Untitled - Banco Central de Venezuela

2009
YEAR-END ADDRESS
BY THE PRESIDENT
OF THE CENTRAL
BANK OF VENEZUELA
Caracas, December 2009
© 2009, Banco Central de Venezuela
Caracas-Venezuela
Cataloging in publication (CIP)
Biblioteca Ernesto Peltzer
Central Bank of Venezuela
Year-end Address by the President
of the Central Bank of Venezuela, 2009-48 p.
Previous title:
Year-end Address by the President
Central Bank of Venezuela
Caracas: BCV, 1976-1993
Dewey Ranking: 330.987064
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VENEZUELA – ECONOMIC CONDITIONS
CENTRAL BANK OF VENEZUELA
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AUTHORITIES
BOARD
Nelson J. Merentes D.
Acting President
Rafael J. Crazut
Bernardo Ferrán
Jose Salamat Khan Fernández
Armando León Rojas
José Félix Rivas Alvarado
Jorge Giordani
(Representative of the
Executive Office)
ADMINISTRATION
Nelson J. Merentes D.
Acting President
Translation:
Víctor Díaz
José Manuel Ferrer Nava
First Executive Vicepresident
I
OVERVIEW
11
II
A SUMMARY OF THE
III
NATIONAL MACROECONOMIC RESULTS
23
IV
CHALLENGES AHEAD FOR 2010
36
V
STATISTICAL APPENDIX
39
GLOBAL ECONOMY
21
The Central Bank of
Venezuela strengthens
its coordination with
the National Executive
to transform the
economic and social
model
In spite of the great uncertainty created
by the international financial crisis, the
measures adopted represent a protection
against negative impacts. The decisions
of the issuing bank in terms of monetary,
financial and exchange policies were
oriented to widen the path of socioeconomic development.
This document may be consulted at
www.bcv.org.ve
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 7
As President of Central Bank of Venezuela (BCV) and on behalf of its Board of
Directors, I salute all fellow citizens of this beautiful country and send New Year
and Christmas greetings. I would also like to wish them a successful year, filled with
peace and prosperity.
I believe this is the best occasion to present to you a balance of BCV’s management
during 2009.
In the past few years, we have accompanied the National Executive in its efforts to
develop a new economic and social model which, not only promotes economic growth
but also aims to lowering poverty, promoting equity, gender equality, social inclusion,
community participation and, finally, achieving sustainable human development.
In line with these actions, the beliefs on which they are based and, what it is stated
under the socio-economic regime provided in the Constitution of the Bolivarian
Republic of Venezuela and in the Economic and Social Development Plan of the
Nation 2007-2013, the definition and implementation of our policies were oriented
towards promoting and providing the necessary conditions to mitigate the impacts
of the global economic crisis and continue advancing towards a sustainable growth,
price stability and the preservation of the domestic and foreign currency value; all
this, without leaving aside the human and social spirit that must accompany such
policies by continuously paying special attention to the needs, requests and initiatives
of the communities, particularly those most vulnerable.
Aware of our responsibility as public servers, we kept a permanent relationship with
different sectors of the Venezuelan society through several programs and activities
in the fields of inter-institutional cooperation and social commitment. The social,
educational and cultural works, as well as progressive approaches to the community,
were also part of our priorities.
It is important to recognize that our workers are our essence. They have demonstrated
their great vocation to service and their commitment and loyalty to the institution.
Therefore, they are the key to success in our management, as well as the support and
stimulus in rough moments when a profound commitment is required. Our sincere
gratitude to all of them since the homeland is made by its people, the men and women
who build it and ennoble it.
The definition and implementation
of our policies were oriented
towards promoting and providing
the necessary conditions to mitigate
the impacts of the global economic
crisis and continue advancing
towards a sustainable growth.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 9
I/
OVERVIEW
The world economy is still suffering the hard times of the profound crisis that was
intensively spread in the second half of 2008. The impacts of the crisis have several
manifestations, such as: the variability of food prices, the instability of the energy
market, the decrease of productive activities, the international financial market
imbalance, high rates of unemployment and the downturn in investment and social
protection programs. In spite of the great uncertainty generated by the crisis, the
BCV, along with the National Executive, managed to protect Venezuela from its
impacts and to continue laying the foundations for the transformation of the social
and economic model.
Likewise, the Bank has permanently been monitoring various indicators (monetary,
fiscal, exchange rate, production and social) in order to send early warnings and to
define policies and actions deemed relevant.
It is fair to recognize the effectiveness of the policies adopted by the National Executive, basically by rescuing our sovereignty in terms of the use and distribution of
our oil income, as well as the promotion of the idea of a multipolar world and of
a regional integration strategy made concrete in different aspects, such as energy
integration, commercial integration, new forms of cooperation, international trade,
cultural exchange and interaction among nations.
However, and in spite of the enormous efforts made to continue with the transition
course from an oil revenue dependent economy towards a new socio-productive
model, the process has been slow. This could be explained by the fact that our
economy is impacted, in great measure, by petroleum income. That is the reason
why we promoted a different logic for its use, which helped to create the National
Development Fund (FONDEN in Spanish) in 2005, in order to make way for a new
gathering and distribution model of such income. At the same time, we modified the
international reserves management strategy of the country to place them in a more
secure environment and make them less vulnerable to the risks of the international
financial system.
The emphasis on social policies and investments oriented towards education, health
and food has prevented the deterioration of the quality of life of the population. As an
evidence of this, Venezuela is one of the countries which has improved its quality of
life rates and which is successfully ahead with the so-called Millennium Goals. This
is shown in the Human Development Index, which reached 0.844 by 2007 while the
Gini Index, which measures social inequality, reached 0.41 by 2008. This is favorable
compared to the 0.52 for Latin America1.
The social programs and the income recovery have helped to lower the levels of
recurrent and structural poverty. In a seven-year period (from 2002 to 2008) extreme
poverty in Venezuela decreased from 20.2% to 11.8%, according to the National
Institute of Statistics (INE).
1
The Gini index helps to measure the distribution of the income within the society and its value may be calculated
from zero to one; zero corresponding to a completely equitable distribution while one implies a completely
uneven distribution in which only a part of the population receives the totality of the income.
In spite of the great uncertainty
generated by the crisis, the BCV,
along with the National Executive,
managed to protect Venezuela
from its impacts and to continue
laying the foundations for the
transformation of the social and
economic model.
(…) We modified the international
reserves management strategy of
the country to place them in a more
secure environment and make them
less vulnerable to the risks of the
international financial system.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 11
Monetary and exchange policies
In its efforts to continue the path of socioeconomic development, the Central Bank
of Venezuela, along with the National Executive, adopted a series of measures on
monetary, financial and exchange policies.
The monetary policy guidelines were established and diffused during the 2009, with
the aim of adapting the liquidity levels of the banking system in order to maintain
the proper functioning of the payment systems, to promote credits for the productive
sectors of the economy, to lower the costs of monetary policies, to promote savings
and to try to moderate inflationary pressures.
Such policies were complemented by the ones adopted by the National Executive,
which were oriented to maintain employment, implement social programs as part of
the commitment with the most vulnerable sectors of the population and speed up the
administrative procedures related to the exchange allocation for goods and services
imports.
It is important to highlight that our institution’s efforts have always aimed to fight the
inflationary spiral that has affected our country for many years. We are aware of the
fact that this scourge is of a structural nature which combines diverse components,
such as the increase in costs related to the raise in international prices due to the
worldwide food crisis, productivity lags and speculation of the economic agents in
the exchange market.
