Some, Mostly Depressing Thoughts, After The Venezuelan Devaluation

February 10, 2013

So far, reactions to the announced devaluation have been somewhat depressing from both the Government side and sadly so, from the opposition side.

From the Government side, the outright defense of the devaluation as something “good” rather than needed and the implication that this is somehow the fault of the opposition has been truly laughable. Some statements have actually been pathetic, like pseudo Foreign Minister Jaua who said that “It’s a way of protecting the dollars of the Venezuelan “pueblo” from the speculative attack of the Venezuelan bourgeois”. Hey Elias! If this is so, why not devalue to Bs. 20? He also said this would increase Venezuelan exports, as if the current currency had all of a sudden made the country competitive, or even worse, as if Venezuela’s non-oil exports were of any significance to the economy at Bs. 4.3, 6.3 or for that matter Bs. 8.

But the Minister of Information was even worse, suggesting the country’s economic parameters “improved” thanks to the devaluation and among others, saying the Debt to GDP ratio went down significantly, because the Bolivar denominated debt went down with respect to the dollar GDP. Unfortunately, he failed to realize that GDP is measured in Bs, not in US$ as per his tweet. He adjusted the numerator in Debt/GDP, but held GDP constant in US$:

VillegasHow convenient! That US$ 328 billion number comes from dividing the GDP in Bs.  by Bs. 4.3. While the GDP will not go down by the full amount of the devaluation (neither will the debt in Bs. stay constant all year!) the argument is really terrible.  Mr. Villegas has rather quickly lost his image as a “serious” person.

But I have also been disappointed by the reaction of many opposition politicians and even economists, criticizing the devaluation itself and not its causes. The impact of the devaluation should have been presented as a consequence of the policies followed by Giordani and his combo. Yes, the devaluation is terrible for the people, but they made it sound as if it could be avoided. In fact, very few politicians noted that it is probably not enough and we will likely see another one before the end of the year. The best comments, in my opinion, were those from the opposition that noted Chavismo accused Capriles of planning a devaluation if he was elected, only to have Chavismo do exactly that.

But that we are becoming a country of beggars was demonstrated by those that oppose Chavismo who were crying because they will now have to travel at Bs. 6.3 per US$, order from Amazon at a more expensive prices and not have access to SITME at Bs. 5.3. Don’t people realize how absurd all of these things are? Only those that are actually well off have the money to travel and thus have access to this foreign currency, to say nothing of those that could manage to get a single dollar from SITME. These were (and are!) ridiculous subsidies that simply sustain the distortions of the Venezuelan economy.

And I will point out to those that think the Government will create a new foreign exchange market sometime in the future, that I think this is highly unlikely. This was all a victory for Giordani and his ideology. The same way he shut down the swap system in 2010, he is now shutting down the SITME, which provided a highly ineffective and inefficient escape valve for importers and manufacturers.

But Giordani believes that by creating this new entity with the bombastic name of “Superior Entity for the Optimization of the Foreign Exchange System” he will somehow direct the foreign currency to the right areas. This will be nothing more than another bottleneck in the Goldeberesque foreign exchange system that has been constructed by adding complication to complication, over the last ten years. Just think this new Über-Cadivi will be composed of the Minister of Planning AND Finance, The President of PDVSA AND Minister of Energy and Oil and the President of the Venezuelan Central Bank. As if they did not have anything to do.

Anyone that thinks such a system can work, has never managed anything productive.

In fact, what is likely to happen is that there will be more delays now, leading to even more shortages. Somehow these  guys think, or want us to think, that their 20/20 system, 20% inflation, 20% shortages, represents a successful  and “shielded” economy. And, of course, reducing inflation, according to Giordani is very “complex”, in a planet where the large majority of countries have managed to reduce inflation to single digits for the last ten years.

Because now, the Government will have to start thinking about salary increases to compensate for the devaluation. Later, they will ha to figure out how to pay for them and the inflationary spiral will feed on its own, because in the end, all that was done was devalue. Nothing else.

