* Chavez sees output reduction major factor in GDP fall
* "Capitalist" methodology unfair for socialist Venezuela
(Adds details, quotes)
By Andrew Cawthorne
CARACAS, Nov 18 Venezuelan President Hugo
Chavez said on Wednesday the South American oil producer's
economic slide was largely due to its compliance with
OPEC-mandated production cuts.
GDP shrank 4.5 percent in the third quarter of 2009, a
second consecutive three-month contraction that by most
economists' definition puts Venezuela in recession.
Though Venezuela is still heading for a smaller economic
decline this year than plenty of other nations, Chavez critics
have leapt on this week's data as evidence of the failure of
his decade-long socialist drive.
Private sector investment and output have suffered in
Venezuela's state-driven model, with large swathes of the
economy nationalized since Chavez came to power in 1999.
But he said Venezuela's people-first policies -- from free
health clinics to subsidized food -- did not show up in data.
Lambasting traditional GDP methodology as an "ideologically
charged ... capitalist instrument", Chavez said it would be
easy to reverse the GDP trend if Venezuela were to disobey
agreements by the OPEC group of producer countries.
Venezuela's cut of about 400,000 barrels per day had helped
lift and stabilize the global crude price, he said.
"One of the biggest factors in the GDP fall is the decline
in the so-called oil GDP," Chavez told a meeting of his United
Socialist Party of Venezuela (PSUV).
"But the drop in the oil GDP is the (OPEC) cut."
Oil GDP slid 9.5 percent in the third quarter data released
by the Central Bank on Tuesday. [ID:nN1718696]
EXPANDING PUBLIC SECTOR
Chavez said Venezuela had complied with its roughly 10
percent share of more than 4 million barrels per day OPEC cuts
as a "geopolitical decision" to help shore up prices, not due
to local wells drying up or lack of investment.
Venezuela could, if it wanted, therefore break with OPEC to
boost the economic data, he said.
"Fine, GDP would immediately go above zero. But what would
that bring as a consequence? That oil prices would collapse to
$20 or more. Then we would have no resources to pay salaries
next year. It would be catastrophic for Venezuela."
The former paratrooper said traditional GDP methodology
also prejudiced Venezuela's case because it gave greater weight
to the private sector than a fast-expanding public sector.
"It's really dangerous, especially when you're dealing with
a transition to socialism," he said, comparing GDP calculations
for Venezuela to a doctor using a damaged thermometer on a
Free health clinics set up by the government were also
prejudicial to GDP data, he said, because unlike costly private
clinics, they did not create a big money-flow.
Regardless of methodology debates, analysts are in no doubt
that Venezuela's economy is in trouble, and at a time when
Chavez is gearing up for legislative elections in September of
next year. [ID:nN18508926]
Finance Minister Ali Rodriguez has said economic
contraction could be as much as 2.2 percent this year, though
the government predicts a modest recovery in 2010.
For factbox on Venezuela's economy, click [ID:nN1750517]
(Reporting Andrew Cawthorne; editing by Carol Bishopric)