The issuing Bank, attentive to the behavior of the monetary market liquidity levels
and, with the purpose of mitigating tensions on this market, has adjusted twice the
marginal reserve rate. In the first opportunity, it was reduced from 30% to 27% from
January 5th, 2009 (reduction of 300 basis points) and, in the second one, such rate was
reduced by 200 basis points and was fixed in 25% from March 9th, 2009.
Likewise, during the first quarter of 2009, BCV initiated a series of adjustments to
the interest rates as well as to the monetary policy instruments of the financial system
within the new domestic and international economic context, and consistent with
the anti-crisis measures adopted by the National Executive. In fact, between March
and April, the Central Bank of Venezuela decreased three times the interest rates of
its absorption instruments by 700 basis points, from 13% to 6% for 28-days term
operations and from 14% to 7% to 56-days term operations.
(…) BCV initiated a series of
adjustments to the interest rates
as well as to the monetary policy
instruments of the financial system
within the new domestic and
international economic context,
and consistent with the anti-crisis
measures adopted by the National
Executive.
In agreement with the announced measure of decreasing absorption operation rates,
the BCV made downward adjustments to the maximum and minimum ceilings of
the financial system’s interest rates2. In that way, it lowered by 100 basis points the
minimum borrowing rate for saving accounts and time deposits (14% and 16%, respectively). It also reduced in 200 basis points both, the maximum lending rate and
the credit card rate, (26%3 and 31%, respectively). Such changes were accompanied
by the decrease of 200 basis points in the interest rate to be charged by the BCV in
its discount, rediscount and advance operations, reaching 31.5%.
At the end of the first semester, BCV’s Board of Directors, as part of the monetary
policy permanent evaluation strategy, made new downward adjustments to the interest
2
3
Into force from April 1st, 2009.
It is important to highlight that the BCV had not considered as necessary the review of the maximal active interest
rate since the regulation of the interest rates began in May, 2005.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 12
Graph 1
Referential rates of BCV’S
absorption operations
Source: BCV.
rates of the financial system. Therefore, from June 5th, it decided to decrease in 150
basis points the minimum ceilings of the borrowing rates and by 200 basis points
the maximum lending rate as well as the maximum and minimum limits applicable
to credit cards.
In that sense, the rate for saving accounts and liquid assets accounts was established
in 12.5%, while the rate to be paid for time deposits and participations was established in 14.5%. The maximum percentage for the lending rate went from 26% to 24%,
while for operations related to financing through credit cards; the maximum rate was
fixed in 29% and the minimum in 15%.
In order to make the new interest rates ceilings of the financial system compatible
with the rates of BCV’s injection operations, the Board approved a 200 basis points
reduction in the different terms of such instruments. Therefore, the new percentages
were: 20% for 7-days term operations, 21% for 14-days term and 22% for 28-days
term. On the other hand, the interest rate to be charged by BCV for its credit assistance operations by means of discount, rediscount, advance and, reverse operations
was 29.5%.
At the beginning of the second semester, the BCV made some changes to the regulations governing the establishment of the reserve requirement by setting up that those
development banks which promote and finance micro-financial activities and which
reach an intermediation index over 70% will be favored by being able to maintain a
minimum reserve requirement of 12% over the total amount of the reserve base of
net liabilities and of the marginal balance.
Some specific episodes of illiquidity occurred in November in the interbank fund
market which, were evident in progressive increases in the amounts traded in interbank
operations, increase in the average overnight rate, reduction of excess banking reserves
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 13
and, concentration of banking reserves holding. To counterattack this situation, the
BCV decided to reduce by 200 basis points the reserve requirement rate applicable
to the marginal balance, reaching 23% from November 30th.
Moreover, the BCV reduced by 100 basis points the rates applicable to its injection
operations4 placing them in 19% for 7-days term, 20% for 14-days term and 21%
for the 28-days term.
During the first days of December, the Board modified the conditions for absorption
and injection operations. In the first case, the participation of financial institutions
was limited5 by not being able to exceed the balance of Certificates of Deposit (CD)
registered in their portfolios for each term when closing November 27th, 2009. In the
case of injection operations, the Board approved to include new terms as of December
3rd: 56 days at 21.25% interest and 90 days at 21.5% interest.
Graph 2
Referential rates of BCV’S
injection operations
Source: BCV.
Measures adopted on interest rates
allowed access to bank financing in
order to encourage investment in
the productive sectors
(…), as well as consumer credits
aimed at purchasing housing,
vehicles and tourist services.
Measures adopted on interest rates allowed access to bank financing in order to
encourage investment in the productive sectors (agricultural, fishing, forestry, manufacturing and tourism), as well as consumer credits aimed at purchasing housing,
vehicles and tourist services; which favored access to goods and services by a sector
of the Venezuelan population which had been excluded. Moreover, the Bank adopted
several measures regarding fees and charges for products and services offered by
financial institutions to their customers and general public.
4
5
Into force from November 27th.
Into force from December, 2nd.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 14
Regarding the exchange system, the international reserves continued to be centralized
and administered, which allowed approving the monthly amount of foreign exchange availability and facilitate the external resources flow required by the different
economic sectors.
Moreover, according to what is established by the Law of the Central Bank of Venezuela, the appropriate reserves position was determined, while the corresponding
transfers of international reserves were made to FONDEN by a total amount of US$
12,999,321,946.756, in order to contribute with investment projects which promote
economic growth, increase social investment and allow the external public debt management. On the other hand, an amount of Bs. 151,082,990.71 on account of liquid
utility derived from the financial management of the Institute in 2008 was transferred
to the national Treasury.
As part of the Foreign Exchange Administration Regime, the BCV and the National
Executive kept the same par value of Bs. 2.1446 per US$ for purchase operations
and Bs. 2.1500 per US$ for external public debt sale and payment.
Payments Systems Updating
It is very interesting for the BCV to update the payments systems in Venezuela in
order to adapt them to the international standards. That is the reason why the necessary human, financial and technological resources were provided to assure the
performance and proper functioning of the Automated Clearing House. Thus, we have
managed to achieve faster, timely and safer financial transactions, allowing greater
efficiency and quality within the internal processes of the financial sector and, at the
same time, a decrease in the operating costs of banks and, therefore, of users, which
has contributed to the strengthening of the system.
This year, progress has been made on the clearing and settlement systems projects,
on the completion of adjustments to incorporate the image exchange service to the
Automated Clearing House, on adapting the space to store numismatics species and
on the windows integrated system.
Regarding the continuous monitoring made to the different indicators of the national
financial system, certain weaknesses were opportunely identified in some financial
institutions, which allowed sending early warnings to the controlling entities leading to
the definition and implementation of a set of measures aimed at footing and ensuring
the stability of the banking and payment system.
Consolidation of the new monetary cone
The BCV has continued with the transition to the new monetary cone by encouraging, through the autobank, the exchange of old currency for currency with the new
denomination in order to contribute directly with the availability of narrow money
in the country and to assure exact payments and changes to traders and purchasers.
These activities provide dynamism to the economy by placing low denomination cash
in circulation. In that sense, 155 exchange points were placed along 11 states of the
country, where more than 11 million bolívares fuertes were exchanged.
6
This sum was transferred in five installments on the following dates: March 9th, March 25th, April 06th, June 26th
and October 15th.
This year, progress has been made
on the clearing and settlement
systems projects, on the completion
of adjustments to incorporate
the image exchange service to
the Automated Clearing House,
on adapting the space to store
numismatics species and on the
windows integrated system.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 15
Approximately Bs. 23,160,438,902.00 represented by 931.9 million banknotes of the
new monetary cone were put into circulation and also Bs. 406,132,623.08, equivalent
to 1,212.6 million coins. 98.2% of the value in circulation in banknotes and 30.6%
in coins have been exchanged.