But as long as the opposition politicians don’t try to educate the population and have such differences among them, maybe Chavismo will be able to sell once again these nutty concepts to the people. The only thing working on the opposition’s favor may be that Chavez’ absence may suggest to the people that these new leaders of Chavismo have no clue as to what they are doing, in contrast to their deity, who could do now wrong. Despite Chavez’ six devaluations and 1000%-plus inflation in the last fourteen years.

54 Responses to “Some, Mostly Depressing Thoughts, After The Venezuelan Devaluation”

  1. m_astera Says:

    “Anyone that thinks such a system can work, has never managed anything productive.”

    Smiles


  2. those that bitch at buying from amazon at 6.3 are probably the same ones that say that 55% in october was good and that december 16 was not as bad as it looked.

  3. Andres F Says:

    Chavismo ignorance is a much bigger burden on their future than any diety or belief they might have.

  4. M Rubio Says:

    Will the nightmare never end?

    • Gordo Says:

      I think that the end will defiantly be a nightmare, and that the present is already a nightmare getting worse… makes it hard to acknowledge. The stress of contemplating it is stressful and wears everybody down psychologically, which serves no useful purpose if there is nothing obvious that can be done about it.

    • Gordo Says:

      One other thing. If you look at the Clasificados on El Universal, the prices for things (except cars) are crazy cheap! Especially, real estate is probably has the lowest prices in the world! If rule of law and property ownership rights are restored, people with money will come back in a stampede!!!!

  5. Hansen Says:

    Mostly depressing? How is the opportunity of convincing the People that this is not Chavez’s doing not depressing?

  6. Rafael Vicente Says:

    Miguel, we can expect some gentlemen cynical and amoral, like good Communists, just know disqualify, endorse and attribute their errors and failures to the third: the Empire, the oligarchy and the opposition, made ​​devaluciones mandanto Hugo duarante the good , for the people.
    Transactions made on the 4th, are the product of IMF impositions, but it turns out all kinds are tax experts, just to close the gap with the public finances, as you mention in your article entoces devalue a 20 BSF. for $ 1.

  7. Ronaldo Says:

    Speaking of deities, Pope Benedict announced his resignation due to his health and inability to fulfill his papal duties. Pope Benedict is more concerned about the Church and the World than himself. El Papa is an hombre bueno.

    You know what’s next. Chavez has been in intensive care and not heard or seen for two months. All signs point that he will never return to be president. Chavez is a thief, not a deity. Chavez needs to take the lead from the Pope and resign, pronto.

  8. Alberto Says:

    This post said six devaluation in fourteen years, past blog, said, seven devaluations. Must be consistent.


  9. Its seven: band devaluation in 2002, 1,600, 1,900, 2,150, 2,650, 4,3, 6,3

  10. moses Says:

    Good morning Miguel,

    How about an article of all devaluations since Feb. 1983 and all the exchange controls that attempted (and failed) to administer currency exchanges ?

    Recadi, OTAC, Cadivi, etc. . .

    • moctavio Says:

      You really want me to get depressed…😁

      • moses Says:

        Hi Miguel,

        Not really, but since some of us have lived through this mess in the last 30 years, you might as well share it and feel better…

    • Roger Says:

      Depressing yes but, it is why Venezuela is where it is at now. Whether we look at the last republic or the present one the economic policy has been the same and the results the same.
      On my first trip to Venezuela, the Bolivar was at 58 to the dollar and the middle class people I met were telling me how their savings and other non adjustable investments had been wiped out! At 10:1 inflation Damn Right! At present were talking > 1000:1. In most countries in the world inflation was well under 100:1 over the same period. Meanwhile, most food (like corn) have been globalized in pricing. Pay the price or starve.Facil Si? If you want lower prices, produce in country and apply local economics as does Mexico and others to provide economical food for the lower classes. At this time were talking external investment and technology and common market partners like Mercorsur. Yes, I know your all gagging but, the Chinese, Iranians and Russians are not in the food business. Also, this mess may speed up the goal of Mercorsur and others for a common currency.

