Poverty Rates In Venezuela: Getting The Numbers Right


Richard Moore

Original source URL:

Issue Brief * May 2006
Center for Economic and Policy Research
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Poverty Rates In Venezuela: Getting The Numbers Right

Over the past year, the statement that poverty in 
Venezuela has increased under the government of 
President Hugo Chávez has appeared in scores of 
major newspapers, on major television and radio 
programs, and even journals such as Foreign 
Affairs1 and Foreign Policy.2 (See Appendix for a 
sample of such statements.) These statements have 
only rarely been contested or corrected.

For example, writing in the May/June 2006 issue 
of Foreign Affairs, Mexico's former Foreign 
Minister Jorge Castañeda stated that "Venezuela's 
poverty figures and human development indices 
have deteriorated since 1999, when Chávez took 
office."3 A May 11, 2006 news article in the 
Financial Times was headlined "Chavez opts for 
oil-fuelled world tour while progress slows on 
social issues; Challengers point to failures in 
housing and poverty ahead of December's 
elections,"4 and questions whether poverty has 
been reduced under the Chávez administration.

This paper looks at the available data on poverty 
in Venezuela, which show a reduction in poverty 
since 1999, as well as related economic data. The 
paper also briefly notes how some of the mistakes 
surrounding the discussion of this issue have 
been made. Finally, we also look at the impact of 
the provision of health care to the poor, which 
has been greatly expanded over the last few years.

Mark Weisbrot is co-director, Luis Sandoval is a 
research assistant, and David Rosnick is a 
research associate at the Center for Economic and 
Policy Research. Dean Baker provided valuable 
comments, and Nihar Bhatt and Kathryn Bogel 
provided valuable research assistance.

1 Castañeda, Jorge G., "Latin America's Left 
Turn," Foreign Affairs, May/June 2006.

2 Corrales, Javier, "Hugo Boss," Foreign Policy, January/February 2006.

3 Castañeda, op cit. Although this paper does not 
deal with this question, it is worth noting that 
the UNDP Human Development Index for Venezuela 
has improved from 1999-2005 (from 0.765 to 
0.772); and since the latest (2005) HDI is based 
on 2003, when the economy was in a deep 
recession, more recent data will show substantial 
improvements in the HDI for Venezuela as it 
becomes available.

4 Webb-Vidal, Andy, "Chavez opts for oil-fuelled 
world tour while progress slows on social issues 
Challengers point to failures in housing and 
poverty ahead of December's elections," Financial 
Times, May 11, 2006.

Poverty Rates In Venezuela: Getting the Numbers Right * 2

Venezuela: Poverty Rates, 1997-2005
Year  Time Period   Households Below Poverty
                                 Line (%)
                                        People Below Poverty Line (%)
1997    1st half    55.6  60.94
             2nd half    48.1  54.48
1998    1st half    49.0 55.44
             2nd half    43.9  50.40
1999    1st half    42.8  49.99
             2nd half    42.0  48.69
2000    1st half    41.6  48.31
             2nd half    40.4  46.34
2001    1st half    39.1  45.51
             2nd half    39.0  45.38
2002    1st half    41.5  48.13
             2nd half    48.6  55.36
2003    1st half    54.0  61.00
             2nd half    55.1  62.09
2004    1st half    53.1  60.15
             2nd half    47.0  53.90
2005    1st half  42.4   48.80
             2nd half    37.9  43.70

Source: Venezuela's National Statistics Institute (INE, República
Bolivariana de Venezuela)

Poverty Rates: Cash Income

Table 1 shows the number of Venezuelan households 
and people living in poverty from 1997 to 2005, 
at half-year intervals. The household poverty 
rate declined sharply from 55.6 percent in the 
beginning of 1997, as a result of the relatively 
strong growth (6.4 percent) of that year. It 
continued to decline, as the economy slowed to a 
standstill in 1998, and reached 42.8 percent in 
the first half of 1999, when President Chavez 
took office. There was some further decline in 
the poverty rate to 39 percent in 2001. But in 
2002 poverty began to rise, surging to a peak of 
55.1 percent for the second half of 2003. This 
was driven overwhelmingly by the oil strike 
(December 2002 - February 2003), which crippled 
the economy and caused a sharp downturn. Capital 
flight and political instability prior to the oil 
strike, including an unsuccessful military coup 
in April of 2002, also contributed to a severe 
recession that saw GDP decline by 28.1 percent 
from the fourth quarter of 2001 to the first 
quarter of 2003.5

The economy then began to recover and grew very 
rapidly- 17.9 percent in 2004, and 9.3 percent in 
2005. As a result of this recovery, the poverty 
rate dropped to 37.9 percent for the second half 
of 2005, the latest data available.