On the other hand, the Mint, as manufacturing area, is developing several projects
which will allow achieving the full sovereignty of coins and banknotes production
that Venezuelan economy requires. In that sense, 171,6 million pieces of banknotes
were printed and 420 million coins were minted in 2009. Also, 317.27 million official
papers, passports, encoded bands, university and high school diplomas, fiscal stamps
among others, have been printed, complementing the modernization of banknotes
manufacturing and of encoded bands project.
Development in Statistics Production
One of the traditional functions that the Central Bank fulfills is to compile and publish
the main economic, monetary, exchange, pricing, balance of payment and financial
statistics The Central Bank of Venezuela is well known as a reliable source of economic information due to the quantity, variety and quality of the statistics produced
by the institute, the up to date methodologies and the high technical level used to
produce them, all of which confirms the reliability of the nationally and internationally published data.
This information allows monitoring and evaluating the performance of each one of
the sectors of national interest and facilitates advising and encouraging the decisionmaking process regarding economic policies.
The balance of the year is the product of several strategic projects, some of them
resulting from inter-institutional cooperation agreements with different organizations
and public institutions and universities, which have helped to update the reference
basis of the statistical programs, to widen the sectorial and geographical coverage,
to increase periodicity and to implement methodological changes established in the
international manuals of the System of National Accounts and Balance of Payments.
In this way, specialized information has been at the disposal of different users such
as policy makers, students, scholars, researchers, analysts and general public.
Approximately Bs. 23,160,438,902.00
represented by 931.9 million
banknotes of the new monetary
cone were put into circulation
and also Bs. 406,132,623.08,
equivalent to 1,212.6 million coins.
98.2% of the value in circulation in
banknotes and 30.6% in coins have
been exchanged.
Some examples of this are the 4th Family Budgets National Survey (BCV-INE-CVGULA agreements); the 7th National Agricultural Census (BCV-MPPAT agreement);
the Macroeconomic Estimates Updating Program II (Pracem II); the consolidation of the
National Consumer Price Index, which now covers all the regions of the country;
the estimation of the Capital Balance of the financial and non-financial private sector
as well as of the financial and non-financial public sector; and the Survey on Costs
Pattern of the Agricultural Sector and Animal and Vegetal Subsectors. Among this
group of programs, there are partial indicators on the household consumption pattern
and on the social programs of the government.
Likewise, the BCV, in its efforts to continue improving its statistical programs, will
focus next year on broadening the Venezuelan social accounting system through the
construction –according to international standards– of extended indicators of economic
activity, as well as of welfare, economic and social development in the country.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 16
Such plan will demand sustained and inter-institutional effort by the Venezuelan
Government in the areas of collecting primary information, designing indicators
and integrating statistical systems to the development of a system of accounts dependent on the social accounting system. The expansion of the statistical base will
integrate the social, productive-distributive, balance of resources and the territorial
measurements.
As part of the development of the “2009-2019 Socialist Guayana Plan of the National
Executive”, BCV has worked together with specialists of Corporación Venezolana de
Guayana and Siderúrgica del Orinoco (Sidor) to gather all the available information
about the diagnosis of the current accounting systems and also about the identification
of needs and requirements of each one of the enterprises that make up the pilot plan
of the iron, steel and aluminum sectors. This effort aims to carry out, in the medium
and long term, a system of satellite accounts of the Guayana region, which will help
to measure the impacts of the overall planning of its industries on different sectors
of the domestic economy and in the balance of payments of Venezuela.
The importance of this information lies in that not only each of the companies in the
area could be managed in detail but also the energy sector, regional and local government, education, health, public services, impacts on housing, natural resources,
environment, investment, capital replenishment, installed and employed capacity
impacts as well as labor.
In that sense, the BCV develops a comprehensive strategy based on organization
supply and on the connection of inter-institutional working teams as part of several
cooperation agreements with other Government entities. The creation of an appropriate
empirical base and the design of shared methods which improve the capacities of
such working teams will help to consolidate the connection among sectoral policies
and macroeconomic policies towards a greater dynamism, sustainability and equality
in the socioeconomic development process.
Foreign affairs
Regarding foreign affairs, the Central Bank of Venezuela actively participated in
the consolidation of the integration process in Latin America and the Caribbean.
Likewise, the Bank tried to deepen the relationship with the country’s counterparts,
with multilateral agencies and with other State bodies. Thus, the BCV made a great
contribution to the creation of new practices by being present in sub-regional, regional and international settings, which has favored the position of Venezuela in the
international scenario and the diversification of its foreign policy.
The BCV has helped with the development of the integration mechanisms of countries
of the Bolivarian Alliance for the Peoples of Our America ((Spanish: Alianza Bolivariana para los Pueblos de Nuestra América, or ALBA) by signing the Constitutive
Treaty for the Unitary System for Regional Compensation (Sucre). This instrument is
oriented to achieve several objectives: monetary and financial sovereignty, eliminating
dependence on the use of the US dollars in regional trade, reduction of trade asymmetries and progressive consolidation of an economic zone of shared development
based on complementing productivity among nations.
The BCV has helped with the
development of the integration
mechanisms of countries of the
Bolivarian Alliance for the Peoples
of Our America ((Spanish: Alianza
Bolivariana para los Pueblos de
Nuestra América, or ALBA) by
signing the Constitutive Treaty for
the Unitary System for Regional
Compensation (Sucre).
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 17
The BCV continues providing, to this type of strategic projects, technical capacity and
its human resource in order to achieve the necessary coordination with the National
Executive. Therefore, the technicians of the BCV have assumed a great leadership in
several domains such as accounting, technology and on developing methodologies
which will bring great contributions to the Sucre and Banco del Alba. For instance:
• Participation in inter-institutional working teams of technical support to the national coordinators regarding the alternative mechanisms disposed to consolidate
regional integration; Sucre; Southern Common Market (MERCOSUR in Spanish);
Latin-American Integration Association (ALADI); and the Bolivarian Alliance for
the Peoples of Our America (ALBA).
• Assisting the ALBA Bank regarding management issues: creation of a comprehensive management model and the process related to the accounting of the Regional
Monetary Council and structuring the Accounting Manual of the Sucre; counseling in the creation of the Operation and Financing Manual of the Sucre; advice
on budgetary issues and participation in technical meetings (held in Nicaragua,
Bolivia, Cuba, Ecuador and Venezuela).
• Welcoming of international missions coming from the Latin-American Reserve
Fund, the International Payment Bank, the National Bank of the Republic of
Belarus and the Central Bank of Vietnam-Vietinbank, in order to strengthen the
inter-institutional cooperation relationships.
• Participation on technical events regarding international monetary and financial
aspects and their impact on the integration process of the Latin-America and
Caribbean Economic System (SELA in Spanish), as well as on writing technical
documents required by the Ministry of People’s Power for Foreign Affairs to
sustain the Venezuelan perspective in different international forums and events.
• Technical elaboration of reports for the participation in international events of
strategic interest for the Bank, most of them related to legal binding with key
regional and international financial and monetary organizations, such as: Bank of
the South; General Meeting of the Bank of International Settlements; Meeting of
Governors of Central Banks of Latin America and Spain; Meetings of Alternate
and Audit Committees of CEMLA; Meetings of the Board of Directors and the
Assembly of CEMLA; Ordinary Meetings of the FLAR Board of Directors; Spring
and Yearly Meetings of the International Monetary and Financial Committee
(CMFI in Spanish) of the International Monetary Fund, of the World Bank and
the G-24.
