Venezuelas economic rebound will be sustained, according to a California-based independent investment research firm. Surging public sector investment is building a strong foundation for long-term economic growth, says Jeph Gundzik, president of Condor Advisers, an eight-year-old investment consulting company based in Mammoth Lakes, Calif.
Mammoth Lakes, CA (PRWEB) July 3, 2004 -- According to Gundzik, record high international oil prices are driving economic growth, which approached 30 percent in the first quarter of this year. "In addition to oil price developments, political and social stabilization, and restructuring of the state-owned oil company, Petroleos de Venezuela (PdVSA) are also providing a strong boost to economic activity," Gundzik says.
Gundzik, who publishes independent emerging markets investment risk analysis, stresses that strong economic growth in Venezuela will be sustained at least through 2005. He believes that global geopolitical instability and increasing oil demand, especially in Asia, will continue to support high international oil prices for the next 18 months. Instability in the Middle East will not subside with whats bandied by the media as the restoration of sovereignty in Iraq or the potential defeat of President Bush in Novembers election. These factors, instead, will restrain the regions oil production as oil demand continues to increase rapidly in China and India," he says.
According to Gundzik, oil prices are only part of the picture of Venezuelas economic recovery. The restoration of political and social stability are also an important component of sustained economic growth. A succession of strikes and opposition protests between 2001 and 2003 recently culminated when Venezuelas National Electoral Committee announced that the opposition-supported presidential recall referendum will be held on August 15. Its unlikely that President Chavez will lose the recall referendum. Apart from another coup attempt, the recall referendum is the oppositions last hope to unseat Chavez before the 2006 presidential election. After the referendum, Chavezs exhausted opposition will probably fracture and weaken, calming the political and social environments," he says.
Gundzik believes that the completed restructuring of PdVSA will also underpin economic growth in the future. For many years PdVSA was allowed a wide degree of autonomy from the government. This encouraged the companys management to siphon revenue out of the country through foreign investment, of questionable value, in downstream operations. After the 2002 PdVSA strike, which almost halted oil production, the Chavez government began to reorient the companys operations away from foreign investment toward investment in Venezuela. By demoting foreign investment and strictly controlling cash flows the Chavez government has captured a significant amount of PdVSA revenue that previously was kept abroad to avoid tax and royalty payments to the treasury. Recapturing this revenue has provided funds for expanding domestic investment," says Gundzik.
According to Gundzik, expanding domestic investment by PdVSA will have a strong positive impact on Venezuelas economy over the long-term, permanently boosting the countrys economic growth. PdVSA accounts for almost 40 percent of Venezuelas production-based gross domestic product. The Chavez governments efforts to reassert government control over PdVSA has been widely criticized both abroad and in Venezuela. Chavez is doing exactly the same thing to Venezuelas oil sector as Putin has done to Russias oil sector. The difference is Venezuelas oil sector is state-owned while Russias is supposedly private. Whos the real autocrat?" asks Gundzik
Condor Advisers, a Mammoth Lakes, Calif.-based consulting firm specializing in emerging markets investment risk analysis, has been serving institutional investors globally since 1995. Condors research has foreseen all the major crises in emerging markets, including the Asian liquidity crisis in 1997, Russias default and devaluation in 1998, Brazils devaluation in 1999 and Argentinas default and devaluation in 2001. Jeph Gundzik is available to speak to the media about global political and economic trends, and investment risk and opportunities in emerging markets. He can be reached in the United States at 760-937-7152 or by email at jpg@condoradvisers.com For more information please visit www.condoradvisers.com .
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