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The Second Four-Year Plan of Venezuela*

Published online by Cambridge University Press:  02 January 2018

M. F. Hassan
M. F. Hassan*
Affiliation:
Department of Economics, University of Miami
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Extract

Development planning in Venezuela began in 1959 as a result of the changes in the economic conditions and in the political situation that occurred in 1958. In that year, on January 23, Pérez Jiménez government was deposed after 10 years of military rule. A provisional government was established and elections were held December 7, 1958 with Rómulo Betancourt (Democratic Action Party) winning a near majority (49%) of votes for Presidency. A coalition government of the Democratic Action party (AD), Democratic Republic Union party (URD), and the Christian social party (COPEI) was established according to a pre-election agreement among these parties.

The economic conditions also changed in 1958. Until that year Venezuela was able to achieve a high rate of economic growth (see Table I) and to accumulate considerable foreign exchange that prevented balance of payments crises such as those which interrupted economic development in other countries.

Type
Research Article
Information
Journal of Inter-American Studies , Volume 9 , Issue 2 , April 1967 , pp. 296 - 320
Copyright
Copyright © University of Miami 1967

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Footnotes

*

The author wishes to express his appreciation to the National Science Foundation for the grant which made possible his period of study in Venezuela, and to the officials of the Venezuelan Planning Office (CORDIPLAN) and to other governmental officials and business leaders for their assistance and cooperation.

References

1 Betancourt became the first elected President to remain in office for the full term. His successor Raul Leoni (AD) was elected in December, 1963 despite Communist threat of sabotaging elections.

2 In November 1960, the URD members of the cabinet withdrew from the government. After the election of President Leoni, COPEI withdrew and AD formed a coalition with URD and the newly formed FND (National Democratic Front). Early in 1966 FND withdrew from the coalition.

3 In the 10-year period, 1947-1957, Venezuela was able to raise its official and foreign exchange holdings from $216 million to $1.446 million. International Monetary Fund, Balance of Payments Yearbook, Volume 12 (May 1961).

4 Hassan, M. F., “Capital Flight: Venezuela 1958-1960,” Inter-American Economic Affairs, Vol. 17, No. 2 (Autumn 1963), 53–73.Google Scholar

5 Gaceta Oficial No. 28, 85 U, Caracas, December 30, 1958.

6 This is characteristic of most developing countries. See, for example, Waterson, Albert, Planning in Pakistan, (Baltimore: Johns Hopkins Press), p. 68 Google Scholar, and Haggen, Everett, Editor, Planning Economic Development, (Homewood: Richard D. Irwin, 1963), p. 261 Google Scholar (Nigeria), and p. 249 (Iran).

7 The administrative bottleneck is related to the educational system in Venezuela, which was neglected for many years, and also to the political structure of the country. In many cases the government does not use the best qualified person for the job, not because it cannot afford to pay his salary, but because of political reasons. This may also be true in many developed countries. However, in the latter countries there are many well trained personnel available from whom to choose and the difference in their qualifications is not as great as in the developing countries.

8 International Labor Office, Informe al Gobierno de Venezuela Sobre la Mission de Mano de Obra, 1956, and The International Bank for Reconstruction and Development, The Economic Development of Venezuela (Baltimore: Johns Hopkins University Press, 1961).Google ScholarPubMed

9 The shortage of experienced personnel was not sufficiently supplemented by foreign experts. United Nations and its specialized agencies, as well as AID and other U.S. agencies, did not provide as much technical assistance to Venezuela as they provided many other developing countries. This is probably due to the fact that Venezuela did not ask for and did not feel the need for such assistance.

10 This delay was due to political and economic reasons. See CORDIPLAN, El Plan de la Nación, Caracas, 1963, p. 1–1.Google Scholar

11 In 1957 the oil industry paid the Venezuelan government Bs 3.8 billion (including Bs 1.2 billion for oil concessions) which contributed 71% of total government revenue in that year. From 1958 to 1963 such payments were estimated at Bs 3 billion annually and constituted between 55% and 60% of total government revenue. In 1964 oil payments increased to Bs 4.7 billion contributing 67% of total government revenue (current exchange rate is Bs 4.50 = $1). Banco Central de Venezuela, Memoria 1958, p. 252, Memoria 1963, p. 90, and Memoria 1964, p. 94.