      • NorskeDiv Says:

        What year was the Bolivar worth 58 to the dollar?

        Also, anyone know what the Bolivar was worth when Chavez first got into office?

        • moctavio Says:

          That mst have been in 1993, old Bolivars of course.

          When Chavez got to power it was about 680 Bolivars (old ones to, I can get the exact number if you want)

  11. chiguire Says:

    “Mostly depressing…” How about “completely depressing…” Venezuela has now entered the Theater of the Absurd where human existence has no meaning or purpose and therefore all communication breaks down. Logical construction and argument has given way to irrational and illogical speech, and its only a matter of time before this reaches its ultimate conclusion, silence. Camu, Beckett, Ionescu and the rest couldn’t make this shit up.

  12. Dr. Faustus Says:

    The Financital Times says there is some ‘panic buying’ taking place in Venezuela over the weekend.

    http://www.ft.com/intl/cms/s/0/12e9f32e-739e-11e2-9e92-00144feabdc0.html#axzz2KcJyOHj0

    In most cases around the world a devaluation is meant to increase the competitiveness of a country’s exports. With Venezuela exporting such few products outside of oil, the devaluation is strictly an internal political matter. They spent too much, and the bill’s come due.

  13. xvegas Says:

    In case that was not depressing enough, see link to 2012 budget categories:

    http://www.mppef.gob.ve/images/pdf/POAN%202012.pdf

    Long live “Supreme Social Happiness”

  14. Ode007 Says:

    I totally agree Miguel. Why not 20/US $. Well we know the answer. I would have thought that this is a missed opportunity for the MUD.
    In the Capriles plan the first step was to reactivate production at its roots. Food. Thus also creating more jobs. He did state that monetary controls / subsidies would remain for a while. We know he needs at least a year for the first Fruit to start being distributed in the country. It would start reducing imports and remove upward pressure on the exchange while freeing up much needed US $ for other items. I would think that by following his plan, I did not see all of it, a full 20 ( if t remained constant for 3 yrs ) would not be necessary, eventually the market would even out.
    The MUD should vigorously be detailing the cause ( bad economics ) effect (devaluation) and that current model being applied is a full Capitalistic correction but that by its self, is not only BACKWARDS but also will not work. I think this would further Capriles Model and sway a few more to the right side of the economic fence. I am not hearing Constructive lingo from the MUD. Damning something for Damn sake sways no one and does not give him the opportunity at some PRE-Campaign exposure ….. And where is our friend Cabello in all of this, trying to make sure the poop does not stick to him? Lets see what OTHER adjustments come down the pipe.. wonder if they will touch the Gasoline price.. uuuuAAAA . saben q se va …

    • Roy Says:

      Gasoline price: At the moment, the price is essentially free. To merely double the price would be insignificant. In order to make any real difference in the subsidy, they would have to raise the price to 20 or 30 times its current rate. So long as they cannot or will not do this for political reasons, there is no sense in making a small adjustment to the price.

      • Kepler Says:

        And nobody but some obscure economist has the courage to say the truth in Venezuela.

        There are times when politicians may consider lying a little bit, being “flexible” with the truth, but we cannot afford that any more.

        As long as no one with a public face wants to educate the population,
        the Venezuelan nation is completely screwed up.

  15. Dr. Faustus Says:

    This from today’s Economist:

    http://www.economist.com/blogs/americasview/2013/02/venezuela%E2%80%99s-currency?fsrc=rss

    Quotes:

    “In recent months pressure has been building on the government for a fresh devaluation. Many staples have practically disappeared from supermarket shelves, and food scarcity is at its highest in five years. In the past two months alone food prices have risen by more than 11%, causing particular suffering to the poor, who are the government’s main supporters.”

    “Moreover, Mr Chávez launched a spending spree on subsidised food and social programmes last year, in a successful bid to build up support for his re-election. That generated economic growth of over 5%, but caused the budget deficit to soar. Now it appears that the ruling United Socialist Party may need to shower its base with cash all over again, since a new presidential election campaign seems imminent.”


