Archive for January 4th, 2004

Inflation and price control quirks in an artificial economy

January 4, 2004

 


The Venezuelan economy is truly full of surprises. The effect of the oil income is remarkable, introducing a number of artificialities that make the country a laboratory for economic concepts like no other one. I understand that the Japanese Government even has a full time economist just studying and attempting to understand the Venezuelan economy.


This year was no different in having the economy exhibit quirks. The country exhibited what may be the largest percentage difference between wholesale and retail inflation ever anywhere. According to the Venezuelan Central Bank, wholesale inflation was 48.9% while consumer inflation was 27.1% a whopping difference over 80%! I have certainly never heard of such a huge difference anywhere. The explanation is apparently quite simple, with the economy shrinking by 11% for the year, the contraction in demand has been so strong that price increases can simply not be transferred to the consumer. This is the second year in a row that this happens. In 2002, wholesale inflation was 37.9% while the CPI went up by a smaller 31.2%. This would appear to indicate that there is a dangerous potential for inflation to increase as price increases are passed on to consumers as the economy recovers a little in 2004.


A second phenomenon worth mentioning is the fact that most months, regulated and unregulated prices went up by similar amounts. This is simply a reflection of the fact that the Government has been quite lax about enforcing price controls as it was clear that they would result in shortages. While I am strongly opposed to price controls, it seems like the lax enforcement is somewhat ridiculous. As examples, pork is being sold at Bs. 7,000 per kilogram, but is regulated at Bs. 4,000. Meat is being sold at Bs. 7,000 per kilogram, but sold at Bs. 5,000. Chicken is being sold at Bs. 3,500 per kilo, while it is regulated at Bs. 2,000 per kilo. Eggs are regulated at 4,200, sold at Bs. 6,000 per dozen. The products where controls are being followed are exactly those that exhibit shortages regularly. Even with the artificialities, all this proves is that the laws of economics work no matter how artificial the environment.

Inflation and price control quirks in an artificial economy

January 4, 2004

 


The Venezuelan economy is truly full of surprises. The effect of the oil income is remarkable, introducing a number of artificialities that make the country a laboratory for economic concepts like no other one. I understand that the Japanese Government even has a full time economist just studying and attempting to understand the Venezuelan economy.


This year was no different in having the economy exhibit quirks. The country exhibited what may be the largest percentage difference between wholesale and retail inflation ever anywhere. According to the Venezuelan Central Bank, wholesale inflation was 48.9% while consumer inflation was 27.1% a whopping difference over 80%! I have certainly never heard of such a huge difference anywhere. The explanation is apparently quite simple, with the economy shrinking by 11% for the year, the contraction in demand has been so strong that price increases can simply not be transferred to the consumer. This is the second year in a row that this happens. In 2002, wholesale inflation was 37.9% while the CPI went up by a smaller 31.2%. This would appear to indicate that there is a dangerous potential for inflation to increase as price increases are passed on to consumers as the economy recovers a little in 2004.


A second phenomenon worth mentioning is the fact that most months, regulated and unregulated prices went up by similar amounts. This is simply a reflection of the fact that the Government has been quite lax about enforcing price controls as it was clear that they would result in shortages. While I am strongly opposed to price controls, it seems like the lax enforcement is somewhat ridiculous. As examples, pork is being sold at Bs. 7,000 per kilogram, but is regulated at Bs. 4,000. Meat is being sold at Bs. 7,000 per kilogram, but sold at Bs. 5,000. Chicken is being sold at Bs. 3,500 per kilo, while it is regulated at Bs. 2,000 per kilo. Eggs are regulated at 4,200, sold at Bs. 6,000 per dozen. The products where controls are being followed are exactly those that exhibit shortages regularly. Even with the artificialities, all this proves is that the laws of economics work no matter how artificial the environment.

Dream on, Patria para Todos

January 4, 2004

 


