Archive for September 21st, 2009

Chavez’ Economic non-plan

September 21, 2009

HelpCoyote[6]

After wondering, arguing, discussing and waiting, we finally have Chavez’ Economic plan…only six months late

or do we…

Let’s see:

There will be 40 measures, but Chavez could not keep his own secret and leaked some of them, among them:

Already implemented: Six Ministers of the Cabinet have received an upgrade and have become Vice-Presidents, so that in Chavez’ words “We can have a more political Cabinet than administrative one”

Is he kidding us? Does he think that 2,000 Barrio Adentro modules have no Doctor because of political rather than administrative matters? And on top of that the people are the same ones that have been incapable of doing anything!

But let’s not get hung up on this, after all, this is the “easy” measure. already decreed, sworn in, more assistants, higher salaries and the like. Meaningless…

The next measure:

An employment program..

Jeez, Chavez got frustrated in 2004 with about eight employemnet programs that never panned out, I guess he is willing to give a try to another failure.

Next:

We will sell a bond to lower the lowered “parallel” market

I guess the most significant part of this, was that Chavez not only acknowledged the existence of that “other” market (which is legal), but that he admitted that the Government had lowered it. According to El Nacional, the Government injected US$ 300 million this week, I hear it was US$ 350 million. It does not matter, that rate is simply not sustainable, either you give CADIVI money or the swap market. Both it is simply not possible.

As to the bond, most previous issues have been atomized in such fashion that they have only lowered the swap rate “psychologically” up to the date of the bond allocation. And given international markets, US$ 3-4 billion may give markets indigestion.

In any case, issuing a bond is not a plan, it is like giving aspirin to someone that has swine flu. Monetary liquidity stands at US$ 103 billion, reserves at US$ 33 billion. See the problem,? Liquidity keeps going up, reserves stay around US$ 30 billion. What happens when liquidity reaches US$ 200 billion, or US$ 300 billion. I don’t know when this bubble explodes, but it will and the result will be ugly, very ugly. While it doesn’t, inflation is at 30%, I wonder if anyone has explained to Hugo what this mean to the “people”.

Next:

CADIVI will give more money to importers.

Jeez, this is like the doctors in Barrio Adentro, we have been hearing about CADIVI giving more money to importers for months, but nothing happens. Is this an administrative or a political decision?

And the final part of the “plan” that we know about is that the “Misiones” will be revived. Which actually depends more on the “administrative” than on the “political” Cabinet. But Chavez seems to think the second one is more important.

In the end, this is an economic non-plan. These are so far just a bunch of measures, all disjoint, aimed at trying to reduce some distortions in the economy, but they are not part of a plan that attacks the problems of the distortions in the Venezuelan economy.

In the end, it is all political for Chavez. Unfortunately for him, if oil stays at current levels, a year from now, none of these “measures” would make a difference. On the contrary, these are all superficial and temporary measures whose effects will dissipate even before the end of 2009.

(To the Chavez cheerleaders I tell them: Try living on minimum wage with 30% inflation and tell me the Venezuelan economy is doing fine. As for oil, the chart looks positive, it seems ready to break 75 bucks, if it does not, watch out Hugo!!)

Follow

Get every new post delivered to your Inbox.

Join 11,813 other followers