  16. THE NATIONAL “CONSENSUS”
    Let’s just know that government/state/nation -for the sake of the argument, the same thing- is the owner of something which is sold in international markets in valuta –dollars- , in other words government gets fiscal revenues from its (oil) rent in valuta. It keeps some on PDVSA, Treasury, FONDEN, etc. foreign accounts; the reminder it sells to Central Bank – royalties, oil taxes, PDVSA dividends- and gets bolivars, whatever the exchange rate is. This very simple fiscal capture corresponds to Central Bank’s law change in 2005 which eliminated the obligation for PDVSA to sell all its dollars coming from oil exports, to Central Bank.
    If government expenditure growths, no matter where oil prices goes up or down, something which have been happening quite normal in the last 35 years, the budget will be in deficit. Since more than half of government fiscal revenues come from oil, governments’ incentives are set to get from Central Bank as much bolivar it wants, government manipulate –devaluate- the official exchange rate accordingly. That it was has happened last Friday. Of course, controls exchange rate are imposed from time to time in order to make politicians their life easier.
    That is the fiscal logic running from February 1982, when the bolivar collapsed due to an external finance problem: Treasury fail to pay his external debt; devaluation of exchange rate came on February 18, nobody believed that the oil rent can make bolivares quicker than the Central Banks printers. Nothing will change from that, as long as the oil rent is distributed from the oil “boca de pozo” to the treasury.
    As you can easily conclude, either you have government being run by strict fiscal rule, -there are many out there- or you have to alienate oil rent from government property, that could be done turning to 1957 oil laws. By the way we have to reform the Constitution, the main Venezuelan’s strength jacket.
    Can you understand why, for instance, Capriles proposal was not very far from Chavez’s one? And why he declared that controls will stay for some time? The national consensus is running the country. I am afraid, the incentives have been there well, before Chavez, he just put some music and a little bit more ideology, and some style, he brought to government the “ripio” of Venezuelan political class.
    Alexander Guerrero

    • ode007 Says:

      Yes, I do know the consensus runs the country, thats why populist moves get him elected time after time. To change the outcome must change the recipe of how the meal is cooked. Pointing out time after time that the PSUV is corrupt does not work.. consensus believes ALL governments are corrupt ( and in fact they are right, its the level of perceived corruption that changes from country to country) Middle class must be swayed to the right just enough to get them to push the right button at election time. The poor will never vote for anyone other than the PSUV – why – they control the food. The poor do not care how the food gets to the plate, they just know if they stand in a line long enough they will get some. Hard to sell Value$ Moral$ and self e$teem to a hungry belly that really does not want to work for the money. They have been $old DIGNITY via ‘ casa digna ” para todos.

  17. Juan Tabares Says:

    “Mr. Villegas has rather quickly lost his image as a “serious” person.”

    REALLY!!?? please devil do tell us since when this imbecile was even a “serious” person, was the sinister beard that was confusing you?

  18. Kepler Says:

    I was also taken aback for that sentence on Villegas.
    His mother is Maja Poljak, who, according to them, suffered from Pérez Jiménez’s dictatorship and had to run away and be in the Amazon.

    Now: Chávez praised Pérez Jiménez several times.
    Chávez declared he wanted to invite Pérez Jiménez to his inauguration ceremony back in 1999.
    Chávez had previously visited Pérez Jiménez in Spain to give him some order by some gochos.
    Chávez praised Pérez Jiménez again in one of the speeches to the nation.
    Chávez has never talked negatively about the terror Pérez Jiménez conducted.

    And you want us to consider Jiménez serious in any sense?

    The guy is a joke, like anyone else in the pseudo revolution.

  19. ode007 Says:

    Thank you Roy & Kepler for your comments.
    Your right about the price of gas. In terms of $ but in terms of BF a 50% increase although negligible in real Market value $ is a joke/negligible to
    reality, in local currency it would throw the biggest wrench into the mechanism.

