By Humberto Márquez
CARACAS, Oct 10 2005 (IPS)

Fernando Rodríguez was recently married and adopted a two-year-old son. He takes classes at the university, works part-time as a chauffeur and runs a flower stall with his wife. “I need a car for all of that, which is why I’m in line for Venemóvil,” he told IPS.

Venemóvil is a programme sponsored by the Venezuelan government in conjunction with automobile assembly plants to exonerate small economy cars, whose cost runs between 8,000 and 9,000 dollars, from the 14 percent value added tax. These affordable compact vehicles have been at the core of the car industry’s phenomenal success in the past year.

Like Fernando, thousands of Venezuelans are “lining up” for the 25,000 cars assembled in the past four months. Venezuela’s Chamber of the Automotive Industry reported that 136,196 new vehicles were sold from January to August, 82 percent up from the same period in 2004.

The banking system registered a 13 percent monthly rise in car loans, a 12 percent rise in home loans, and a six percent rise in credit cards.

Consumption has also grown in foodstuffs, to which Venezuelans dedicate one-third of household income on average (a proportion that rises to two-thirds among the poor), according to the private polling firm Datanálisis.

The increase in food purchases is partly due to the Mercal programme launched two years ago by the government of President Hugo Chávez, which set up a chain of shops that sell staple food products and other essential items to the poor at subsidised prices.. Mercal now covers 47 percent of the market for food.

The programme offers products at 25 to 40 percent below market price, and the 14,000 shops sell a total of 4,000 tons a day of foodstuffs in this country of 26 million people.

“I wouldn’t say that the families in this neighbourhood buy more food now, but their money certainly stretches farther in the Mercal shops,” Elena Rodríguez, who lives in El Observatorio, a poor district in western Caracas, told IPS. Rodríguez is the head of her household, which has a total income of 270 dollars a month, one and a half times the minimum monthly wage.

The fact that Venezuelans spend less on food and tend to have more money in their pockets these days explains the “boom” in purchases of consumer goods like clothing, footwear, home appliances and furniture, as well as the brisk business being done by restaurants, car dealerships and real estate companies.

“We have had six quarters of Gross Domestic Product (GDP) growth, with a never-before-seen increase in oil revenues,” Albis Muñoz, the head of the economy commission in the retailers association and an outspoken opponent of the Chávez administration, remarked to IPS.

Luis León, director of Datanálisis, told IPS that sales were up this year for all of his large private sector clients.

A spokesman for the franchise sector commented to IPS that “wise businesspeople are turning to products with a smaller profit margin that are however in high demand in lower-income sectors, whose buying power has improved.”

“The goods that are most highly consumed are food, vehicles, and traditional retail products overall,” said Muñoz.

He pointed to “an increase in liquidity, which closed in December 2004 at 46 trillion bolivars (21.4 billion dollars) and reached 57 trillion (26.5 billion dollars) in September.”

Venezuela’s Central Bank reported that in the first half of this year, the economy grew 9.3 percent, after expanding 17 percent last year. That growth, said the Bank’s experts, was fuelled by “a 20.8 percent increase in internal aggregate demand, and within that, an 18.1 percent increase in private final consumption.”

The driving force behind this rise in consumption are greater oil profits, amounting to 30 to 35 billion dollars a year. Venezuela exports some 2.5 million barrels a day of crude at an average price this year of 43 dollars a barrel, compared to 32 dollars in 2004 and 26 dollars in 2003.

The Chávez administration launched around a dozen social programmes, including an adult literacy drive that provides monthly grants equivalent to half of the minimum salary to around half a million adults taking literacy courses or who have continued their primary or secondary studies.

The government also regulates the prices of some 20 staple food products and 100 essential medicines. In addition, the state has placed controls on public utility rates and the fees for several banking transactions.

Thousands of cooperatives have also received financing for their undertakings, which mainly involve services provided in both urban and rural areas. The state has indexed the minimum wage to inflation (the inflation rate so far this year is 11.6 percent) while paying off hundreds of millions of dollars so far in back wages to public employees.

“Our concern is that this expenditure will not be sustainable, because if savings and investment do not expand, it will be very difficult to maintain GDP growth,” said Muñoz.

“Unfortunately, (oil profits) have just been spent for decades in Venezuela, while investment, both public and private together, amounts to less than 15 percent of GDP,” he added. In its report “Where Is the Wealth of Nations”, released in September, the World Bank noted that Venezuela is among those countries with a negative savings rate. The study points out that like fellow oil exporters Gabon and Trinidad and Tobago, Venezuela consumes more than it invests.

In the 1970s, when oil prices rose threefold, Venezuela experienced a boom of petrodollars that won the country’s upper and middle classes fame around the world for their shopping sprees. They became known for the phrase “That’s cheap. Give me two!”

Although that is a thing of the past, consumption is clearly up again today. “What else am I going to do with the money?” asked Estela, a lawyer who was trying to decide between two TV sets with liquid crystal screens at a cost of thousands of dollars in Pabloelectrónica, a shop packed with customers in downtown Caracas.

“It’s worth having one of these for watching movies on cable TV,” she told IPS.

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