Posted on 04/12/2005 3:35:55 AM PDT by M. Espinola
Economists are warning that the Russian government is making some of the same mistakes that have held back growth in Latin America, particularly in Venezuela, as it seeks to control profit-making industries at a time when it should be attracting foreign capital.
The economy — already characterized by underinvestment, high inflation and weak institutions — could see even worse rates of investment since the government ramped up its consolidation of the oil and gas sectors, says a report from Aton Capital to be released Tuesday.
Andrei Illarionov, the president's economic adviser, has labeled the move toward increased state control of the most successful sectors in the economy "the Venezuelan disease."
Whereas in the early 1950s Venezuela's oil sector, controlled by foreign investors, ensured economic growth surpassing 10 percent per year, in 1957 the sector was privatized and as a result Venezuela's gross domestic product is now 40 percent below the level it was in the 1950s, Illarionov said Monday at the Russian Economic Forum in London.
With higher oil revenues, "the Russian state is finding ever more temptations to repeat the Venezuelan experience and strengthen its control over — or even nationalize — whole sectors of the Russian economy," Illarionov said.
An uncertain business climate, characterized by insecure property rights, uneven enforcement of laws and contracts, and fears created by the Yukos case and other tax audits, is widely blamed for the low levels of investment in Russia.
Higher taxes on the oil sector have also led to slower investment since the second half of 2004.
Poor investment at a time of rising consumption has also left Russia with double-digit inflation, which reached 11.7 percent last year.
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(Excerpt) Read more at themoscowtimes.com ...
ping
I agree with your observations on Russia's politicians, as well as Putin. It's an economic black hole siding with many of America's enemies.
They're reaping what they've sown. They went after Yukos and now no one trusts them. Their number-one mission since the end of the USSR should have been to stamp out corruption, and now they're paying the price for not doing so.
For his part, Chavez seemed to welcome the opportunity to liken his own authoritarian style to that of the Russian leader, with whom he said he expected to become "good friends."
"In the world at large, they characterise us in the same way," he told reporters. "They call us democrats with our own vision of democracy."
"We believe in democracy, but not the kind of democracy forced on us," Chavez said, adding: "A strategic alliance has began, a joint path."
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