Reorganizing the gold sector
The Central Bank of Venezuela
suggested a re-evaluation of the
participation policy in the domestic
gold market (…)
In order to take advantage of the gold sector potential for regional and national socioeconomic development and, at the same time, to strengthen the international
reserves, the Central Bank of Venezuela suggested a re-evaluation of the participation policy in the domestic gold market by promoting productive investments,
creating new sources of employment in this sector, and developing the processing
activity and by supporting its reorganization.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 18
Therefore, the Rules on the Marketing of Gold and its Alloys7 were established as
a mechanism to give an incentive to mixed enterprises of the gold sector. Likewise,
some strategic alliances were built with different national and international organisms
through different workshops with public entities such as: the National Integrated
Customs and Tax Administration Service (SENIAT in Spanish), Ministry of People’s
Power for Basic Industries and Mining (MPPIBAM), Ministry of People’s Power
for Labor (MPPT in Spanish), Ministry of People’s Power for the Environment
(MPPAMB in Spanish), National Guard/Department of Mining National Security,
Regional Government and Mayor’s Office of the Bolívar State.
International alliances were successfully established with the following countries:
Turkey, Switzerland, Italy, France and the Czech Republic. Several high level meetings were held with representatives of the central banks and with other organizations
related to the gold sector, such as jewelry and gold consortiums, education institutes
and gold certification institutes.
In this sense, BCV’s Board of Directors, according to record number N° 4,122 dated
October 23rd, 2008, designated the year 2010 as the “Year of Gold” in the context
of the Bicentenary of the Declaration of Independence, the 70th anniversary of the
BCV and the 25th anniversary of the Gold Department of the BCV. For the celebration of the “Year of Gold”, the BCV is planning an agenda of actions which aims
to highlight the history of gold in the country and more specifically in the BCV by
economic, social and cultural activities of the sector, as well as the incorporation
of fundamental actors such as small and medium-sized producers, associations and
goldsmith cooperatives.
Society and the Central Bank of Venezuela
During the year 2009, the BCV widened its contribution to the Venezuelan society
in virtue of its social commitment with the population, its interest in preserving
and spreading the historic memory and heritage of the Nation, as well as its interinstitutional relationship with the national authorities.
In terms of social commitment, the Bank made a special effort to strengthen the institutional capacities and to develop an agenda of events focused on the educational,
institutional, cultural and social areas. In that sense, the Bank contributed to strengthen mechanisms for the creation and development of social economy networks and
associative forms of social production which encouraged general economic welfare
and equality of opportunities.
In terms of political-institutional contributions, the Bank focused on spreading
knowledge, monitoring and studying economic happenings and trends as well as in
informing about the decisions taken as part of the process of accountability to the
Venezuelan society. This implied having proper communication mechanisms and relationship with different audiences, with public authorities and regulatory entities.
In terms of social contributions, the Bank, as an essential part of its performance and
as an entity of the State, helped the population and satisfied the needs of the communities and organizations, offered comprehensive social assistance to natural persons
with limited financial resources and created an economic awareness in the population
through the education, training and divulgation of socio-economic knowledge.
7
(…) the Rules on the Marketing
of Gold and its Alloys were
established as a mechanism to give
an incentive to mixed enterprises
of the gold sector. Likewise, some
strategic alliances were built with
different national and international
organisms (…)
Resolution N° 09-06-03, Exchange agreement N° 12.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 19
In order to achieve this, the BCV made great efforts oriented to reinforce the institutional capacities of national universities and of different entities of the public sector
through discussions, exchanges and interaction with policy makers. This process of
reinforcing education and spreading actions in different levels of education include
didactic programs for children and youngsters, guided visits to the facilities of the
Bank and internship programs, as well as providing electronic and printed bibliographic material to specialized groups, general public and through the participation in
education and book fairs, in order to spread the editorial heritage of the Bank.
Regarding the institutional sector, the Central Bank made an effort to provide specialized information about the institutional products available to properly interpret
economic policies and indicators. This was achieved by different means: workshops,
conferences, seminars, special meetings with specific groups from different organizations and institutions of the State.
Likewise, the requirements of the population regarding public information about the
BCV were attended through the Office of Citizen Service. This office managed the
requirements within the competence of the BCV, while the other requirements were
transferred to other organizations of the State. In this sense, the organized community
formulated some initiatives which encourage practicing citizen’s participation.
Regarding the cultural contribution, the BCV promoted spreading people’s culture
and encouraged the knowledge of historical values and cultural heritage of the Nation which are under the custody of the Institute. In this sense, the Central Bank of
Venezuela:
• Encouraged didactic, recreational and cultural activities among the population
and made public the historical and cultural heritage under its custody.
• Exposed a fine art collection in the Centro Cultural Salvador de la Plaza and
presented popular artistic and musical performances at Plaza Juan Pedro López.
• Showed the institutional patrimony, represented by cultural goods and knowledge
the Central Bank has, particularly national and universal artworks; jewelry of the
Liberator, numismatic collection, among others, which are available to all Venezuelans as a personal and professional growth and development tool.
The Bank made a series of
contributions to the population as
an essential part of its performance
as an institution while attending the
requirements of the communities
and people’s organizations.
It is fair to highlight the communicational management and the editorial policy. In
the first case, an information network was developed to update the workers and other
audiences of the Bank (professionals, teachers, investigators, students and general
public) about its performance. Traditional and alternative media and resources were
used for this purpose. On the other hand, the editorial policy was based on strengthening production by expanding its offer to the specialized audience and to children,
which represented a great contribution to the study, research and the spreading of
economic, social and cultural themes.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 20
In 2009, due to the worst recession since World War II, the world economy decreased
1.1% compared to a 3% increase in 2008. This behavior is related to a high decrease
in employment, financial intermediation restrictions and to the world trade squeeze
in the last two years, which have affected exports and consumption.
II/
A SUMMARY
OF THE GLOBAL
ECONOMY
Remnant doubts on recovery have led to a delay on fiscal and monetary incentive
measures. At the same time, the limited inflationary expectations do not forecast low
interest rates until the end of 2010; the non-conventional monetary measures have
been extended while efforts are continuously made to gradually recover the health of
the financial system in developed economies. In that sense, the G-20 was opposed to
a premature withdrawal of the agreed incentives until a better scenario is assured.
However, from the third quarter on, growth in developed economies began again,
except in the United Kingdom, due to the conventional and non-conventional fiscal
and monetary measures, which were coordinately implemented at the end of 2008
and then extended to 2009 in several meetings of the G-20. In developing countries,
recovery came earlier since they have less financial exposure and a greater macroeconomic strength. Remarkable are the cases of China and India which experienced an
acceleration of their growth at the beginning of the second semester.
In China, fiscal stimulus increased investment contribution to the GDP while consumption has been revived. At the same time, the recovery of China and India has
encouraged exports (particularly of raw material) of other developing countries which
relied on them to take up the expansive cycle again.
According to ECLAC, the economies of Latin America will tighten 1.8% in 2009
as a whole, with the exception of Brazil, Peru and Uruguay which show a positive
economic future. However, in 2010, the region could grow 4.1%. On the other hand,
Latin American country risk measured by the EMBI Plus differential fell about 380
basis points from a 694 level at the end of 2008.
Although the discussion about a new world bubble as a result of the high price
increase in assets with high rate of return as those of variable income investments,
emerging sovereign instruments, financial assets of raw material and real estate in
China, is not conclusive, there could be a certain level of fear in the international
markets for the consequences of maintaining the costs of money at very low levels8
in most economies.
In terms of monetary flexibility, maintenance of fiscal stimulus and low aversion to
risk, the price of gold reached new maximum levels driven by central banks’ purchases. On the other hand, the dollar grew weak against a currency basket, due to lower
interest rate differentials with regard to other currencies and to a gradual process of
portfolios global recovery by central banks and sovereign wealth funds.
8
In fact, the interest rates of the Federal Reserve are located between 0% and 0.25%. The Bank of Japan’s rates
are 0.10%, while the European Central Bank lowered its rates from 2.5% at the end of 2008 to 1% on May 2009.
