During Axco's recent visit to Venezuela it was possible to identify three major areas causing particular concern in the country:
Politics Prices Violence.
Under President Chavez it appears that politics is more important than anything else. The president’s ongoing verbal attacks on the US, his wish to befriend like-minded politicians in Latin America and his apparent desire to increase the state’s role and reduce the role of the private sector in Venezuela’s economy, all mean that economic factors have taken a back seat. There have been a number of articles in the local press strongly critical of Chavez; these have allayed fears regarding press freedom to an extent.
The concentration on politics rather than economics has led to very high inflation. When the government imposed price controls on certain basic goods, the producers stopped producing, as a result of which there were shortages; removal of controls meant renewed availability at higher prices. General inflation from 2007 to 2008 was 30%, in answer to which Chavez increased the minimum wage by the same figure. The Venezuelan people are suffering, as evidenced by the reduced trade in the bars and restaurants of Caracas. It was reported that a loosening of the public purse-strings early in the second half of 2008 ahead of the municipal elections in November, had led to another shortage of foodstuffs.
Insecurity has become a serious problem and many people feel that Venezuela has too few police officers. Particularly in poor areas, armed bands are said to be in control, and murders were being reported in the press on a daily basis.
Axco’s Insurance Market Reports on Venezuela are in production following our consultant’s visit to the country. They will be published in the third quarter 2008.
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