5 This is using seasonally adjusted data for 
quarterly GDP (Banco Central de Venezuela, 
http://www.bcv.org.ve/ ).

Poverty Rates In Venezuela: Getting the Numbers Right * 3

Thus if we compare the latest available data to 
the start of the present government, the 
household poverty rate fell nearly 5 percentage 
points - from 42.8 percent in the beginning of 
1999 to 37.9 percent in the second half of 2005. 
The household poverty rate was thus reduced by 
12.9 percent. Measuring individuals instead of 
households, the poverty rate decreased by 6.3 
percentage points -from 50 percent of the 
population to 43.7 percent. That was a 14.4 
percent reduction in poverty. Since the economy 
has continued to grow rapidly this year (first 
quarter growth came in at 9.4 percent), the 
poverty rate is almost certainly significantly 
lower today.

How then have so many people reached a different 
conclusion? The most common mistake has been to 
use the data from the first half of 2004, which 
was gathered in the first quarter of that year. 
The household poverty rate at that time was 53.1 
percent, which is of course up enormously from 
1999. There are several things wrong with using 
this measure. Most importantly, this poverty rate 
is measuring the impact of the oil strike and 
recession of 2002-2003.

Poverty rates are very sensitive to expansion and 
downturns in the economy, so to compare 1999 with 
the first quarter of 2004, leaving off the 
subsequent recovery, is meaningless and 
misleading. As noted above, the Venezuelan 
economy grew by 17.9 percent in 2004, and by 9.3 
percent in 2005. We would expect and, in fact, 
did see a massive reduction in poverty from an 
economic recovery of this magnitude. So most of 
the news reports and articles alleging an 
increase in poverty under the Chávez 
administration are analogous to comparing winter 
temperatures to spring temperatures, and 
concluding on that basis that there is no global 

Also, since a preliminary estimate of poverty 
rates for 2005 (38.5 percent) was released in 
September of that year, it is not clear why 
anyone would have used the out-of-date numbers. 
The economy had by that time already grown by 
more than 18 percent6 since the first quarter 
2004 numbers were collected; it should therefore 
have been clear that the early 2004 numbers, 
which reflected the prior recession, were a very 
serious overestimate of the poverty rate.

Some articles and reports continue to rely on 
this out-of-date, early 2004 data, questioning 
the more recent data as somehow not comparable, 
or as not plausible.7 For example, last week's 
report from the Financial Times:

"Early last year, Venezuela's National Statistics 
Institute said 53 per cent of the population 
lived in poverty at the end of 2004, 9.2 points 
higher than in early 1999, at the start of the 
Chávez government. Irked by the numbers, the 
president ordered a change in INE's 
"methodology". Shortly after, it announced that, 
in mid-2005, only 39.5 per cent of people lived 
in poverty - a 14.5 point "improvement" in a few 

6 From the first quarter of 2004 to the third 
quarter of 2005, also using seasonally adjusted 
data (Banco Central de Venezuela, 
http://www.bcv.org.ve/ ).

7 Michael Shifter, writing in Foreign Affairs 
(May-June 2006) notes the increase in poverty 
from 43 to 54 percent during Chávez's first four 
years in office, and then states that the 
government has "just changed its methodology for 
measuring poverty to reflect improvements in 
non-income criteria such as access to health 
services and education, which, it argued, were 
not reflected in past figures."

