National Association of Manufacturers August, 2000

1. Confederación Venezolana de Industriales National Association of Manufacturers August, 2000 La Estrategia de Venezuela es la Industria

2. CONINDUSTRIA’s Vision CONINDUSTRIA aims to be a highly coordinated and strong organization in its sector, to be competitive and seek export opportunities, to be an engine for development and a generator of wealth and general well-being, whose status in the local market has earned it a positive and highly favorable image. Venezuela’s Strategy is its Industry

3. Our Mission CONINDUSTRIA A business services organization that supports the competitiveness of Venezuelan industry, especially that of small and medium enterprises (SME). Venezuela’s Strategy is its Industry

4. CONINDUSTRIA A business services Organization • Maximum representation of the industrial sector • National and international agreements • Represents 84% of the manufacturing sector’s production • 90% of non-traditional Venezuelan exports • Gathers 80% of SME’s Venezuela’s Strategy is its Industry

5. Economic highlights 1999 • Inflation = 20,1%. • Oil price increases ($15/barrel) • Increase in currency reserves- $15.000 MM • Decrease in Government budget deficit • Economy geared to the oil sector • Currency estabilization to curb inflation • GDP loss of 7,2% La Estrategia de Venezuela es la Industria

6. Manufacturing sector in VENEZUELA: 1999 • GDP loss of 10% • Closing of > 350 establishments • Loss of > 50.000 jobs– (19%) • Idle capacity > 40% • Non-traditional exports fell > 25% • Interest rates > 30% • Bolívar overvalued > 40% La Estrategia de Venezuela es la Industria

7. La Estrategia de Venezuela es la Industria

8. Industry today ¿How do you rate the venezuelan manufacturing sector today( april 2000)? MM = Muy mala M = Mala RHM = Regular hacia Mala RHB = Regular hacia buena B = Buena MB = Muy buena Coyuntura Industrial, Primer Trimestre de 2000 Campo y procesamiento elaborado por: Datanálisis La Estrategia de Venezuela es la Industria

9. Capacity utilization ¿What was the capacity utilization during the first quarter 2000? Coyuntura Industrial, Primer Trimestre de 2000 Campo y procesamiento elaborado por: Datanálisis La Estrategia de Venezuela es la Industria

10. (Base 1997 = 100) Fuente: Banco Central de Venezuela La Estrategia de Venezuela es la Industria

11. Employment Number of employed workers in manufacturing sector +5,29% -0,71% +6,86% +13,8% +7,90% -5,53% -0,62% -6,77% -4,47% +2,72% +0,96% -25,28% -4,43% -21,02% -24,8% -10,8% Coyuntura Industrial, Primer Trimestre de 2000 Coyuntura Industrial, Primer Trimestre de 2000 Campo y procesamiento elaborado por: Datanálisis La Estrategia de Venezuela es la Industria

12. La Estrategia de Venezuela es la Industria

13. La Estrategia de Venezuela es la Industria

14. Fuente: BCV y cálculos pripios. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

15. Inflation and Interest rates October 1997- June 2000 (%) Fuente: BCV y cálculos pripios. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

16. Exchange rateSeptember 1998-May 2000 Bs./US$ Nota: cifras correspondientes al último día hábil de cada mes. Fuente: BCV y cálculos propios. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

17. Inflation & Devaluation in Venezuela • December 1991- December 1999 • (%) Fuente: BCV y cálculos propios. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

18. INFLATION, DEVALUATION Y COMPETITIVENESSBrasil, Colombia, Chile, México, Perú y VenezuelaDecember 1996-February 2000(%) • Fuente: Banco Central del Brasil, Instituto Brasileño de Geografía y Estadística, Banco de la República de Colombia, DANE, BCV, Banco Central de la Reserva de Perú, Banco Central de Chile, Banco Central de México y cálculos propios. Elaborado por la Unidad de Análisis Económico e Industrial. CONINDUSTRIA. La Estrategia de Venezuela es la Industria

19. Exports: Venezuela > Colombia Imports: Colombia > Venezuela 1996-2000 (million dollars) (*) Emero-Abril 2000Fuente: Comunidad Andina. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