The Bank of England lowered its rates from 2% at the end of 2008 to 0.5% in March. A similar tendency was
observed in emerging countries.
In 2009, due to the worst recession
since World War II, the world
economy decreased 1.1% compared
to a 3% increase in 2008. This
behavior is related to a high
decrease in employment, financial
intermediation restrictions and to
the world trade squeeze in the last
two years, which have affected
exports and consumption.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 21
Oil market
In 2009, marker prices in the international oil market have been recovering after the
huge collapse caused by the world economic crisis. In fact, after the marker crude
West Texas Intermediate (WTI) registered a minimum closure price in December,
2008 (USD/b 33.87), the price reached a new maximum of twelve months in October,
2009 (USD/b 81.37).
In spite of the fact that the average price for 2009 was USD/b 61.719, it is still 38.2%
lower than the price for 2008 (USD/b 99.75), since uncertainty has prevailed in
terms of the strength of the market fundamentals recovery, especially in developed
countries. Therefore, the thesis that the speculative factors participation is crucial in
price formation process continues existing.
According to the figures of the International Energy Agency (IEA), the global demand
for oil will decrease in 2009, for second year in a row10, to 84.9 million barrels per
day (mbd). Such decrease (1.4 mbd), which is greater than the one registered in 2008
(0.2 mbd), is due to the lower consumption of OECD countries (OCDE in Spanish),
which has been counteracted by an increase –though more moderate than previous
years– in the demand from emerging countries (0.6 mbd). Though IEA foresees a
growth for the fourth quarter of 2009, it will be propelled by this latter group of
countries for the first time since the second quarter of 2008.
The coordinated effort of OPEC
countries has contributed to
reestablish the balance of the
market. However, the inventories
–currently located at 59.4 days of
future demand cover– are above the
average of the past five years.
In terms of the global economic decline, which profoundly affected the demand, OPEC
members focused on reducing the excess supply in the market and on avoiding prices
to fall below a level that helps to maintain investments which guarantee energy supply
in the medium and long term. In that sense, the most recent cut agreed on January
1st, 2009 by the group of oil producing countries consisted on cutting production in
4.2 mbd, which is equivalent to a 24.85 mbd production limit. According to the most
recent data, even if the OPEC has increased its production to 26.61 mbd in the past
months, this organization has still not reached the levels registered in 2008.
The coordinated effort of OPEC countries has contributed to reestablish the balance
of the market. However, the inventories –currently located at 59.4 days of future
demand cover– are above the average of the past five years.
9 On December 24th, 2009.
10 A reduction of the global demand had not been registered in two consecutive years since 1982-1983.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 22
III/
NATIONAL
MACROECONOMIC
RESULTS
Real sector and employment
According to the estimates of the Central Bank of Venezuela, the gross domestic
product (GDP) presented, in real terms, a year on year squeeze of 2.9% in 2009. This
result is the first fall of the GDP after five years of growth.
The lowest level of economic activity was particularly observed in the oil sector,
whose value added decreased at an annual rate of 6.1% as a result of production
cuts implemented by OPEC in a context of low energy demand caused by the global
economic crisis. Such measures represented a decrease of 6.3% in the extraction of
crude oil and natural gas and of 5.1% in oil refining by the public sector.
Non oil sector recorded a decrease of 1.9% fundamentally related to the Gross Value
Added (GVA) tightening in manufacturing (7.2%), trade and repair (8.2%), transport
and storage services (8.5%). Among the factors that contributed to these results
highlight the weakening of aggregate demand, the uncertainty regarding the global
economic recovery and the imports tightening recorded during the year, particularly
in the third and fourth quarter. The latter was determined by a less foreign currency
supply by CADIVI, entity that in 2009 adopted a stringent foreign resources management policy due to a decline in Venezuelan exports proceeds.
On the contrary, it must be highlighted the accelerated growth rate in communications
(10.1%) as well as in construction (3.1%), electricity and water (4.6%) and social
and personal community services (3.1%).
In this context, non-tradable activities slightly decreased during the year (0.8%),
while the value added of tradable ones tightened in 5.1%.
From an institutional point of view, the public sector showed greater buoyancy than
the private one by recording an annual increase of 1.3%, driven partly by the nationalization process undertaken by the National Government, specifically in activities
related to the iron and steel company (SIDOR in Spanish), cement industries, as well
as in the financial sector. Thus, the participation of the public sector in the GDP in
2009 grew from 29% (in 2008) to 30.3%. It also needs to be highlighted the increase
in general government (2.2%), communications (15.4%) and electricity and water
services (4.6%).
A decrease of 2.6% in the private final consumption was observed when analyzing
the results of the GDP from the demand point of view. This obeys to a fall in real
income, an increase in unemployment and less expenditure rate in households. On
the other hand, the Gross Fixed Capital Formation (GFCF) tightened at an annual
rate of 7.6 % influenced by more restrictions in the surrender of foreign exchange
which influenced imports and by the decline of the macroeconomic performance
expectations.
(…) the participation of the public
sector in the GDP in 2009 grew
from 29% (in 2008) to 30.3%. It
also needs to be highlighted the
increase in general government
(2.2%), communications (15.4%)
and electricity and water services
(4.6%).
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 23
Chart 1
Indicators of the real sector
(Annual variation)
(*) Estimated numbers.
1/ Includes agriculture and restaurants and hotels.
2/ Services of financial mediation measured indirectly.
3/ Average of the period January-November.
4/ Accrued variation of the NCPI for the period January-November.
5/ Accrued variation of the nucleus of the NCPI for the period January-November.
Source: BCV and INE.
In terms of Government’s final consumption, it increased 2.1% in 2009. This behavior
is related to the counter-cyclical orientation of the fiscal management as part of a
cautious strategy of public finance management.
It is fair to highlight that during 2009, imports of goods and services decreased in
19.7%, which contrasted with the increase of 3.8% observed in the previous year.
The decrease of imports is a key factor in the restraints recorded by both, private
consumption and domestic investment.
Likewise, a weakening of the external demand, which dropped 9.8% in 2009, was
registered. This negative performance is due to a decrease of both, the oil exports
and the non-oil exports.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 24
Chart 2
Gross Domestic Product
Demand approach
(Variation %)
(*) Estimated numbers.
Source: BCV.
The downfall in non-oil economic activities impacted unfavorably the labor market
by showing, for the first time in five years, an increase in unemployment. According
to official figures from the National Institute of Statistics (INE in Spanish), the unemployment rate averaged 8% in the first 11 months of the year, which represented an
increase of 0.6 percentage points compared to the average rate in 2008.
Graph 3
Unemployment rate
(Quarterly average)
Source: BCV.
Regarding the structuring of the labor force by institutional sectors, the nationalization processes undertook in 2009 created a new recovery of public employment.
This situation helped the public sector to increase its participation in 1.1 percentage
points over the overall employed population, to finally reach 19% at the end of the
third quarter of 2009.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 25
Economic activities which showed deeper falls in absolute terms during the JanuarySeptember period in terms of employment were: construction (40,226 jobs) and
manufacturing (10,614 jobs). On the other hand, staff employed in the trade sector
showed a net increase of 44,257 workers.
The nominal wage measured through the Wage Index, by the Central Bank of Venezuela, increased at an annual rate of 22.2% at the end of the third quarter of 2009.
The minimum wage reached VEB 959.08, after the National Executive announced
two increases of 10% which were implemented in May and September.
Prices
The National Consumer Price Index registered (NCPI) an accumulated variation of
23% during the 2009 January-November period, which represented a decrease of
4.6 percentage points compared to the same period in 2008. The inflationary core
also reduced its rate of growth compared to the previous year, although its growth
rate remained above the NCPI’s, showing an accumulated increase of 27.6%11 in
November.
