A few economic tidbits from the revolution

April 26, 2009

1) Venezuela’s non-oil GDP is back down to 1977 levels according to Toby Bottome of Veneconomia. I guess this is a backwards revolution, 35 years lost, proving once again the IVth. was bad, but the Vth. is worse.

2) Two weeks ago, I was telling people I did not understand why the parallel swap rate was not soaring given that CADIVI is simply not giving much (Even if we don’t have statistics for March). Now that the rate has soared in two weeks, I am concerned that there are no more shortages out there. One notices shortages in paper products and dairy products, but something has to give at some point. According to Association of Supermarkets, the number of products you find in their shelves is down between 45 and 50%. And you notice it when you visit supermarkets.

3) And Minister of Finance Ali Rodriguez correctly said gas prices need to be reviewed “but now now”, but said that ther can be no devaluation until local production is given incentives to produce more. I guess Rodriguez does not understand that local producers see 30%-plus inflation, over 2% per month, while the Government imports at the same official rate of Bs. 2.15 per US$ than 4 years ago. There is simply no incentive that will allow local producers to invest and work more, it is just impossible to compete under those conditions.

4) And while taking over farmlands is no longer news in Venezuela, this week the Government decided that sugar cane lands in Aragua and Carabobo states are too fertile for sugar cane and have to be taken over and/or planted with different crops. This includes some of the best rum producing areas. Of course, nobody has given it any thought in the Government as to what to do with the sugar processing plants nearby, the workers that are there and what happens to them if the crops are changed. In fact, why doesn’t the Government show us how efficient it has been in making productive the 2 million acres of land it has taken over forcefully since 2000. And you know why that is, go back to item #1 on this list.

5) And the Government is also going after farms that breed horses for racing. Government over the years have slowly destroyed what was once a thriving industry in Venezuela. In fact, estimates are that the racing industry during Chavez’ time has destroyed some 11,000 jobs under the Government’s hands. What’s interesting is that while three fairly important horse farms ahve been intervened, the on owned by the brother of a certain Cabinet member was visited but left alone…Love the revolution, no?

6) And how about Chavez’ coop movement? Since 2003 the Government has created 366,000 cooperatives for the development of shared responsibilities and profits. Of these, only 20,000 are functional today. How much money was lost in the process? To say nothing of the wasted effort and illusions of the people who participated who were sold fantasies by the revolution.

3 Responses to “A few economic tidbits from the revolution”

  1. GeronL Says:

    People who think that government can run an economy better than the public doesn’t understand what an economy is. Government is simply not an effficient means of production, distribution or anything else. It cannot make the decisions of millions of people for them, its simply impossible.

    All of this was very predictable. It was predicted as a matter of fact by economic thinkers like Mises, Rothbard, Hayek, Hazlitt and such.

    I just find it sad that we in the US now have a President of a similar, although possibly (hopefully) lighter persuasion. Time will tell.

  2. island canuck Says:

    I recently read that Cadivi is doling out US$2.5 billion a month.

    The article stated that the demand is US$6.5 and recommended that businesses go to the swap market for the difference.

    The problem is that the secondary market can not support the US$4 billion monthly.

    That is why we are seeing a steady increase in the black market rate.
    As the price goes higher we will see less & less imports.

    Things that we take for granted in the market place will disappear. You mentioned paper products. Venezuela does not have a pulp & paper industry so it’s all imported. Many products are price controlled so the manufacurers will simply stop producing. Things like toilet paper & news print will just not be available.

    A scary future.

  3. Deanna Says:

    Well, I guess Venezuelans will just have to get used to using corn cobs like the good old days. Oh, sorry, corn cobs will also be scarce since corn is mostly imported!!!!


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