20. PRIVATE SECTOR EXPORTS & IMPORTS 1989-1999(millon dollars) Fuente: OCEI. Elaborado por la Unidad de Análisis Económico e Industrial La Estrategia de Venezuela es la Industria

21. Jobs Imported and Exported La Estrategia de Venezuela es la Industria

22. Proposals to estimulate the Industrial Sector • 1. INCREASE SALES: • Government Purchase’s Law • Modernize Customs Controls • Temporary Verification of imports • Temporary control of third country imports • Increase/update “draw back” repayment • Control of illegal imports. La Estrategia de Venezuela es la Industria

23. Proposals to estimulate the Industrial Sector 2. REACTIVATE INDUSTRIES: • Repeal Asset Tax. • Reduce exemptions to Value Added Tax. • Establish competitive pricing for government services and products. • Provide medium term financing with insurance guarantees • Improve competitiveness of labor. • Political and judicial estability La Estrategia de Venezuela es la Industria

24. Proposals to estimulate the Industrial Sector • 3. COMPENSATE CURRENCY OVERVALUATION: • New currency-exchange policy • Flexible currency bands • - Competitive currency rates to allow strong internal market • - Export- development policies competitive with neighbors . La Estrategia de Venezuela es la Industria

25. Achievements/Comitments • v Improvement of employment /production index • v Continuous improvement: competitiveness / productivity. • v Increase in export capacity. • v Increased investments. • Support/ growth of S.M.E. • Economic growth through manufacturing. La Estrategia de Venezuela es la Industria

26. Global Trends: • Fewer large companies and more SME’s • Emergence of outsourcing • SME’s displaying characteristics of larger companies • Transition from family-run SME’s to professional firms • SME’s without boundaries Venezuela’s Strategy is its Industry

27. SME: Issues to be addressed • Resistance to cultural change: Move from family-run • to more business-oriented companies • High production costs and resistance to • technological innovation. • Lack of supply chains among different-sized • companies. • Traditional and inflexible management approaches. • Little development of marketing strategies. • Inadequate disbursement of financing toward SME’s • Incentives for internationalization Venezuela’s Strategy is its Industry

28. An Example of support for SME Coninpyme Program: A CONINDUSTRIA - Interamerican Development Bank (IDB) Joint Initiative with the Objective of Strengthening the Competitiveness and Productivity of Venezuelan Small and Medium Enterprise Venezuela’s Strategy is its Industry

29. A comprehensive approach to assistance for SME a) Comprehensive Assessment Alliances and Synergy b) ImprovementPlan c) Implementation . Technology . Training . Financing . Internationalization Venezuela’s Strategy is its Industry

30. Conclussions • Time for a concerted effort • Switch from planning to execution • Achieve a real and competitive exchange rate • Devaluation without a fiscal adjustment plan not feasible • Achieving confidence is our challenge: • Changing the mind-set of Venezuelans • work = well -being • We have to change an economy based on oil revenues to become a productive and exporting country.................! La Estrategia de Venezuela es la Industria

31. Confederación Venezolana de Industriales National Association of ManufacturersAugust, 2000 La Estrategia de Venezuela es la Industria

32. Inflación Trimestral AnualizadaOctubre 1997 - Junio 2000(en porcentaje) Fuente: BCV y cálculos pripios. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

33. Pagarés, Tasa Activa, Depósitos a 30 días, Ahorrosy la Inflación AcumuladaEnero 1999 - Mayo 2000(en porcentaje) Nota. Todas las tasas de interes en promedios ponderados mensuales.Fuente: BCV y cálculos propios. Elaborado por la Unidad de Análisis Económico e Industrial. La Estrategia de Venezuela es la Industria

34. Una Experiencia de apoyo a la PYME Programa Coninpyme: Iniciativa de CONINDUSTRIA y el Banco Interamericano de Desarrollo -BID- para el Fortalecimiento de la Capacidad Competitiva de las Pequeñas y Medianas Empresas venezolanas La Estrategia de Venezuela es la Industria

35. Enfoque integral de asistencia a la PYME a) Diagnóstico Integral Alianzas y Sinergias b) Plan de Mejoras c) Implantación . Tecnología . Formación . Financiamiento . Internacionalización La Estrategia de Venezuela es la Industria