The downturn observed in these indicators was determined, among other factors, by
a lower rate in the domestic aggregate demand during the year, governmental policies
aimed at ensuring food security and weather conditions that made possible an abundant
supply of some agricultural goods during the first semester of 2009. In this sense, it
is fair to highlight the relatively moderate advance shown by the prices of food and
non-alcoholic beverages, domain which increased 18.3% during the aforementioned
period, a behavior that contrasted with the 36% increase in 2008%.
However, it is necessary to emphasize that several factors continued generating inflationary pressures, such as: (1) expansion of the exchange rate gap; (2) inflationary
inertia related to the past inflationary levels and to the expectations on the future
development of this variable; and (3) the restrain of the domestic supply, especially of
manufactured products. Moreover, the increase, from 9% to 12%, in the Value Added
Tax rate, in force since April, 2009, affected prices and avoided a further decrease in
inflation during the year.
In this context, the National Executive implemented a series of measures in order to
counteract the upward pressures on prices, which include:
•
Maintaining a policy of subsidies for the production of certain agricultural products.
• Approval of the Special Development Plan for the Construction, Rehabilitation
and Consolidation of the Agrarian and Rural Infrastructure and the Agricultural
promotion in the entire country during the fiscal year 2009.
• Approval of the 7th Special Plan for the Supply of basic foodstuffs, raw material
for the production of food and other basic food products.
11 The inflationary nucleus is an indicator that isolates the goods and services which prices present great volatility
(agricultural goods) and those goods and services which prices are administered and controlled from the package
of the National Consumer Price Index (INPC in Spanish).
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 26
Graph 4
Consumer price index
(Annual variation)
Source: BCV.
Another element which contributed to mitigate inflation was maintaining the price
control and management policy initiated in February 2003. During 2009, this policy
was characterized by fewer adjustments to the prices of the controlled products and
by ordering reductions in prices of goods such as powder milk, sandwich bread and
pasta.
All this allowed controlled products to show an accumulated variation of 19.1% until
November, which is lower than the increase observed in the same period for 2008
(24.4%) and than the reports of non-controlled goods and services (26.6%).
Table 3
Adjustments to the policy on price management and control 2009
PMVP: Maximum Price of Sale to the Public (MPSP).
Source: Official Gazettes.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 27
When analyzing the inflationary behavior by kind of good, it was observed that, until November, 2009, tradable and non-tradable goods showed similar accumulated
inflation rate (23% and 22.8%, respectively) which resulted, in both cases, lower
than the rates registered the same period in 2008 (30% and 24.1%). Less increase
in tradable goods was, essentially, due to the downturn in food and non-alcoholic
beverages prices while in non-tradable, it was mainly due to lower price increase in
the domain “restaurants and hotels”, whose variation rate decreased from 38.1% in
2008 to 27.4% in 2009.
In terms of study, Caracas and Mérida were the cities with greater inflation rates,
recording variations of 25.2% and 25.1% by November. Those levels surpassed the
national average in 2.2 and 2.1 percentage points. On the other hand, the domain
which showed the lowest price increase was “Rest of the Nation”, with a variation
of 21.3%12.
The Wholesale Price Index (WPI) registered an accumulated variation rate of 24%,
compared to the 27.7% increase in 2008. Unlike the previous year, the performance
of the WPI, was determined mainly by the development of imported goods prices,
which were influenced by more CADIVI restrictions to deliver foreign currency. That
is why they have now a year on year variation rate of 37.3, compared to the 17.3%
variation rate in 2008. On the other hand, the rise in price of national goods was
26.5%, which represents 8 percentage points below the record displayed in similar
month the previous year (34.5%)
In relation to the producer price index of the private manufacturing industry, it showed
a downturn of 0.3 percentage points in its year on year variation rate in November,
reaching 26%.
Graph 5
Consumer price index by domain of study
(accrued variation until November)
When analyzing the inflationary
behavior by kind of good, it was
observed that, until November,
2009, tradable and non-tradable
goods showed similar accumulated
inflation rate (23% and 22.8%,
respectively) which resulted, in
both cases, lower than the rates
registered the same period in 2008
(30% and 24.1%).
Source: BCV and INE.
12 This domain includes medium and small cities, as well as the rural areas of the country.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 28
Balance of payments
Preliminary figures showed a balance of payment position of USD 11,027 million
(5.5% of the GDP). This result took place in an unfavorable international environment
in which the effects of the global economic crisis are still felt by initially pushing
down international prices of raw material.
Table 4
Balance of payments
Overall summary
(Million USD)
(*) Preliminary numbers. The 2009 estimates include projections of the closure of the foruth quarter of the year.
1/ Prepared according to the guidelines of the 5th Edition of the IMF Balance of Payments Manual.
2/ A plus shows fewer assets or more liabilities.
3/ Excludes the adjustments for foreign exchange variations, prices and accounting update in the BCV balances.
Source: BCV.
The current account balance was USD 12,416 million (6.2% of the GDP). This outcome, which presents a restrain of 66.8%, was related to a fall in oil exports, which
reached USD 57,610 million in contrast with the USD 89,129 million registered in
2008. Oil exports were determined by a fall in sales (3.6%) and in the average price
of the Venezuelan basket (32.7%). It is important to highlight that the reduction in
export sales is due to production cuts agreed by OPEC at each one of its member
countries.
Non-oil exports reached USD 3,326 million, which represented a reduction of 44.7%
compared to 2008, in the public and private sectors, especially in industries producing
common metals, chemical substances and products and rubber, among others.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 29
Imports reached USD 38,500 million, showing a decrease of 22.2% during 2009,
which was mainly due to the decrease shown by the private sector (26%).
The financial account balance was supported on the “other investment” account
(USD -19,673 millions), which showed an increase of public assets during the year
related to oil activity. The non-financial private sector increased its deposits due to
three new issues of public securities during the year which extended the secondary
security market among residents and non-residents.
Meanwhile, direct investment aggregate flows created a deficit of USD 6,292 million
associated to assets increase in the oil industry due to uncollected bills from its subsidiaries abroad and to a liabilities decrease compared to direct investors in the country
after the takeover, by the Venezuelan State, of foreign-owned capital companies in
the iron, steel, financial and cement sectors.
The balance of the portfolio investment account was USD 7,065 million due to the
Government and private financial institutions assets validation and to the liabilities
increase in papers of the oil and government sectors.
The outcome of the balance of payments allowed accumulating an estimated level of
BCV’s gross international reserves by December 31, 2009 of $ 35.011 million.
Monetary and financial sector
The monetary market performance in 2009 was characterized by the downturn in
aggregates rate of growth. In fact, the provisional information, by December, reports
a growth rate of the nominal monetary liquidity (M2) of 19.5%, lower than the average variation of the previous year (25.1%) and than the one corresponding to the
first semester of 2009 (29.1%). In real terms, this aggregate showed, by December
18th, a fall of 4.6%.
Graph 6
Nominal and real monetary liquidity
(Year on year variation)
* To the week of 11/27
** To the week of 12/18
Source: BCV.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 30
Despite money multiplier growth, liquidity performance was determined by the
downturn in the monetary base. A determining factor in this outcome was the lower
incidence of public operations13, mainly associated to the national public debt placements made during the year. The monetary action of the Central Bank of Venezuela
reached VEB 11,825 million contrary to the net effect of its contributions during 2008,
while there was a minor demonetization through net foreign exchange sales.
In 2009, the interest rates were based on the modifications established by the Central
Bank of Venezuela in terms of the legal limits. In that sense, the average rate applied
on asset operations of universal and commercial banks was 18.8%, by December
18th, 3.4 percentage points below the level of the previous year. On the other hand,
the savings and term deposit rates were, by December 18th, 12.6% and 14.9%, 2.4
and 2.5 percentage points below the rates at the end of 2008, respectively.
