Has Chavez been told how tight things are getting?

June 22, 2009

Even with increased oil prices, things are not well in revolutionary Venezuela. The only question is whether anyone has told Chavez about it. My feeling is nobody has, because he continues acting as if everything is fine, as his Government continues to get into contradictions which simply can not be explained.

Take for example Chavez gloating yesterday that while the capitalist world was losing, jobs he was creating them in the thousands, but unemployment, which ended 2008 at 6% is now at 7.7%, so even the Government’s magic fake statistical institute can not push it down, as the country has lost some 120,000 jobs in 2008.

And after General Motors announced that it was shutting down for three months because it was not receiving foreign currency from the Government, some genius in the administration decided to blame it on GM’s bankruptcy in the US, saying the flow is normal. The truth is that none of the automakers has received much these year in terms of real dollars. They get the approvals from CADIVI, but after the autoparts are here, no payment is made. The result? CADIVI owes the auto and autoparts companies of this world some US$ 3 billion. These are cars have mostly been sold and at the official rate of exchange to wit.

But just to prove the lie, and the veracity of both points above, the Government rushed today to announce that it would give automakers and autoparts companies US$ 2 billion in 2009, not even enough to cover the outstanding debt, but they think (hopefully, cross your fingers) that car companies will not start firing people right and left.

And then, as Chavez nationalizes a Japanese hot iron briquette company and he bickers with the Japanese partners of the Aluminum complex to the point that they are leaving the country and he owes Japanese Toyo company a bunch of money, it looks like the Japanese may not be here to stay. In fact, the loan that Chavez sent Rafael Ramirez to Japan for, seems to be in peril and maybe some US$ 33.5 billion which Chavez claimed he had gotten from that country too (I donit believe that figure for one minute). And if Nippon Export and Insurance stops insuring investments in Venezuela, you can kiss the whole kimono and pachinko goodbye.

The truth is that things are bad and getting worse. The question is whether Chavez has any inkling about what is going on. I hear the pharmaceutical sector is not getting foreign currency, that Brazil’s Bndes has not approved the loan nor received the paperwork required from this side to have it approved, that Brazilian companies are owed US$ 2 billion, car companies US 2 billion, airlines US$ 1 billion, local banks US$ 600 million, PDVSA owes the companies it did not take over a few billion and owes the Government a few billion in taxes.

And the second half is only going to be worse. Companies that have been holding off in firing are doing it. Spending will slow down, imports are already down sharply, inflation is the pits (Coca Cola from Bs 2,000 to 3,500 so far this year, to give you a very important indicator) and the only plan the Government seems to have is…

to have PDVSA issue US$ 2 billion in bonds…

which I think is absolutely crazy. It will do nothing for the swap market, it will kill the country’s yield curve and unless the bonds are sold really cheap to Venezuelans (like 20% below the swap rate), people participating may lose money by the time they manage to sell their paper in the international markets.

At this point Chavez has only one terrible choice: devalue. The problem is that doing it just that does little except temporarily balance the fiscal picture, but creates huge inflation and likely shortages. Not pretty, no? But it is the natural result of not making any decisions and postponing some tough ones. No country can go on forever and ever owing everyone money and that is what Chavez has been doing so far this year. And it is unclear what his cohorts have promised, but things must have looked really bad for Chavez to bring back Jorge Giordani and his Garcia Marquez block of ice on the form of economic rules he invented ten years ago and have not served Chavez well, but are as inopportune today as they were in 1998, 2000 and 2002. Because Giordani’s pseudo-voodo economics have not ridiculed him because oil prices have always managed to climb beyond anyone’s imagination.

But he is back on the helm of idiotic and revolutionary economic policy, ready to produce a crash that will make the world economy look healthy in comparison. In the next six months the Venezuelan economy will shrink, conservatevily speaking, by 5% and the Chavez administration will have gone through all of the savings in Fonden. Thus, unless oil hits $100 a barrel again before then, imports in 2010 could collapse to US$ 20 billion and people will be asking for Chavez (not Giordani’s) head.

Does he know this? Does he even have an inkling? is he being told anything..

I seriously doubt it.

14 Responses to “Has Chavez been told how tight things are getting?”

  1. Lars Says:

    I think he knows and they will deal with it just like their Iranian counterparts: with due force and repression. In the meantime, let the bonanza go on!

  2. Andromeda Says:

    Yes he knows…
    Too bad he bet everything on ‘Rosalinda’.
    Hope he gets some XXL ‘Guayuco’ diapers before the ‘cagalera’ starts.

  3. T.I.G.O.T. Says:

    “Does he know this? Does he even have an inkling?”

    Of course not. How could he possibly know anything about what’s happening anywhere in the planet when he gets his news exclusively from VTV?