    Kepler:
    Public Face. Again I go back to missed MUD opportunity. On a scale of 1-10 I perceive PSUV is a 2, Diego Arria is a 5.5 and Caprilles a 4.5. During the ” Debates ” Arria always said that a ” constituyent ” would have to be called and that his Gov would be for a period of 2 years and marked as “transitional”. The MUD, and many others marked him as ” Radical Right ” but he has History & a Face people know. Using someone like that to tell the truth un-sugar coated about what is needed makes Caprilles appear more like a 3.5 ( Henri Falcon) they should Tag team them. In a Country where the majority of people BELIEVE they have a right to a Free ride in life Arria does not have a chance but Caprilles does if he allows someone ELSE to sell the Hard sour medicine First and he comes in with the sugar. Caprilles tried during his campaign to ” raise the min. salary, a populist move, but he was topped by Chavez that offered more .. this would be the reverse Arria offering Removal of the Financial Tumors and Caprilles offering they try Chemotherapy first. Torrealba (radar) has a style that connects with the people that need to be swayed .. ( I’m thinking out loud here) micro / macro economics in plain creolo :)

  20. Kepler Says:

    We don’t need a man but a movement educating people.

    Venezuelans right and left have an utterly Middle Age attitude to politics and this in the XXI century, with oil and all, is particularly problematic.

    I often hear and read about the perfect Latin American idiot. I agree with the problem of said idiot but I often wonder: haven’t we realised why Latin America keeps producing so many of those? In reality there are as many everywhere, but people elsewhere are more and more avoiding them.
    Why are people elsewhere going less for idiots than Venezuelans do? For one because of the oil we have. For another, because somehow some groups elsewhere have decided to educate the people.

    The extreme left has worked on infiltrating Venezuela from the times of Gómez. It has found fertile ground because a lot of the others had a feudal (not capitalist, but FEUDAL) attitude towards property rights, education and so on.

    At the end of the day those lefties introduced some badly digested synthesis of European theories, mixed them with some old stories of our past and produced more feudal crap…but a lefty feudal crap.

    What we have in Latin America and specially in Venezuela is one feudal lefty crap fighting against a simply “feudal crap”.

    We need something else.

    We need what we never got: the Enlightening, something Europeans got the tough way, something US Americans and Canadians mostly inherited, transplanted and further developed.

    We didn’t see the Enlightment in Spanish America as it hardly arrived to Spain. If we want to start bringing about a tiny bit of it to Venezuela and in that way demining Chavismo, we need not ONE PERSON but a whole movement creating networks nationwide to talk and discuss about the essence of

    1) sustainable development (not simply in the sense of planting trees but in the sense of investment, social and economic innovation, paying for retirement schemes, increasing competitiveness

    2) wealth, how poor Venezuela actually is, how wealth is generated, how much money we have per head based on raw stuff alone

    3) the meaning of debate (not “environment of debate”)

    4) the meaning of pluralism

    You don’t need to have finished secondary school to grasp all those things. You need a teacher with a couple of hours.

    You don’t influence Venezuelans if you just keep focusing on this

    http://www.noticierovenevision.net/economia/2012/septiembre/2/38564=julio-borges-deploro-que-venezuela-importe-70-de-los-alimentos-que-consume

    With that Borges might serve as a cathartic medium for María Alejandra López, nothing more.

    What Borges said in that Xth press conference might have been right but
    it is for the choir, it was said in a boring fashion and it might be the priority message.

    Venezuelans on average are just ignorant. They are not idiots.
    Ignorance can be healed. You don’t do that with those kinds of conferences to Globovision-Venevisión-Televisora Regional de Porlamar (just making up this last one)

    You don’t do that through a guy like Diego Arrias, who had a hacienda, no matter how good an hacendado he was. Most people in Venezuela do not have haciendas.

    You educate the masses with a team of people who are neither Diosdado-Cabello-kind of thugs nor feudal lords but who are average Venezuelans with some ideas about points 1 to 4

    And they will be the ones undoing the infiltration work the lefty idiots have been carrying out since almost a century.