Graph 7
Interest rates
Universal and commercial banking
* To the week of 12/18.
Source: BCV.
The performance of the banking system was affected by less economic activity
buoyancy, in a context of policies that aim to preserve the proper operation of the
payment system and to promote credits for productive activities. Even though the
Central Bank of Venezuela implemented an expansive monetary policy, a group of
financial institutions showed liquidity problems, which forced the controlling authorities to perform an exhaustive evaluation of these particular cases as well as to
adopt administrative and preventive measures.
In every case, the Central Bank of Venezuela supported the rest of the financial authorities to start the timely rehabilitation of the national banking system in order to
preserve the stability of the payment system and defend investors’ interests.
13 Includes the management of the central government, PDVSA, Bandes, Fogade, state and municipal governments,
autonomous institutes, universities and semi-public organisms.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 31
In that sense, after having carefully monitored all indicators and financial operations,
certain measures were adopted, especially in the case of eight institutions (from
provisional administration with or without cessation of financial intermediation to
liquidation). First of all, a process of provisional administration (intervention) without
cessation of financial intermediation was carried out in four institutions14 in November. Then, for two of them, provisional administration continued but with cessation
of financial intermediation. On November 27th, it was decided to liquidate the other
two institutions (Banco Canarias de Venezuela and Banco Provivienda-Banpro)
after Sudeban considered there were technical, financial and legal reasons for those
institutions to stop operating15 and 16.
A second intervention with cessation of financial intermediation took place at the
beginning of December to four financial entities (Central Banco Universal, Baninvest,
Banorte and Real). Then, the National Executive announced the creation of Banco
Bicentenario, formed by Banfoandes, Bolívar Banco, Central Banco Universal and
Banco Confederado, which began its operations on December 21st.
Excluding the group of financial institutions which were provisionally administered,
it can be observed that the Venezuelan financial system shows acceptable levels in its
main indicators. Even if during part of the year the intermediation registered decreases
compared to the previous years, such behavior reverted towards the end of the period
due to the measures announced by the National Executive and the Central Bank of
Venezuela to reactivate credits and promote economic growth.
Graph 8
Commercial and universal banking
Mediation
Source: Sudeban.
Excluding the group of financial
institutions which were
provisionally administered, it can
be observed that the Venezuelan
financial system shows acceptable
levels in its main indicators.
14 Banco Canarias, Banco Provivienda-Banpro, Bolívar Banco and Banco Confederado, all of them universal
banks. Published in the Official Gazette N° 39,310 dated November 19th, 2009.
15 According to what was established in the Law of Partial Reform of the General Law of Banks and Other Financial
Institutions. Resolution published in the Official Gazette N° 39,316, dated November 27th, 2009.
16 Brokerage houses and insurance companies were intervened along with the interventions of the financial institutions aforementioned.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 32
Regarding assets quality, it stays below the levels reached at the beginning of 2004
in spite of the fact that due credits and credits in dispute registered an increase in
relation to the gross portfolio.
Graph 9
Commercial and universal banking
Delinquency indicators
1/ Reestructured portfolio+due+dispute
2/ Portfolio+due+dispute
Source: Sudeban.
Concerning assets, it is fair to highlight that, securities investments registered an
annual increase of 23.1%, while the loan portfolio grew 10.5% compared to December, 2008. It is also fair to mention that the expansion of the financial institutions’
investment portfolio was partly due to the new issues of Vebonos, treasury bills and
PDVSA’s foreign currency bonds, carried out during the year, according to the indebtedness strategy defined by the National Executive.
The loan portfolio, in real terms, presented a year on year decrease of 11.7% by
November. Within this portfolio, commercial and consumption loans, micro credits
and agricultural credits also presented an annual decrease of 27.4%, 18.8%, 20.3%
and 2%, respectively. The rest of the portfolios presented real increases of 14.1% in
the case of tourism and 5.8% in the mortgage sector.
Bank loans oriented to sectors considered as priority17 have gained more relevance
in the gross loan portfolio overall by reaching 38.7% in November, compared to
29% in December 2008, which could be related to the improvements in preferential
interest rates granted to such sectors and to the minimum percentages compliance
demands. On the contrary, consumption loans decreased their weight by changing
from 23.6% to 22.3% in November 2009, in spite of the interest rate applicable to
credit cards.
17 Corresponds to the credits that are granted to agriculture, tourism, manufacture, microenterprises and mortgage
credits.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 33
Graph 10
Commercial and universal banking
Real year growth rate of the credit portfolio
Source: Sudeban and BCV.
Talking about liabilities, the total attracting showed an average increase of 26.8%
during the period January-November 2009, in contrast with the 30.9% in the same
period the previous year. Regarding the institutional sector, deposits from the private
sector grew 11% (29.1% in 2008), while the deposits from official entities grew 33%
(14.5% at the end of the previous year).
Graph 11
Commercial and universal banking
Structure of the credit portfolio
Source: Sudeban and BCV.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 34
In short, the year 2009 stood out as a period of reorganization of the national banking system due to the provisional administration process, fusions and acquisitions
of financial institutions that took place. In that sense, it needs to be mentioned the
open-door intervention of Banco Industrial de Venezuela as of May, after Sudeban
detected some severe problems. On the other hand, Stanford Bank was intervened in
February and then was merged with Banco Nacional de Crédito in June.
In July, the national Government acquired Banco de Venezuela, which previously
belonged to the Spanish group Santander. This purchase was made as part of the
country’s national development strategy and with the idea of turning that entity into
the driving force of the Public Banking Association. An entity created in September
with the aim of reaching coordination, rationalization, optimization, efficiency and
sustainability in the banking sector.
Regarding the necessary amendments for the proper operation of the national banking
system, the National Assembly passed, on December 23rd, the Partial Amendment
Decree-Law for Decree Nº 6,287 of the General Law of Banks and Other Financial
Institutions, which roughly established the following aspects: the requirement of
Sudeban’s authorization to acquire stocks among financial institutions; modification
of the organizing structure of the Fondo de Garantía de los Depósitos y Protección
Bancaria (Fogade); increase the six-month contribution of the financial institutions
to Fogade from 1% of the deposits to 1.5%; and increase the amount of deposit
insurance from VEB 10,000 to VEB 30,000, which applies to the administrative
liquidation processes of Banco Canarias and Banpro. Likewise, such coverage was
extended to deposits whose holders are savings banks and social security institutions,
by including their payment through securities with collateral security. Another striking
element is the change in the priorities when paying the coverage, by envisaging the
payment of deposits of children and adolescents and those natural persons over 55
years (previously 60 years).
The national Government acquired
Banco de Venezuela, which
previously belonged to the Spanish
group Santander. This purchase
was made as part of the country’s
national development strategy and
with the idea of turning that entity
into the driving force of the Public
Banking Association.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 35
IV/
CHALLENGES AHEAD OF 2010
Changes experienced in the international environment and their transmission to
Venezuelan society, as a result of the pressure of the world economic crisis and its
economic, geopolitical and ideological impact, represent, for the country, challenges
difficult to underestimate. In fact, the crisis developed into a important tightening in
the real production of goods and services and into a redefinition of the foundational
parameters of the international economic order due to its universal nature, global
coverage and temporary permanence.
This is revealed in the growing difficulty shown by traditional hegemonic centers to
achieve, by themselves, the recovery of the global economy and in the development
of new power poles with different and competitive perspectives about the suitable
policies to achieve economic growth and to assure price stability. The systemic nature of the economic crisis upsets the normal orthodoxies regarding the legitimate
role of the State in the economy and consolidates a rediscovery of economic policies
aiming –through direct public investment and bailout operations to rescue banks and
companies– to preserve the proper functioning of the payment systems and maintain
production and employment levels.