8 Webb-Vidal, Andy, op cit.
Poverty Rates In Venezuela: Getting the Numbers Right * 4

There are several mistakes here. First, as noted 
above and on the National Statistics Institute 
(INE) web site, the 53 percent figure is from the 
beginning of 2004, not the end; since the economy 
grew 17.9 percent over that year, that makes a 
very big difference. Second, according to the 
INE, there has been no change in the institute's 
methodology; and there is no evidence that it has 
changed.9 The latest figure of 39.5 percent, for 
the second half of 2005, still measures only cash 

Third, the 14.5 percent drop in the poverty rate 
from the beginning of 2004 to the second half of 
2005 is not at all unusual given the amount of 
economic growth during this period. Unemployment 
fell from 17.1 percent in February 2004 to 10.7 
percent in February of 2006.11

For example, if we look at what happened to 
poverty in Argentina, where a similar amount of 
growth took place during 2003-2005, we find a 
much steeper reduction in the poverty rate. 
During this period, the percentage of households 
living in poverty fell from 41.2 percent for the 
first half of 2003 to 22.5 for the second half of 
2005.12 This is a drop of 18.7 percentage points, 
or a 45.4 percent reduction in the number of 
households living below the poverty line.

So there is no economic reason to question the 
decline in the poverty rate that occurred from 
the beginning of 2004 to the end of 2005. The 
amount of poverty reduction that occurred is also 
consistent with econometric estimates of the 
elasticity of poverty rates with respect to 
economic growth.13

Non-Cash Income

As noted above, the reduction in poverty since 
1999 measures only cash income. This, however, 
does not really capture the changes in the living 
standards of the poor in Venezuela, since there 
have been major changes in non-cash benefits and 
services in the last few years. To take an 
analogy from the other direction, imagine that in 
the United States, the Medicaid and Food Stamp 
programs were abolished. This would have an 
enormous impact on the poor population of the 
United States, even though their cash income 
would have remained the same.

9 Elías Eljuri, INE's President, quoted in a 
Miami Herald article stated that, "There is an 
opposition campaign against the INEŠWhen I 
reported that poverty had risen [during Chavez's 
first four years in office], I was their hero. 
Now that the economy has grown and I'm reporting 
that poverty has dropped, I've suddenly become a 
liar," Andres Oppeheimer, "A miracle! Venezuela's 
poverty has suddenly fallen," Miami Herald, 
October 27, 2005.

10 The INE also has alternative measures of 
poverty other than the poverty rate used here, 
such as the Human Development Index for Venezuela 
(based on the Human Development Index methodology 
of the UNDP), the Unsatisfied Basic Needs (UBN) 
method (advanced by the United Nations Economic 
Commission for Latin America, ECLAC), and the 
Social Well-being Index (Índice de Bienestar 
Social), all of which attempt at incorporating 
poverty-related factors other than cash income.

11 We are comparing February 2004 to February 
2006 because the data are not seasonally 
adjusted. In Venezuela, as in developing 
countries generally, the unemployment rate does 
not have the same meaning as it does in 
high-income countries, in that many people who 
are severely underemployed are counted as 
employed. Nonetheless this change in the 
unemployment rate is significant.

12 Instituto Nacional de Estadística y Censos 
(INDEC), República de Argentina. Data available 
online at: http://www.indec.gov.ar/.

13 See, e.g., Mejia, J. A., and R. Vos. (1997), 
"Poverty in Latin America and the Caribbean: An 
Inventory, 1980-95," Working Paper Series 1-4, 
Inter-American Development Bank, Washington, D.C. 
Available online at: 

Poverty Rates In Venezuela: Getting the Numbers Right * 5

In Venezuela, since 2003 a series of programs 
have been established to provide health care for 
the poor, subsidized food, as well as increased 
access to education. For example, an estimated 
14.5 million people, or 54% percent of the 
population, now receives free health care through 
the Barrio Adentro program.14 An estimated 40 to 
47 percent of the population (around 10.7 to 12.5 
million people) buys subsidized food through the 
Mercal program, at discounts averaging 41 to 44 
percent.15 A May 2006 report16 by Datanalisis, a 
survey research firm associated with the 
opposition in Venezuela, found that Mercal 
represented 47.3 percent share of total sales in 
the food distribution market in March 2006, 
compared to 34.7 percent in October 2005.17

Access to free health care is a major improvement 
in the lives of the poor, and one that does not 
show up in the standard measure of poverty. It is 
not possible to adjust the poverty rate in a way 
that fully accounts for this change. For example, 
we could estimate the value of the health 
services provided free to the poor and add that 
to their income. However, the value of these 
services is so large relative to the poverty 
threshold that this method would move the vast 
majority of poor people over the poverty line.

