VZCZCXRO8179
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHCV #1104 2331233
ZNR UUUUU ZZH
P 211233Z AUG 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 3589
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 001104 
 
SENSITIVE 
SIPDIS 
 
HQ SOUTHCOM ALSO FOR POLAD 
TREASURY FOR MKACZMAREK 
NSC FOR RKING 
USDOC FOR 4332 MAC/ITA/WH/JLAO 
 
E.O. 12958: N/A 
TAGS: ECON VE
SUBJECT: VENEZUELA'S ECONOMY CONTRACTS IN THE SECOND QUARTER 
 
REF: A. CARACAS 819 
     ¶B. CARACAS 368 
 
¶1.  (SBU) Citing a statement e-mailed by the Venezuelan 
Central Bank (BCV), news organizations reported August 20 
that BCV figures indicated Venezuela's economy contracted 2.4 
percent in the second quarter of 2009.  (Note:  As of the 
afternoon of August 20, the BCV had not posted the figures on 
its website.  End note.)  This contraction was widely 
anticipated (ref A) and reflects the impact of the drop in 
oil prices in the second half of 2008 on government spending 
and the economy at large.  Indeed, a number of local analysts 
believe the contraction began in the first quarter of 2009. 
Citing BCV sources, they claim initial first quarter figures 
showed a slight contraction, causing newly arrived BCV 
president Nelson Merentes, perhaps at the bidding of 
President Chavez, to ask state-owned enterprises to submit 
revised production figures, which led to a positive figure 
for first-quarter growth. 
 
¶2.  (SBU) Comment:  What will be more interesting than the 
figures themselves is how President Chavez explains them. 
When the financial crisis began spreading to the real global 
economy in 2008, he first maintained Venezuela would not be 
affected.  He then revised his line to say Venezuela was "not 
immune" to the crisis but had the reserves to manage it. 
When he announced several "anticrisis" economic measures in 
March (ref B), he insisted the crisis "had not touched even a 
hair of Venezuela."  Chavez has recently said he was 
reviewing measures that would bring better balance to 
Venezuela's foreign exchange system, so we think it likely he 
will make at least one address on economic issues in coming 
days or weeks.  A hint of how he will address the economic 
contraction is provided in the BCV's statement to news 
organizations, which notes Venezuela's contraction "came 
after 22 consecutive quarters of growth and more than a year 
after the global financial crisis negatively impacted the 
economic performance of most countries in the world."  End 
comment. 
DUDDY