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According to the Central Bank of Venezuela (BCV), the private industry not related to the oil business grew 20.7% of the Gross Domestic Product (GDP: goods and services generated by the economy of a country) in the third quarter. These figures reflect the recovery of the manufacturing sector throughout 2004, after an 8% contraction in 2003.

The manufacturing sector suffered the consequences of the strike launched by the opposition, which interrupted the supply of inputs like plastics, containers, chemicals, fuel, gas, spare parts, and other national and imported goods. In the first quarter of the previous year, the local industry underwent a historical 30.7% plunge, to close between January and June with a 20.6% of total production. During the first semester of 2004, production recovered and reached a total 38.9% growth.

Lope Mendoza, president of the Industrial Businessmen Confederation of Venezuela (Conindustria), admits that the recuperation of the industrial activity is a consequence of the atmosphere of appeasement in the country, after months of political unrest. Moreover, he considers that the demand for goods and services has improved due to the increase in public spending, stimulated by a rise in oil prices. A study of the third quarter by Conindustria reveals that the manufacturing sector is growing at a slow but consistent pace. The report also indicates that the capacity used by the companies rose from 44.9% in the third quarter of 2003, to 55.04% in the same period in 2004.

“According to the BCV figures, most industrial sectors have grown above the general average: textiles, chemicals, common metals, minerals, automobiles, tires, and plastics. Only the food industry has kept a rate of activity below the average of the whole sector since February 2003” , said Mendoza.

He explained that the food processing industries have been affected both by the increase in imports of finished products and by the application of price controls at a lower amount than the real production costs of basic necessities.

Additionally, he mentioned that there has been improvement in most variables, like production, employment, sales, and production capacity. He commented that in most industries, there has been an increase in product orders and inventories in order to meet the demand. “The number of assured orders has remained stable at an average of two months for the big and medium industries, and at an average of one month for the small ones”, he noted.

As for sales, he noted that factories report a gradual growth of the demand, especially for the Christmas season.

Moderate investments

The report by Conindustria indicates that despite the improvement in sales and production, industries are still reluctant either to make great investments or to expand their plants. “The expenses made this year have been for maintenance and repair of machinery and equipment” he explained.

Lope Mendoza considers that in order to achieve sustained growth, it is necessary to invest at least between 6% and 8% of the GDP. “The survey also reveals that although most industrial businessmen have claimed that they will limit their investments to the operational aspect of their production process (maintenance), the percentage of those willing to make major investments is slightly increasing”, he said.

The president of Conindustria estimates an 18% growth for 2004, and between 10% and 12% for 2005. “Although the answers by the industrial businessmen that responded to the survey are moderately optimistic about the evolution of industry in the near future, the BCV growth figures the for the industrial sector revealed an important recovery that could increase significantly in 2005, if the conditions for investments in the country improve”, he said.

Published in Quantum N.42