Another way to incorporate the value of health 
care services to the poor is to take an estimate 
of what they would be spending out-of-pocket on 
health care if it were not provided by the 
government. This method vastly understates the 
value of these services to the poor, since in the 
absence of government provision many poor people 
simply go without needed health care, and 
therefore their out-of-pocket spending does not 
represent their actual health care needs.

Nonetheless it is worth looking at this estimate 
of the value of health care services to the poor. 
There are no recent data available specifically 
for Venezuela, but based on expenditure surveys 
of poor people in other middle-income 
countries,18 we can take as an estimate that the 
poor in Venezuela would spend about 5 percent of 
their income on health care.

Table 2 shows the impact of these health care 
benefits on poverty if we take into account the 
money that people below the poverty line would 
spend on health care in the absence of the 
government's provision of health care. A range of 
estimates is provided, based on expenditures of 4 
to 6 percent of income. As can be seen, the 
present poverty rate would be reduced from 37.9 
percent to between 36.2 and 35.3 percent; the 
mid-range value would be 35.8 percent.

14 Rico, R. and Alva C. (2005), "Las misiones 
sociales venezolanas promueven la inclusión y la 
equidad. La revolución bolivariana sorprende al 
mundo," Fundación Escuela de Gerencia Social, 
Ediciones FEGS, Caracas.

15 "Impacto Social de la Misión Mercal," INE, 
Caracas, Sept. 2005. Available online at: 

16 "Mercal es el lugar más visitado para comprar 
alimentos," Datanalisis, May 2006. Available 
online at: http://www.datanalisis.com.ve).

17 In principle, the INE poverty rate should 
incorporate the impact of subsidized food on the 
poor, simply by taking into account the prices 
that poor people pay for food, in calculating the 
food basket on which the poverty line is based. 
The INE publishes the cost of the food basket 
each month, and it is not clear whether the full 
impact of the Mercal prices have been taken into 
account; if they are not, then the INE poverty 
rate would be overestimating the actual poverty 

18 See, e.g., "Determinación del gasto familiar e 
ingreso familiar, canasta básica de alimentos y 
líneas de pobreza," Dirección General de 
Estadística, Encuestas y Censos (DGEEC), 
Paraguay, July 2003; "Gastos de los hogares," 
INDEC, Argentina (http://www.indec.gov.ar); 
"Gasto de los hogares," INEGI, Mexico.

Poverty Rates In Venezuela: Getting the Numbers Right * 6

TABLE 2Venezuela: Impact of Health Care Programs 
on Poverty(all numbers expressed as 
percentages)1st half2nd half1st half2nd 
halfOfficial rate53.147.042.437.9Adjusted for 
health careLow cost50.844.840.436.2Medium 
cost49.743.839.535.3Source: INE and authors' 

It is important to emphasize that this estimate 
of the impact of health care spending on the poor 
does not really measure the benefits that they 
derive from free health care. It is only 
estimating the money that they would otherwise 
spend on health care and adjusting the poverty 
rate accordingly. But the poor would often do 
without health care if it were not provided by 
the government, and therefore suffer from worse 
health, lower income, and lower life expectancy. 
So the value of these health care services is 
much greater than the amount that they would have 
spent out-of-pocket in the absence of the 
government programs.

Finally, the government has steadily increased 
overall social spending from 8.2 percent of GDP 
in 1998 to 11.2 percent of GDP in 200519 and is 
expected to reach 12.5 percent of GDP in 2006.20 
On education, for example, real government 
spending per capita has increased by 80 percent 
from 1998 to 2005, with public spending on 
education at more than 4 percent of GDP annually 
during this period. Through the main literacy 
program, known as "Misión Robinson", an estimated 
1.4 million people (or more than 5 percent of the 
total population) of different ages have learned 
how to write and read.21 These programs have also 
benefited the poor, again in ways that are not 
reflected or feasibly incorporated into the 
measured poverty rate.

