Venezuelan Forecast

Sep 21st 2007
From the Economist Intelligence Unit
Source: Country Forecast

Having won a strong mandate in 2006, the president, Hugo Chavez, has launched his third term with a drive to deepen “21st-century socialism”. Complete control of the legislature and significant influence over weak and politicised institutions should facilitate this agenda, but obstacles remain, including the gradual decline of fiscal revenue, which, combined with a downturn in private investment, will produce an economic slowdown. This will help to reduce inflation to below 20% in 2008-09, notwithstanding a forecast devaluation of the fixed official exchange rate in 2009 as the bolivar becomes increasingly overvalued. For now, still-strong public finances and external accounts should allow the authorities to avoid a devaluation in 2008, despite a parallel market premium of over 100%. As the forecast period progresses, the current-account surplus will narrow; both import and export growth will slow, but export growth will slow faster.

Political outlook
The proposed constitutional reform has been made public. Assuming it is approved quickly by the National Assembly, it must then be passed by popular referendum on December 9th 2007. Apart from a move to eliminate presidential term limits, the most controversial elements are a weakening of private property rights, the politicisation of the military and the introduction of new types of local government. Opinion polls suggest indefinite presidential re-election is unpopular, but other elements of the reform, such as a reduction of the working day to six hours, could help secure the approval of the entire package.

Economic policy outlook
In light of recent government statements, the Economist Intelligence Unit has revised its exchange rate forecast and do not now expect a devaluation of the official rate in 2008, despite a parallel market premium of over 100%, on the assumption that high oil prices will prevent fiscal or balance-of-payments pressures.

Economic forecast
A revision to our exchange-rate forecast for 2008 has prompted a slight downward revision to our forecasts for inflation and the current-account.

Negotiations with the FARC

During the past couple of weeks Alvaro Uribe and Chavez have been engaged in trying to release hostages from the FARC. Meanwhile, French president Nicolas Sarkozy is also getting involved in an attempt to release Ingrid Betancourt a dual national of French and Colombian citizenship.

An interesting fact is that Uribe released Rodrigo Granda, a senior member of the FARC, apparently at the request of Sarkozy. You may remember that Granda was caught living in Venezuela by paid Venezuelan agents.

It seems that Uribe is putting himself in a precarious position in dealing with the FARC, considering the failed attempts in the past and Uribes strong stance during his presidency. For Chavez this may give him a marginal success story in a foreign policy campaign that has seen many setbacks during the past few years.

Thus far Chavez has released a group of Colombian nationals being held since 2004 accused on trumped up charges that they were planning on killing Chavez. In addition Chavez said he was willing to resolve a territorial dispute over the oil rich Gulf of Venezuela. This dispute almost led to a war between the two countries in 1987.

According to The Economist negotiations are likely to be difficult and not likely to result in any winners:

But the problem for Mr Chávez—and this might be Mr Uribe's calculation—could be that in the end the FARC may reckon that it has more to lose than gain by a deal. “The hostages are the only thing the FARC have that gets them heard internationally and gives them any importance domestically,” says Gerson Arias of Ideas para la Paz, a think-tank in Bogotá. Whatever the outcome, all three parties in the coming negotiations face risks, some of which may be unexpected.

The FARC I can't imagine giving up hostages since it is their only barganing chip, for Chavez this would be another set back and a source of frustration since both have expressed sympathy for each other. In addition, Chavez might be seen as incapable of even persuading sympathizers of his revolution. In the end it will be interesting to see how negotiations play out.

Venezuela: Two competing health care systems

Below is an article that was published in the medial journal "The Lancet". Readers will remember a few months ago another article in The Lancet looked at how some Cuban doctors sent to Venezuela have defected to the United States (and Colombia) to escape the terrible conditions of Cuba and Venezuela.

In Venezuela, two public-health systems grow apart

Daniel Cancel 

President Hugo Chavez's popular social missions have brought free primary health care directly to low-income communities in Venezuela. But critics say that these new health services have grown at the expense of the country's existing hospitals. Daniel Cancel reports from Caracas.