Politicians can be truly blind, if not stupid. The Secretary General of the party Patria Para Todos (PPT) says in today’s El Nacional that the party will “consolidate”  its regional power in the upcoming regional elections which will take place in June. PPT backed Hugo Chávez for the Presidency in 1998 giving him 142,859 or 2.19% of the vote, gaining at the time 7 Deputies of the National Assembly, 4 elected nominally, 2 by part slate and one by electoral percentage. However, the party got zero (Yes, none!) votes despite being in the ballot to support Hugo Chavez in 2000, getting exactly one Deputy to the National Assembly. Thus, they lost ground by backing Chavez in those two years. Six months later, the party had two regional figures elected; both of them were supported by Chavez’ MVR in their respective elections. I understand that from polls, one of them  Gov. Manuitt from Guarico state, may be the only candidate who would win any Governorship for the parties that currently support Chavez, if the opposition fields a single candidate in each state. Now, PPT has been the only party that has supported Chavez throughout his Presidency. The party has managed to have two or three of its members in the Cabinet all these years and one of its members is President of PDVSA. But as a party, they have lost their identity, which already showed in the 2000 election, so it is really hard to believe that they would “consolidate” what they simply don’t have. Moreover, the party may even feel a backlash for its unquestionable support of Chavez

Cattleya Lueddemanniana flowering season

January 4, 2004

The Queen of Venezuelan orchids Cattleya Lueddemanniana has begun flowering, check out these wonderful pictures of the first two plants that have flowered in my house.

Cattleya Lueddemanniana flowering season

January 4, 2004

The Queen of Venezuelan orchids Cattleya Lueddemanniana has begun flowering, check out these wonderful pictures of the first two plants that have flowered in my house.

It is Cat. Lueddemanniana season already!

January 4, 2004



The queen of Venezuela’s Cattleyas (in my humble opinion) Cattleya Lueddemanniana, has begun its flowering season a little early, but in full force as seen above. These are two plants that flowered this week, each with three floers in each stem. The top one did not have a label, but I think it is wonderfl. It is the first time the plant flowers and these pictures may be premature as the flowers opened only yesterday. Note that they are big flowers, the lip is dark and it has a little suggestion of flaring which can not be seen clearly in the picture. In the bottom is a much lighter variety a cross between Cat. Leuddemanniana Clint Mclade x Raga. The second one I got from Orquideario Cerro Verde. The first one probably came from there too, as Mr. Mantellini definitely has the best variety of Cattleya Lueddemanniana in Venezuela thanks to his patient crossing of the best plants in the Country. He is also a very nice person and a great conversationalist.  

Some interesting articles

January 4, 2004

 


Have done lots of reading in the last couple of days. Some interesting articles;

Article in the New York Times about a program in Brazil, Mexico and other countries whereby parents are paid by the Government to have their kids go to school. The program seems to be a success. Venezuela had a program called “la beca escolar” but it was tied to the kid being registered to school not actually for attending, like in these programs. This program was created in 1990 and eliminated by Hugo Chavez for reasons that nobody really understands.


 


Two great speeches by Michael Crichton which I learn about via Instapundit. The first one is extremely good and is called “Aliens cause Global Warming” and it is about how bad science or science that is not proven get a lot of play if properly “sold” for political reasons and many become standard fare in the media. The second one is about the amount of unsubstantiated speculation in the media which is useless and unjustified. Reading the first article made me realize that if bad science can get so much play because of political interests, then there is very little hope that good economics will get the required attention from politicians that are just trying to get their hands on power. I find politicians here (Pro and against Chavez) have or have had very little interest in economics. To most of them economics is not even in the top five of their priorities and most of them truly believe that they can improvise economic policy and that economics is closer to art than science. In any case, Mr. Crichton proves that he is not only a great fiction writer, but also a thinker. Enjoy!

Some interesting articles

January 4, 2004

 


Have done lots of reading in the last couple of days. Some interesting articles;

Article in the New York Times about a program in Brazil, Mexico and other countries whereby parents are paid by the Government to have their kids go to school. The program seems to be a success. Venezuela had a program called “la beca escolar” but it was tied to the kid being registered to school not actually for attending, like in these programs. This program was created in 1990 and eliminated by Hugo Chavez for reasons that nobody really understands.


 


Two great speeches by Michael Crichton which I learn about via Instapundit. The first one is extremely good and is called “Aliens cause Global Warming” and it is about how bad science or science that is not proven get a lot of play if properly “sold” for political reasons and many become standard fare in the media. The second one is about the amount of unsubstantiated speculation in the media which is useless and unjustified. Reading the first article made me realize that if bad science can get so much play because of political interests, then there is very little hope that good economics will get the required attention from politicians that are just trying to get their hands on power. I find politicians here (Pro and against Chavez) have or have had very little interest in economics. To most of them economics is not even in the top five of their priorities and most of them truly believe that they can improvise economic policy and that economics is closer to art than science. In any case, Mr. Crichton proves that he is not only a great fiction writer, but also a thinker. Enjoy!

Follow

Get every new post delivered to your Inbox.

Join 12,011 other followers