23 governorships, although the opposition emerged
victorious in two key state elections (industrial Carabobo state and
oil-rich Zulia). However,
despite decentralization attempts under past governments, national control
over provincial resources remains centralized and thus Chávez is unlikely
to be affected significantly by these opposition victories. Moreover, the political constellation in Congress will
greatly facilitate governance since the strong electoral mandate will
enable Chávez not only to continue to use his popular support but also
his legislative strength to force his policy agenda through Congress.
Public sector spending raises inflationary expectations.
Chávez was re-elected on a strong populist agenda and
continued public discontent with the traditional political elite.
His electoral pledge for the coming 2000-2006 term is to improve
the poor economic and social conditions by revitalizing the ailing economy
primarily through increased public sector investment and the adoption of
important economic legislation. The
success of the Chávez administration's economic policy will hinge
fundamentally on the availability of fiscal resources and the recovery of
the economy, both of which depend heavily on persistence of favourable oil
prices. On 11 August, the year to date average for the Venezuelan
basket remained at a high of US$ 25.41 per barrel.
High government spending and the up-tick in economic activity are
anticipated to increase pressure on prices.
Economic growth resuming.
According
to the president, the economy grew between 2-3% in the second quarter of
this year, up from 0.3% in the first quarter.
The most recent data from the Central Bank confirms that economic
activity is resuming. According
to the Central Bank, production in the manufacturing industry rose 12.6%
in May over the same month last year, while national retail sales grew by
a solid 30.7% for the same period. April
data for other sectors shows, that mining and sugar production performed
strongest among all sectors, registering over 40% year-over-year growth.
Oil production increased a more modest 4.3%, whereas cement output
was down 16.6% reflecting a continued slump in the construction industry.
While the release of official data from the Central Bank is still
pending, the president's announcement is well in line with this month's
Consensus Forecast figure.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Venezuela. For more details please click here.
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