12 Oficina Central de Coordinación y Planificación, Social Change in Venezuela, (Caracas, 1965), p. 5.

13 Platt's Oil Price Handbook and Oilmanac, (New York: McGraw-Hill, 1961).

14 See for example, Lubell, Harold, “The Soviet Oil Offensive,” The Quarterly Review of Economics and Business, Vol. 1, No. 4, (1961), pp. 7–18.Google Scholar

15 M. F. Hassan, op. cit. pp. 60-62, and Gibson, Raymond, “Areas of Problems and Promise Facing International Oil,” The Magazine of Wall Street, (April 16, 1966), pp. 104–107.Google Scholar

16 “La disminución de la inversión en la economía venezolana,” Orientación Económica. (Instituto Venezolano de Análisis Económico y Social, Caracas, No. 6 Oct. 1962) pp. 39-42.

17 Ibid, p. 39.

18 CORDIPLAN, op cit., pp. 8-10.

19 “On the non-economic factors in economic development see Echavarria, J. M. and Higgins, B., Social Aspects of Economic Development (Vol. II), UNESCO, 1963 Google Scholar; Hagen, E. E., The Theory of Social Change: How Economic Growth Begins, (the Dorsey Press, 1962)Google Scholar; Rostow, W. W., The Process of Economic Growth, (New York: W. W. Norton, 1962)Google Scholar, Greetz, C., Peddlers and Princes; Social Development and Economic Change in Two Indonesian Towns, (University of Chicago Press, 1963).Google Scholar

20 Mayne, Alvin, “Designing and Administering a Regional Economic Plan with Special Reference to Puerto Rico,” in Isard, Walter and Cumberland, John H., eds., Regional Economic Planning (Paris: Organization for Economic Cooperation and Development, 1961).Google Scholar

21 R. F. Harrod, “An Essay in Dynamic Theory,” Economic Journal, (March 1939), and E. Domar, “Expansion and Employment,” American Economic Review, (March 1947).

22 Comité de los nueve, Alianza para el progreso, Evaluación del Plan de la Nación 1963-1966 de Venezuela, (September 1963), p. 35.

23 For the critical use of capital output ratio see Reddaway, W. B., Development of the Indian Economy (Homewood: Richard D. Irwin, 1962).Google Scholar

24 This analysis does not mean that achieving the objective is merely a matter of attaining an appropriate rate of capital formation.

25 Mensaje Presidencial, Caracas 1965, p. 3.

26 See Neal Van Middleworth, “Venezuela's Oil Decline,” World Petroleum, March 1961 and G. Tungendhat, “World Oil Problems, 1962,” the Petroleum Time, February 1962.

27 In 1958 Venezuela's oil reserves were estimated at 16,500 million barrels compared with 33,000 million barrels for the U.S. and 174,350 million for the Middle East. Oil and Gas Journal, Dec. 29, 1959. In 1963 they were estimated at 17,000 million barrels compared with 75,000 million barrels for Kuwait, 62,000 million for Saudi Arabia, 32,- 000 million for Iran, and 30,990 million for the U.S. World Oil, August 15, 1964.

28 International Bank, op. cit. pp. 199-204.

29 Ibid, p. 197.

30 CORD1PLAN, Plan de la Industria Manufactura 1965-1968. The third development plan projects a lower annual growth rate of manufacturing (10.3%) than that of the second plan.

31 Kuznets, Simon, Economic Growth and Structure (New York: W. W. Norton, 1965), p. 240.Google Scholar

32 Simon Kuznets, “Quantitative Aspects of the Economic Growth of Nations: II Industrial Distribution of National Product and Labor Force,” Economic Development and Cultural Change, Supplement, July 1957, Table 3, p. 10.

33 “Agriculture in Economic Development.” Monthly Bulletin of Agricultural Economics and Statistics, February 1964, pp. 1-4. See also William H. Nicholls, “An Agricultural Surplus as a Factor in Economic Development,” Journal of Political Economy, February 1963, pp. 11-39.

34 Simon Kuznets, “Economic Growth and the Contribution of Agriculture,” a paper presented at the Eleventh International Conference of Agricultural Economists in Mexico in 1961. Printed in his Economic Growth and Structure (New York: W. W. Norton, 1965) pp. 236-56.

35 CORDIPLAN, El Plan, op. cit., p. 62.

36 The Ministerio de Fomento estimated the urban population at 67.8% in 1961. It also projected the urban population to reach 71.6% of total population in 1965 and 75.7% by 1970. Ministerio de Fomento, Anuario Estadístico de Venezuela 1957-1963, Caracas, 1964.

37 The International Bank for Reconstruction and Development, The Economic Development of Venezuela.

38 OIT (I.L.O.), Informe al Gobierno de Venezuela Sobre la Misión de Mano de Obra, 1956.

39 For more details on the level of education in Venezuela see International Bank, op. cit., chapter 14, and CORDIPLAN, El Plan de la Nación, Chapter XI.