    That is yet another part of “1984” that Chavez never got. The newspeak and the information control and all that stuff; it’s supposed to prevent THE PEOPLE from knowing the truth, not BIG BROTHER. Big Brother is supposed to know what is actually happening. He’s supposed to TELL the lies, not BELIEVE in them. But Chavez not only wants everyone to believe that Venezuela is Fantasy Island, he wants to believe it himself.

  4. zamuro Says:

    even if he doesn’t know he may be getting the notion that only the desperate bet on oil prices above 100 US$/b could save him. more rigorous crack downs on protesters and dissenters will bridge the meantime.

  5. island canuck Says:

    2 L bottle of coke here in Margarita is now BsF.5.75 at a large supermarket.

    We always had few brands of everything to choose from however now it is far worse. None of the popular brands of a few years ago show up on the shelves. Just brands with strange names & terrible taste.

    Bread is like cardboard. I had forgotten what good bread tastes like however an extended holiday in the US & Canada changed that.

    We need a new car. I suspect that getting anything not made in China is going to be a problem.

    If, as Miguel says, things are going to get worse, God help us. Does Chavez know? Probably not. If he is like one of our family members then everything is the fault of the Imperio.

    Yesterday I was in Juan Griego, a Chavista stronghold. The city is covered in new huge paint work on walls & fences that says:

    GLOBOVISION NO INFORME – ENFERME
    APAGE LA INFERMEDAD!

    Globovision does not inform – it sickens
    Turn off the disease

  6. concerned Says:

    Ignorance is no excuse, so please don’t allow Chavez to get off the hook by his saying “I didn’t know”. One day he and the disease that surrounds him will be held accountable for what they are doing today.

    When Chavez controls 99% of the written and aired press, why do they have to resort to the spray painted smear campaign against Globovision? Could it be that they recognize nobody watches the other channels? It is everywhere and only speaks of the class of people payed to paint it. There are some very good artists who paint throughout the cities and they should have hired them. This just looks bad and only compliments the trash at the bottom of the wall it is painted on. They also only paint at night and that is why I called them cockroaches in another post.

  7. Impartial Says:

    I think he has an inkling but cannot understand the magnitude of the problem. After all, he is just a soldier who thinks that everything can be achieved through brute force.
    I disagree about the 100$/barrel price that the Revolution needs to survive. I think that that number is way higher than that (200$???). It doesn’t matter: oil is not going that high up anytime soon.

  8. jsb Says:

    The oil price will rise and save him, thanks to unrest in Iran.

  9. Kepler Says:

    Oh, my God! If somebody is considering US bread tasty things must be really bad in Venezuela!

    Wee joke, wee joke.

    Good article, Miguel, again I think it is a pity it is not written in Spanish.

    As for Globovisión: I am absolutely sure most Chavistas, including the biggies, want it to go on, it benefits them only. Only Chavez and a couple of others really mean it. This is just a show.

  10. AndyG Says:

    oil price will not rise and save H. unrest in Iran not that big of a factor. shut in and excess capacity in the rest of OPEC is greater than or equal to the production of Iran and Venezuela combined. Unless something really spurs demand a big rise in price will not happen. If the people of Iran take back their country and install a peaceful government sanctions will be lifted and their production will climb. Iraq too will begin to put more oil out into the market. When hugo’s house of cards comes crashing down how many other despots are going to get sucked down the tubes with him. The Cubans can have one last march up the Malecon to the US interests building. Waving white flags with their hands held high in surrender. What country will the crooks try to flee to and still keep their bags of loot ?

  11. Eric Says:

    “What country will the crooks try to flee to and still keep their bags of loot?”

    That’s the terrifying question that must be keeping a lot of them up all night. When it collapses, it all comes down, and there’s nowhere to hide except maybe somewhere in Africa or Central Asia. And even there, our criminals will get a taste of the medicine Vladimir Montesinos (and countless narcos and mafiosi on the run, who put their money on Venezuela as a safe haven) had to swallow — getting blackmailed and nickled & dimed by the locals until the money runs out.

  12. LT Says:

    Events roughly in chronological order:

    Pharmaceuticals not getting CADIVI dollars
    AH1N1 pandemic
    International pharmaceuticals announce they have developed a vaccine for AH1N1 that could be ready by Autumn
    AH1N1 now in Venezuela
    Patent protection eliminated in Venezuela
    Pharmaceuticals warn they many not be able to bring the most advanced and newest drugs to Venezuela
    AH1N1 numbers increasing in Venezuela
    Connect the dots

  13. Avila Says:

    Of course he knows. He does not care. Money continues to flow into pockets of his cronies and family. Every nationalization has strategic importantance–they make money and now that money making venture is in the hands of the Bolivarians. Sure owning CANTV makes it easier to repress, but what do they need with things like teh telifedico and Canaima lodge?

  14. Gringo Says:

    Has Chavez been told how tight things are getting?
    If only the Czar knew….And to see what happens when the Czar took charge, look at how the Russian armies performed during WW1.
    Just came to my mind.


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