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Venezuela Businesses Demand Reform

November 12, 2001

CARACAS, Venezuela (AP) _ Venezuela’s largest industrial association urged the government to reform its economic policy, warning of ``collapse″ otherwise.

The National Council of Industries, also known as Conindustria, said Monday the government should promote state purchases of domestic products; adjust the tax and foreign exchange policies; and modernize the labor and social security laws.

``If urgent measures aren’t taken, a collapse of the economy will be inevitable,″ the statement said.

The criticism comes despite a 3.5 percent economic expansion in the first quarter, up from 3.2 percent last year. Venezuela’s economy shrank 6.1 percent in 1999, and the government expects 3.5 percent to 4 percent growth this year.

President Hugo Chavez last week called the economy one of the most ``solid″ in Latin America. He defended his efforts to revive the economy, pointing to his efforts to lower inflation and increase foreign reserves.

Many economists warn that the growth relies too heavily on government spending buoyed by a two-year boom in international oil prices. Venezuela depends on oil for 80 percent of its export revenue and half of government income.

But Conindustria said in its statement that 21 percent of the country’s industrial parks have closed in the last five years; non-oil exports have dropped 50 percent in the last six years; and customs fraud cost the country $584 million last year.

Conindustria added that 6 million of Venezuela’s 24 million people are either unemployed or working in the informal economy, which includes domestic servants, street vendors and some taxi drivers. Those workers don’t pay any form of taxes.

The group also complained that the local currency, the bolivar, is almost 50 percent overvalued, making imports cheaper and exports less competitive. The government denies the bolivar is overvalued.

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