In conclusion, there is no ambiguity as to the 
decline in poverty in Venezuela over the last 
seven years, even if we look only at cash income. 
Reports to the contrary, although numerous, are 
simply in error.

19 Sistema Integrado de Indicadores Sociales para 
Venezuela (SISOV), http://www.sisov.mpd.gov.ve.

20 "Consolidar el crecimiento económico con menor 
inflación y más inversión social y productiva," 
Boletín Especial No. 41(2005), Ministerio de 
Finanzas, Venezuela.

21 Rico R. and Alva C., op cit.
Poverty Rates In Venezuela: Getting the Numbers Right * 7

** Appendix

The following is a sample of statements appearing 
in major media or foreign policy journals that 
deny and/or misrepresent the decline in poverty 
that has taken place in Venezuela under the 
present government. This list goes back to 
October 2005 because a preliminary estimate of 
the poverty rate for 2005 (38.5 percent) was 
released in September of that year. Also, by that 
time, the economy had already grown more than 18 
percent since the early 2004 numbers were 
collected; it should therefore have been clear 
that the early 2004 numbers were a serious 
overestimate of the current poverty rate.22

Foreign Affairs, article by Jorge Casteñeda: 
"Latin America's Left Turn," May/June 2006

"Venezuela's poverty figures and human 
development indices have deteriorated since 1999, 
when Chávez took office."

Financial Times, news report: "Chavez opts for 
oil-fuelled world tour while progress slows on 
social issues; Challengers point to failures in 
housing and poverty ahead of December's 
elections," May 11, 2006

"In one area - poverty - the government is 
adamant that it scores top marks. But there are 
doubts over the reliability of official data.

Early last year, Venezuela's National Statistics 
Institute said 53 per cent of the population 
lived in poverty at the end of 2004, 9.2 points 
higher than in early 1999, at the start of the 
Chavez government.

Irked by the numbers, the president ordered a 
change in INE's "methodology". Shortly after, it 
announced that, in mid-2005, only 39.5 per cent 
of people lived in poverty - a 14.5 point 
"improvement" in a few months."

Foreign Policy, article by Javier Corrales: "Hugo Boss," January 1, 2006

"Chavez has failed to improve any meaningful 
measure of poverty, education, or equity."

Washington Post, editorial board, editorial: "A 
Leader for the 21st Century," January 18, 2006

"In Venezuela, poverty rose from 43 to 53 percent 
during Mr. Chavez's first six [sic] years in 

22 Long before the preliminary numbers were 
released (i.e. for most of 2005), it was clear 
that the early 2004 numbers overestimated the 
current poverty rate, due to the extraordinarily 
rapid growth of 2004.

Poverty Rates In Venezuela: Getting the Numbers Right * 8

Foreign Affairs, article by Michael Shifter: "In 
Search of Hugo Chávez," May/June 2006, Vol 85, 
Number 3

"Available data of these measures' effect are 
mixed and not altogether reliable. According to 
the Venezuelan government's National Institute of 
Statistics, poverty rose from 43 to 54 percent 
during Chávez's first four years in office . . . 
The government has also just changed its 
methodology for measuring poverty to reflect 
improvements in non-income criteria such as 
access to health services and education, which, 
it argued, were not reflected in past figures."

CNN "Insight," quote from CNN host Jonathan Mann, October 17, 2006

"ŠMore than half of Venezuela's 25 million people 
were found to be below the poverty line. Then the 
government found a new way to measure the poverty 
line and the numbers suddenly got better.

Changing the numbers, changing the landscape, 
changing things in general is what Hugo Chavez is 
all about."

PBS "NewsHour", quote from guest Alvaro Vargas 
Llosa on program: "No Resolution in Hemispheric 
Free Trade Talks," November 8, 2005

"When Chavez took power six years ago, about 43, 
45 percent of his people were poor, and now 
that's about 53 percent, even though the price of 
a barrel of oil has gone up from about $15 to 
over $60."