In this new context, the modern economic system cannot work without a comprehensive, transparent, regulated and efficient financial system. Central Banking must
continue exploring the field of preventing systemic crisis in the payment systems by
evaluating the convenience of the size and type of financial institutions and working
on the responsibilities of the supervisory bodies in order to promote a greater control and transparency. All these tasks correspond to Sudeban, Fogade, the National
Commission for Value (CNV in Spanish) and to the issuing bank.
It is plausible that in the current world scenario of growing multi-polarity, Venezuelan foreign policy continues developing initiatives to consolidate Latin America
and the Caribbean as an zone of economic integration by strengthening the Union of
South American Nations; the inclusion of Venezuela into Mercosur; the success of
the Bank of the South and ALBA; the Venezuelan-Chinese Fund, the Sucre and the
consolidation of bi-national payment systems in domestic currency which will help
to preserve trade flows with a minimum impact on the use of foreign currency and,
therefore, on international reserves, as well as to reinforce the economic protection
measures of our country.
Part of the plan is to add versatility
in the design of monetary policies
and additional efforts to adjust
the functioning of the exchange
market, in order to reduce the
structural causes of inflation and to
provide the economic agents and
the population with knowledge and
information to act more effectively
in the economic activity.
Given this challenge, the Central Bank of Venezuela must support the National
Executive in the design and establishment of instruments to consolidate the region’s
financial architecture and the strengthening of the monetary and financial cooperation
among the central banks of the region. To achieve all this, the Bank needs to define
roles, to intensify the exchange and to have a more assertive, articulated and conscious
performance, as well as to reorganize assets under its control.
The objectives of harmonious development with poverty reduction, social inclusion
and the gradual reduction of the level of inflation require close coordination and
cooperation of the Institute with the National Executive and other State institutions.
Part of the plan is to add versatility in the design of monetary policies and additional
efforts to adjust the functioning of the exchange market, in order to reduce the structural causes of inflation and to provide the economic agents and the population with
knowledge and information to act more effectively in the economic activity.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 36
The contribution of the Institute towards sustainable and equitable economic growth
is based on the fact that the causes of inflation in Venezuela are beyond the monetary level and, therefore, require specific policies designed to promote financing to
productive investment, to reduce external vulnerability of the national economy, to
strengthen the payment system and to improve the public policies in the social and
regional fields through the development of new economic estimates, the improvement
of simulation models and supporting regional financial and economic integration.
Implementing the necessary policies and actions to promote social, economic and
political change towards a new socio-productive model aims to overcome the asymmetries and to meet the general needs of the population. The Central Bank of Venezuela
particularly emphasizes on contributing with the Economic Committee to go back
to a growing GDP, to reduce the exchange rate gap and, thus, meet the requirements
of society and the national productive sector.
Our main objective is to assure the efficiency and security of the payment, clearing
and settlement system, stabilize the monetary cone, cooperate with the controlling
entities which monitor the financial system and, promote social, educative and cultural
interaction with the community, which, identifies the Central Bank as a public service
institution, with regional presence, which goes beyond the traditional concept of central banks to satisfy the requirements of the increasingly changing environment.
In fiscal matters, average price estimates of the Venezuelan basket by 2010 are higher
than those provided in the budgeting. This National Executive’s cautious strategy is
related to a risk minimizing policy to sustain the fulfillment of budget allocation and
to neutralize the possible negative impacts that the development of global economy
could cause on social growth and development. However, the fiscal impact on economic growth will depend greatly on the efficiency and quality in the management
of government expenditure, particularly, social and investment expenditure.
The Institute will make a special emphasis on social co-responsibility, solidarity
and people’s participation, as well as on establishing direct and permanent contact
with sectors with associative models of production and social distribution and with
those with few socioeconomic resources. BCV will guide its economic, financial and
socio-productive education and information, the promotion of popular culture and the
knowledge of the historic heritage guarded by the Institute to such sectors.
Finally, the Central Bank of Venezuela knows the importance of having working,
technical and professional staff encouraged to achieve its objectives. Therefore, the
Bank makes efforts to continue supporting incentives for the staff, permanent recreational, sports and cultural activities; and to integrate handicapped people to the
facilities of the Bank and to facilitate access to the different funds in order to assure
a fair and sustainable working environment for the community of the Central Bank
which welcomes this new year full of joy due to the celebration of our 70th anniversary
and the Bicentenary of the Declaration of Independence of Venezuela.
The Institute will make a special
emphasis on social
co-responsibility, solidarity and
people’s participation, as well as on
establishing direct and permanent
contact with sectors with associative
models of production and social
distribution and with those with
few socioeconomic resources. BCV
will guide its economic, financial
and socio-productive education
and information, the promotion of
popular culture and the knowledge
of the historic heritage guarded by
the Institute to such sectors.
Caracas, December 2009
Nelson J.
Merentes D.
Acting President
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 37
V/
STATISTICAL APPENDIX
Main macroeconomic aggregates
(*) Provisional numbers
* Revised numbers
a/ Accrued as of November
1/ Average of the first three quarters of the year
2/ Through November
3/ Year end
4/ Year on year variation (Nov-09/Nov-08).
5/ Includes demand deposits, savings deposits, time deposits and otherwise.
6/ Plain average of lending and borrowing interest rates of time deposits in commercial and universal banking (national coverage)
Source: BCV, INE and Sudeban.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 41
Groos domestic product
(Thousand VEB)
1/ Including agriculture and restaurants and hotels
2/ Sifmi: Indirectly measured brokerage services
Source: BCV.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 42
Total, non-working and working population
(People)
Note: Total population in the private sector comprised private formal, informal and undefined employment.
1/ Potential labor force
2/ Did not mention any variable to apply as working in the formal or informal sector of the economy.
3/ Looking for a job for the first time
Source: INE.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 43
Price indicators
(Variation %)
Source: BCV.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 44
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 45
(*) Figures up to November 27th.
* Reviewed figures.
Source: BCV.
Monetary Aggregates
(Balance in million VEB)
Commercial and universal banking
A summary of the balance sheet
a/
1/
2/
3/
4/
5/
6/
7/
Numbers by November.
Refers to net available funds; the allowance for liquid assets has already been included.
Includes investments in securities for dealing, securities available for sale, securities held through maturity, other securities and restricted securities.
Includes proceeds receivable for liquid assets, investments in securities, loans portfolio and other accounts receivable, in addition to fees receivable and the allowance.
Includes stake in third parties, investments in foreign branches and the allowances.
Includes contingent assets, fi xed assets and any other assets.
Includes rights and stake in securities and restricted public bank deposits.
Includes BANAP bonds and other borrowing, in addition to accounts payable for public bank deposits, BCV bonds, BANAP bonds, other borrowing,
financial brokerage bonds, convertible bonds and junior bonds.
Finally, it includes other fi nancial brokerage bonds, junior bonds, convertible bonds and other liabilities.
Source: Sudeban.
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 46
YEAR-END ADDRESS BY THE PRESIDENT DECEMBER 2009
PÁG. 47
1/ Including loans for the following sectors: mining and oil and gas prospecting; construction, manufacturing; transport; storage and communications, electric power, gas and water supply; wholesale and retail trade; restarurants and hotels; social
and community and individual services.
y actividades no bien específicadas.
Source: Sudeban and own estimates.
Loans portfolio distribution
Commercial and universal banking
(Thousand VEB)
This Year-end Address
by the President of the BCV
was printed out in Caracas,
Venezuela, in the workshops of the
Central Bank of Venezuela,
during January, 2010.