In the southwest corner of Caracas, the 54-year-old Coche public hospital has only one radiograph machine working; the second was recently disabled after rats chewed through the electrical wires. Just 5 km away in the neighbourhood of El Valle, brand new health clinics have been opened as part of President Hugo Chavez's social mission, with state of the art equipment funded by the government. Both treat patients free of charge, but the differences are stark.

This contrast illustrates perfectly the reality of the current state of the country's public-health system. Instead of re-equipping and improving existing hospitals, the government has poured millions of dollars into creating a parallel social health-care system, which still is not growing fast enough to meet people's needs.

In the 1999 constitution of Venezuela, article 83 guarantees the right of all citizens to access free health care and receive adequate treatment. This policy forms part of the socialist agenda by Chavez, the controversial former paratrooper turned revolutionary leader. His focus on the poor was largely seen as a giant step forward in settling part of the social debt accumulated after years of abandonment and inefficiency in the public-health system. 8 years on from that bold initiative, citizens are still receiving free care. But now, as a result of the fragmented Venezuelan health-care system, poor management, constant changes in administration, and periodic shortages of supplies, the quality is not what many had anticipated.

Maria Elena Rodriguez, a health research coordinator with the Caracas-based human rights watch group Provea, says of the government's health reforms “I think a lot of measures in the past 5 years have been admirable but they have been followed by plenty of management and implementation failures as well as a lack of transparency in spending”.

The major advances under Chavez's government in health revolve around the social development programmes known as missions. These programmes are funded principally by the state oil company Petroleos de Venezuela, which, by riding the wave of an oil boom, has fuelled the government's political projects and kept the economy afloat.

The mission Barrio Adentro (inside the neighbourhood), the banner social programme of the Chavez government in 2003, has brought primary health care directly to the poorest Venezuelans. The programme has been tremendously popular with citizens who are unable to pay private health insurance and has boosted the president's ratings. The patients are attended to in their own neighbourhoods by Cuban doctors, who are on loan in exchange for oil shipments. The mission began with just 54 Cuban doctors in 2003 and has expanded throughout the country. According to figures from the health ministry, some 26 819 doctors are now practising in Venezuela.

The original Barrio Adentro I programme was initially characterised by two-storey, octagonal brick clinics located in poor urban areas which serve both as offices and residences for doctors. That model has been giving way to well equipped clinics capable of providing advanced health care to Venezuelans. The second phase of the programme, Barrio Adentro II, was inaugurated in 2005 with the opening of 30 diagnostic centres, 30 rehabilitation centres, and several high technology centres. The high-tech centres provide nuclear magnetic resonance tests, three dimensional ultrasound, mammography, video endoscopy, and electrocardiography, among other services.

The original goal to build 1235 new clinics during 2006 was not achieved, although 175 diagnostic, 183 rehabilitation, and six high-tech centres were opened last year according to the health ministry.

With this programme, the public- health system in Venezuela has diversified greatly. It has reached low-income communities with the intention of relieving the old, overcrowded hospitals. Critics, however, say Barrio Adentro has grown at the expense of the former health-care system and has yet to lessen the number of patients in traditional institutions.

The attention the government gives to Barrio Adentro has also been an issue with Venezuelan public-health workers, who complain of low wages, shortages of basic supplies, and poor working conditions. Many see the social projects as getting preferential treatment while hospitals are left to fend for themselves.

Olga Machado de Castillo, a member of the board of directors and secretary of labour relations in the Venezuelan Medical Federation, a staunch opposition group to Chavez, believes the neglected public hospitals have worsened under the current government. The presence of Cuban doctors in the country, she says, forms part of an active discrimination campaign against Venezuelan health professionals. She calls the arrival of Cuban doctors “an invasion”.

“One of the problems in the country is the presence of supposed Cuban doctors. We have determined through studies that only one in every ten of these doctors is really qualified to be practising in medicine while the others are simple technicians”, said Castillo.