The New York Times, column by John Tierney: "The 
Idiots Abroad," November 8, 2005

"The new wave of populists is led by Chavez, 
who's been using the recent windfall in oil 
revenues to expand government and solidify his 
hold on power. But even while $100 million in oil 
money pours into Venezuela every day ($60 million 
of that from those terrible gringos north of the 
Rio Grande), the poverty rate has risen above 50 

Washington Post, column by Jackson Diehl: "Buying 
Support In Latin America," September 26, 2005

"In Chavez's Venezuela, the [poverty] rate has 
risen from 43 percent in 1999, the year he took 
office, to 53 percent last year, according to 
government statistics. During this same period 
Venezuelan oil revenue, which makes up most of 
the government's income, roughly doubled."

Poverty Rates In Venezuela: Getting the Numbers Right * 9

Miami Herald, column by Andres Oppenheimer: 
"Responsible leftist leader set to leave office 
in Chile," March 9, 2006

"By comparison, oil-rich Venezuela has seen 
poverty grow by more than 10 percent since Chávez 
took office, according to official Venezuelan 
government figures that were recently revised 
after Chávez denounced them as unfair."

Miami Herald, column by Andres Oppenheimer: 
"Chavez having propaganda field day at U.S. 
expense," November 5, 2005

"If I were advising Bush, I would tell him to 
send some spin doctors to the press center, and 
expose Chavez as a sham who -- according to 
Venezuela's own National Institute of Statistics 
-- has increased poverty by 11 percent during his 
first five years, despite enjoying the biggest 
oil boom in Venezuela's history."

Miami Herald, column by Andres Oppenheimer: "A 
miracle! Venezuela's poverty has suddenly 
fallen," October 27, 2005

"How interesting! Just a few months after 
Venezuela's official statistics institute 
reported that poverty had increased by 11 percent 
since President Hugo Chavez took office in 1999, 
the same institution is now reporting -- after a 
public scolding by the president -- that poverty 
has suddenly plummeted to pre-1999 levels. Š

My conclusion: If Venezuela's INE is right, and 
wants to maintain its reputation of unbiased 
economic reporting, it should accept some adult 
supervision and open its books to independent 
economists, like most governments do.

Otherwise, I will have to conclude that it is 
following Cuba's example, and has begun 
publishing its own happy figures, which nobody 
can independently corroborate. Miracles may 
exist, but most of us find it hard to believe in 

Miami Herald, column by Andres Oppenheimer: 
"Chavez Deserves Prize for Economic Bumbling," 
October 9, 2005

"Chavez can claim the dubious achievement of 
having increased Venezuela's poverty despite the 
country's biggest oil boom in recent decades.

Indeed, since I disclosed in this column in March 
that Venezuela's official National Institute of 
Statistics (INE) had reported that poverty rose 
by 10 percent during Chavez's first five years in 
office, several international institutions have 
reported equally negative figures.

The INE, you may recall, said that poverty in 
Venezuela rose from 43 percent to 53 percent 
between 1999 and December 2004. Subsequently, 
Chavez lashed out against the INE, saying that it 
reflected the international ''neoliberal'' 
standards of measuring

Poverty Rates In Venezuela: Getting the Numbers Right * 10

poverty, which according to him were not suitable 
for a ''socialist'' country such as Venezuela.

Others Agree

But now, other international organizations -- 
including the United Nations and the World Bank 
-- are painting a similar picture of Venezuela's 
social involution.

As strange as it sounds, they say poverty is 
rising in Venezuela despite the fact that world 
oil prices have soared from $8 a barrel when 
Chavez took office in 1999 to about $62 a barrel 

Los Angeles Times, column by contributing editor 
Sergio Munoz: "The Santa of the Tropics," March 
5, 2006

"After seven years as president of Venezuela, 
Hugo Chavez's brand of populism has produced 
social catastrophe and economic disaster for 
Venezuelans, including the poor he champions.

Despite hundreds of billions of dollars in oil 
revenue -- $49 billion last year alone -- and 
social spending that includes free medical 
services, the country's poor are poorer, schools 
have not improved and the general standard of 
living has declined, according to a recent United 
Nations Human Development Report."

Associated Press Worldstream, news report by 
Marcel Honore: "More than 1,000 attend opposition 
unity rally ahead of congressional elections," 
October 15, 2005

"Critics accuse Chavez of becoming increasingly 
authoritarian and dangerously dividing this South 
American nation of 26 million along class lines. 
They say his left-leaning policies have increased 
poverty in the world's fifth-largest oil 

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