    • Gordo Says:

      I think any strategy that seeks to move Venezuela “forward” won’t move forward if it leaves the poor behind. That should be a lesson learned by we educated and informed people.

    • Gordo Says:

      The poor should have learned a lesson also. They should have learned that electing people who expropriate productive companies and then run them into the ground is not a solution to their needs.

    • ode007 Says:

      Kepler :) its called IslaTV – so far.

      I Can not disagree with your formula – PSU has been using it for over 10 years when they banned some books, added others to mandatory curriculum and turned everything in to a revolt against the feudal rich. ( I wonder if they know how many hours a week the rich actually work and how many generations of work it takes to get there if your NOT a thief ) What you are advocating though is Long term. I am advocating for short term get it done for the next election … has to be sometime this year. Julio Borges could use some classes on speech giving.. Snr Maria Lopez? ( mother of Leopoldo ?Sorry dont know much about her. Give us something short term Kepler.. looking for the magic pill here :) Is there one?

      • Kepler Says:

        Ode, there is absolutely no short term or magic pill, no silver bullet and no wooden cross.

        I wrote some stuff already above.

        First of all: what’s rich? That’s always a relative term. There are certainly wealthy and upper middle class people who got there out of “sheer work”.
        And yet: there is not a clear cut division for most. A lot of people in Venezuela just got an additional push by the fact of being close to the State’s “teta petrolera” and because they got into some of the oligopolies, of the import monopolies and so on.

        We never ever had capitalism in Venezueola. We jumped from a basically feudal society to oil.

        Now: although we did a big jump in the middle of the XX century when it came to education, the population boom, laxity towards birth control and above all the oil dependency got us to what we have. Education quality for the masses also deteriorated RAPIDLY AND DRAMATICALLY from the seventies…numbers of “literate people” kept going up but basic, BASIC education has gone down the toilet. I don’t want to talk about university education because first things come first. If you don’t have but a bunch of half-literate people getting to university, it’s going to be a farce for the vast majority any way.

        So what?

        As I said: we need some group of politicians explaining more what are the structural malaises. We need not one boring guy at a press conference in Caracas but groups of people travelling from time to time where 90% of the population lives…setting up vectors, people who talk about those issues there.

        We need people distributing flyers in buses (yes, buses) explaining one or two things about what I already mentioned.

        If power changes, one of the first things democrats need to do is to start registering property land and property land claims for all of Venezuela and making that accessible on a digital way. Do you know most Venezuelans live in “tierras del estado” or just tierras de nadie?
        That is like 4, 5 centuries ago in Germany or France.
        People have discussed about property rights for slum dwellers. It is more than slum dwellers.

        Politicians should also talk in clear terms about what the hell they understand by “decentralización”. Con qué se come eso?
        In reality for most of them is the power to become the feudal lord in their region, not to give power to people in the region.

        Start talking to people about how they are subsidizing the rich by letting petrol be given away….etc

        We need a plan for general education about how screwed up the economic and social structures of the country are

        • deananash Says:

          1990, on the autopista, just past the tollbooth, returning to Caracas from the beach, on a bus. National Guard pulls the bus over, delaying everyone for 15 minutes while cedulas were checked.

          I stood up and “educated” everyone to the fact that NONE of the private cars were being stopped.

          The poor thanked me by “telling” on me. The police thru me in jail for the night. This was pre-Chavez. The poor aren’t interested in being educated.

  21. moctavio Says:

    I have come up in the world, I am a banker now :-)

    • Kepler Says:

      You wouldn’t tell us, it took an “investigative journalist” to discover you are the Venezuelan Alfredo Harp Helú, not just the Latino Paul Singer.
      Por eso es que estamos como estamos :-p

  22. firepigette Says:

    We are who we are for the choices we make, and a country is nothing more than the sum of its parts.Each and every one of us has to be what we want our country to be, and not expect others to do it for us.

    We have to go from dependent thinking to independent thinking.Independent thinking starts at home, and is learned (or not )at school.