The Federation refuses to acknowledge any advancements or improvements in health under Chavez; it also claims preventable diseases are on the rise, and diseases that had been eradicated in the past have returned once again. The government denies these allegations, saying that reports of tuberculosis and dengue fever outbreaks are media-provoked slander. They also defend Barrio Adentro saying no Venezuelan doctors would do the work of the Cuban medics in impoverished and violent city slums.

But the equipment, personnel, and propaganda that has been used in Chavez's social missions has come at a steep financial cost, and has left the staff of the country's long-established public hospitals asking about their share of the money.

Elisabeth Chacón has been working at the Coche Hospital for 26 years. Trained as a paediatrician, she is now the hospital's director, and is thus very aware of the woes that have beset the hospital. The deteriorating façade and out-of-service lifts convey maintenance problems in the hospital, though the deficit in doctors, nurses, and therapeutic beds highlight a more profound crisis. “The money we receive for 1 year of medicine does not cover our costs for 3 months, and the rest of the year we have to ask for credits and request help from the health ministry”, she said.

The Health Secretariat is in charge of funding, and answers to the needs of 14 hospitals and 87 outpatient clinics in the metropolitan area. Their annual budget equals $248 million but 90% is spent on paying the salaries of doctors, nurses, and other labourers. This leaves little cash for buying supplies, maintaining the infrastructure and ambulances, and buying new equipment.

The government's response to the deteriorated state of the public hospitals has been the creation of the Barrio Adentro III programme. This initiative has been intended to supply the hospitals with the vital equipment and supplies they have lacked for so long, although so far hospitals say they have seen little progress.

Luisana Melo, the newly appointed director of the Health Secretariat, admits that the public health-care system is in “crisis”, but she remains optimistic about the possibility of changes under her mandate. In her opinion, the principal cause for the degradation of the country's health- care system is the years of neglect it faced at the hands of the country's previous “neoliberal” administrations. The policies enacted during these years, as Melo sees it, tried to “weaken the public-health system in order to strengthen the private system”. Melo mentioned the need to audit the number of workers and the deficits in hospitals to better distribute the funds.

Venezuela's hospitals are still popular with the public. Elena Rodriguez says that despite all the government propaganda, many Venezuelans tend to turn to the decade-old hospitals first, even with new clinics around the corner. “As part of the culture or habit people go straight to hospital when they have a minor ache or pain, which contributes to the hospitals being overrun”, she says.

Melo says this habit is because of a pattern she calls “ruleteo” (roulette table), where patients are repeatedly told to go to the next hospital or clinic to be attended to. “Instead of going to Barrio Adentro for a consultation, the people go directly to the hospitals. This is to avoid being sent all over town in case the diagnostic centres are unable to treat their ailment”, she said.

A proposal by the Lord Mayor's Office to organise the different public and private health care elements under one control centre could help to fix the roulette problem, according to Melo. Or it could be another good idea that is not followed through to the end, as critics suggest.

Overall I think this article captures the essential problem with health care in Venezuela. That is Chavez is creating two health systems, one that is "well funded" dominated by clinics in barrios but are only capable of providing the most basic services (i.e. Tylenol, check-ups, and bandages). Meanwhile people prefer to go to hospitals which are underfunded thus can not provide adequate service and are understaffed. The health care system is further deteriorating due to price controls and the Chavez government threatening private clinics.

Ideally the government would not build a parallel hospital system but rather a complementary one. If history is any indication, which it usually is, eventually the clinics of Barrio Adentro will fall into disrepair and neglect and the public hospitals will continue to be under funded and under staffed, leaving the private hospitals to those who can afford them.

In other news: Measles has returned after four years of absence in Venezuela, possibly as a result of the inadequate coverage of vaccination in children and the accumulation of susceptibles in other ages. To read more about this visit Caracas Chronicles. For those interested Miguel has also discussed issues dealing with health care in Venezuela.

Invest. clín, June 2007, vol.48, no.2, p.135-137.