| The Venezuelan system of public finance is facing structural and institutional problems that make the budget pro-cyclical and deficit biased. As a result, a cycle of fiscal adjustment and expansion has rooted, revealing a situation of unsustainable fiscal imbalance, which impedes the design of long-run public policies. Although a general consensus exists about the positive association between fiscal performance and macroeconomic instability, that relationship has not been proved convincingly and sufficiently. This dissertation analyses that problem from an economic perspective in different levels: (a) focusing on the budget constraint it shows the procyclical character of the Venezuelan fiscal policies and founds a ratchet effect in the government spending that makes the budget deficit biased; (b) it examines the macroeconomic impact of fiscal performance, finding a positive association between fiscal policies and growth, as well as a positive, influence of fiscal deficits on inflation; (c) it, finally, examines the influence of the economy on fiscal deficits, showing that, in the absence of a fiscal rule that stabilizes government spending, fiscal sustainability is tied to given oil-price scenarios. The main conclusion of the thesis is that rather than to a high structural fiscal deficit, fiscal insolvency in Venezuela is associated to the absence of mechanisms that prevent public finance from being exposed to the volatility of oil revenues and the deficiencies of the fiscal institutional system. It is inferred that a sound fiscal reform, which includes efficient, stabilization mechanisms and overcomes the main shortcomings of non-oil fiscal accounts, is necessary. This task that looks easy from an economic perspective, given the lessons of the fiscal reforms already implemented in other developing countries, looks very difficult from a political perspective. According to this reasoning, this work has not ended yet, but the nature of the analysis to find a solution to the structural fiscal problems of Venezuela belongs rather to the sphere of the Political Economy than that of the Economic Theory. |