    But ultimately the choice is made by each individual.

    Each one of us has to be willing to stand alone, without preconceived ideas.

    The strength of a group is made up of the strength of each individual.

  23. Nicolaas Smith Says:

    There is a way to stabilise your non-monetary or real economy with daily indexation like Brazil did for 30 years during hyperinflation of up to 2000% per annum. You can also stabilise your monetary economy at any rate of inflation with daily indexation of the entire money supply. If someone would finance a trip to Venezuela for me, I would manage to first convince your accounting authorities and then your central bank to do it. Any offers?

    I can show any company in Venezuela how to automatically maintain its capital constant in real value. I can show Venezuela how to automatically maintain its monetary economy stable.

    Hello Miguel, how are you?

    Nicolaas Smith

    http://realvalueaccounting.blogspot.com/

  24. Nicolaas Smith Says:

    I can show Venezuela how to automatically maintain its non-monetary and monetary economies stable.

    Nicolaas Smith

    http://realvalueaccounting.blogspot.com/


  25. You really think these guys would be interested? Inflation is how they survive.

    • Nicolaas Smith Says:

      Hi Miguel,

      Daily inflation-indexing of the entire Bolivar money supply would remove the entire cost of inflation (not actual inflation). The Central Bank will have to pay all commercial banks the overnight rate equal to overnight inflation on their overnight cash balances.

      I think companies would be interested to know how to automatically maintain their capital constant. If I could get to Venezuela I would be able to do it. It was done for 30 years in Brazil.

  26. moctavio Says:

    Companies would be interested, but not the Government. By devaluing, the Government solves its fiscal problem over and over at the expense of the people.


  27. I agree with you: the government would not at first be interested. That is why the plan is to first do the accounting part: copy what Brazil did for 30 years with daily indexing of all constant real value non-monetary items, e.g., salaries, wages, rentals, capital, all items in equity, all non-monetary receivables, all non-monetary payables, etc.


    • You stated in your previous blog that you favour dollarization. My plan is the same as dollarization, but at no cost. Dollarization is very costly. You have to replace your entire money supply in USD. It also comes with two massive negatives: 1. you lose seignorage to the USA and 2. your central bank loses independent monetary policy capability.

  28. moctavio Says:

    I believe in dollarization, but I am in a true minority. But I dont believe for a minute Venezuelan politicians will ever do something that provides stability. The private sector in Venezuela is miniscule and with little influence or power. I want my Centrakl Bank to lose independence, the currency has gone in 40 years from 4.3 to 43,000

    • Roy Says:

      Miguel,

      For a country whose principle export is sold in dollars, it seems like a no-brainer, as it did for Ecuador. But, as you said, transparency, stability and lack of ability to steal from the population by inflating the currency are not high political priorities.

  29. island canuck Says:

    Miguel,
    It might be interesting to do a post on the hidden debt that the government has that is not public.

    1) CADIVI behind by 180 to 220 days. Imagine how many billions of $$ that represents.

    2) Seguros Sociales – How many billions of Bs are they behind in payments to people on sick leave or maternity leave? We have 1 employee that has been waiting more than 3 years for her maternity payments.

    3) Expropriations: How many billions are outstanding to owners that they expropriated & never paid?

    4) Prestaciones: How much is outstanding in government prestaciones for either ex employees or in reserve as required by law for current employees?

    That is just 4 that came to mind however I’m sure there are many more.


  30. Problem is there is little data available.

  31. moctavio Says:

    But in most countries there are sources to make estimates. I remember when Petkoff was Minister of Planning and they needed to know what the Governemnt’s severance pay liability was and nobody knew. He had to put PDVSA’s economic office to work to calculate it in order to change the law.

    Pharmaceuticals alone is owed US$ 2 billion
    Dividend repatriation is estimated to be US$ 13 billion.
    Expropriations, may be like US$ 30 billion
    Severance? Anywhere from US$ 20 to US$ 60 billion.

    Paying all that will truly require an “adjustment”.


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