Obstacles to buy US dollars and raw materials lash manufacturing

The Venezuelan manufacturing sector has shown a constant lackluster performance. Although gross domestic product (GDP) will recover losses reported in a six-quarter recession period (2009-2010), the industry lags behind production levels recorded in 2008. Moreover, the future looks bleak amid looming stagnation.

Manufacturing grew 3% by the third quarter of 2012 at a 5.2% rate that boosted all the economy contrary to 2011. Additionally, 2% progress was also reported from January-September with respect to last year, but it is still way from the 5.6% of the total GDP, according to the figures of the Central Bank of Venezuela (BCV).

The disappointing performance of the manufacturing sector is attributed to multiple reasons, but mainly to the overvalued foreign exchange rate, difficulties to buy US dollars to import raw materials and equipment, and shortages in raw materials produced by domestic basic industries.

For instance, US dollar sales to companies, the chairman of the Venezuelan Confederation of Industries (Conindustria) says, may take 120-150 days, and sometimes this may extend to 180 days.

This causes delays so as to pay suppliers. If suppliers abroad are not paid within the next few weeks, companies may have to face shortages amid high demand. 

Furthermore, although US dollar purchase is vital for industries, the currency turns out to be one of the main trouble makers in view that the foreign exchange rate (VEB 4.3 per US dollar) has been overvalued since 2010. As a result, importing is cheaper than producing at home.

Translated by Jhean Cabrera