40 W. Arthur Lewis, “Economic Development with Unlimited Supply of Labor,” The Manchester School, May 1964, “Unlimited Labor-Further Notes,” The Manchester School, January 1958.

41 Myint, Hla, “Economic Theory and the Underdeveloped Countries,” Journal of Political Economy, October 1965, pp. 477-91.CrossRefGoogle Scholar

42 Karl De Schweinitz, Jr., “The Role of the State in Underdeveloped Economies,” and M. F. Hassan, “Economic Systems and Underdevelopment Discussion,” both presented at a joint session of the Association for Comparative Economics and the Southern Economic Association at the annual meeting of SEA, November 11-13, 1965.

43 International Labor Office, Employment Problems and Underdevelopment, Geneva, 1964.

44 Galenson, Walter, “Economic Development and the Sectoral Expansion of Employment,” International Labor Review, July 1963, p. 519.Google Scholar

45 Large amounts of agricultural products were imported to meet increasing domestic demand for food. Only recently has agriculture been able to increase its production of food and thus reduce agricultural imports.

46 Cook, Hugh L., “The New Agrarian Reform Law and Economic Development in Venezuela,” Land Economics, February 1961, p. 15.Google Scholar

47 CORDIPLAN, op. cit. pp. 11-12, 14 and 317-319.

48 In view of the deficits in housing, estimated at 575,000 units, Venezuela is faced with the task of constructing large amounts of housing and other community services such as sanitation and water systems.

49 ‘Comité de los nueve, Evaluación del Plan de la Nación 1963-1966 de Venezuela, Septiembre de 1963.

50 When using this type of analysis two factors should be noted. First, average productivity of the economy may change as a result of changes in the sectoral structure of GDP even though the productivity in each sector remains the same. Second, when expressing productivity in terms of labor force, one should take into consideration the available knowledge of idle capacity in order to estimate corresponding values in specific cases.

51 This model was used by Venezuela to estimate its employment in 1961. See Angel Monti, “The Programming of Short-Term Financing,” Economic Bulletin for Latin America, March 1965, p. 83.

52 This way of estimating AE and AP would tend to slightly overestimate the productivity effect: (E —E ) (Pn∼P ), Ibid, p. 78.

53 CORlDIPLAN,n£7 Plan de la Nación, pp. 25, 78, and 80.

54 In Venezuela a value of A P = 50% was considered the most probable value of productivity effect in 1961. Angel Monti, op. cit. p. 78.

55 This estimate is reached by using the formula AGDP = AP + AE, when AGDP = 10 billion bolivars, AE = 50%, or Bs 5 billion, AE = (E —E ) P , E = 2.3 million persons, and P = 12,700 Bs. n o o o o

56 Kuznets, Simon, “International Differences in Capital Formation and Financing,” National Bureau of Economic Research, Capital Formation and Economic Growth (Princeton: Princeton University Press, 1955), pp. 34–35.Google Scholar

57 United Nations, The Economic Development of Latin America in the Post-War Period (New York, 1964), p. 114.

58 M. F. Hassan, op. cit. pp. 53-73.

59 “E1 Plan de la Nación v la Formación de Capital,” Orientación Económica. Num. 8 (April 1963), p. 36.

60 United Nations, Yearbook of National Account Statistics.

61 Examples of the public enterprises are the Instituto Venezolano de Petroquímica, Corporación Venezolana de Petróleo, and Corporación Nacional de Hoteles y Turismo.

62 The International Bank mission to Venezuela reported that the fees charged for services in many cases are low, such as charges of the Instituto Nacional de Obras Sanitarias (INOS) for water, see International Bank op. cit., p. 39.

63 Committee on Economic Development, Cooperation for Progress in Latin America (New York: April 1961), p. 42Google ScholarPubMed, and Banco Central, Memoria 1959.

64 The index of money supply (1953 = 100) increased from 80 in 1951 to 183 in 1957, Banco Central, Memoria 1957.

65 The index of the value of imports (1953 = 100) increased from 83 in 1951 to 203 in 1957.

66 Hirschman, A. O., Latin American Issues (New York: The Twentieth Century Fund, 1961), pp. 69–79.Google Scholar

67 Such a rate may be compared favorably with that in other Latin American countries, e.g. (1958 = 100) Argentina Brazil Chile Colombia Venezuela 1963 index 490 660 229 158 114 U.N. Statistical Yearbook, N.Y., 1964.