Maduro: Stay The Course!

January 15, 2014

smileWhat are these guys smiling at?

Lots of expectations today. Rumors of positive change. Bonds moving up. Maybe, just maybe, Maduro was about to change the course of the Bolivarian revolution. There was talk of a fairly competent oil manager becoming President of PDVSA. Of Ramirez moving to Finance, which would have been a bummer. Of Merentes being shipped back to the Central Bank. In the end, the last one was the only one that became true. Ramirez stays where he is and Merentes is replaced by Rodolfo Marco Torres. Pardon me, General Rodolfo Marco Torres.

As for devaluations and distortions in the economy, not much to report. Maduro did say that travelers will have to go to Sicad or better said, use the Sicad rate for their travels. But he did announce that Cadivi will be eliminated, which many interpreted as the elimination of Cadivi for the private sector, and the Government keeping the Bs. 6.3 per US$ rate to itself.

The path is clear: For the Government, extremely cheap dollars, for everyone else, not even Mastercard, only black market.

As For Minister Marco Torres. What can I say? He does have experience in the Government’s financial sector, but not the type I would boast about. When he was a Colonel, he was in Fonden (uups!), was Treasurer at a very touchy time (oh baby!) and then he was moved sideways to Banco de Venezuela and Minister for Public Banks (I think it happened in that specific order, but who cares, really?). Now he is moved to a new Joint Ministry of Finance AND Minister for Public Banks. The revolution has all these supermen with no training that can do the job or two or three people at once.

And yes, there were other announcements, like they are going to go after speculators and crooks. (Seriously!) Or that they will merge the Superintendecy fo Price Controls and the Consumer Protection agency. (Saman is out once again!).

And yes, Nelson Merentes returns to the Venezuelan Central Bank, where he expanded monetary liquidity at such high pace, that inflation is now in the mid fifties. I guess he is being rewarded for his accomplishments, and sent back to keep up the good work, after his failure in Finance.

But in the end, what Nicolas Maduro is saying is that the revolution will stay the course. That he fails to understand the distortions and dangers to the economy. That between ideology and fear, he can’t even begin to attempt to solve the problems of the Venezuelan economy. I have heard of a few people that talked to Maduro this week or last week about the problems. He heard them all politely, but nothing of what was said is reflected in this speech.

In some sense, this is what Maduro has done in the nine months since he was elected (perhaps?) President. He can not make choices. He has not listened. He has tried to please everyone in his unholy Bolivarian coalition. From Marxists to military, from Socialists to enchufados, from radicals to pragmatists, from Communists to Cubans. He has been unable to make decisions, And he continues and will continue to do so, as long as the Bs. 6.3 per dollar rate is feasible or doable. The private sector seems to be relegated to mostly Sicad or the black market. Maduro thinks the State can do anything. Run everything.

That is the model of the revolution. And as I suggested earlier, there will be no collapse this year. But I can say Maduro’s style suggests that the deterioration will accelerate much faster than it needs to. Inflation will be up this year (85%?). So will the black market rate (double?). GDP will contract (-3%?). Shortages will increase. (35%?) The only thing I can say I am sorry about is that I used the title “Clueless in Miraflores” in the previous post.

It would have been even more perfect for this one!

27 Responses to “Maduro: Stay The Course!”

  1. xp Says:

    Thank you for your thoughtful and insightful essays.

    That …
    He can not make choices [may be powerless to do so?]

    He has not listened. [ delicate balance between factions, and no real support from his peers]
    He has tried to please everyone in his unholy Bolivarian coalition [ by sticking
    to a status quo].
    From Marxists to military, from Socialists to enchufados, from radicals to pragmatists, from Communists to Cubans [ every faction seeing the others as unwilling partners?].
    He has been unable to make decisions [ why bother? he is in the swamp up to the neck, surviving for now].
    He’s wearing lead-filled shoes,
    enjoying his moments in mira los flores,
    and dreaming of utopia.

  2. Alex Says:

    What do you expect from a communist bus driver? Economy to him is like chinese to me. It’s not a common sense subject.

  3. metodex Says:

    I seem to be unable to understand what all of this means still, much like the last elections.

    Just one question for you Miguel: If i want to travel this year,to the USA for example. Where will i get my dollars?No more cupo electronico? no more 300 dollars cash?

    • Bob Says:

      “Where will I get MY dollars ?
      Well to start with the dollars were never yours and the handouts have now come to an end.
      Like the rest of the world you will now have to work for them. And No ! Form filling is not work !
      However if you can afford to pay “real” market rates plus 10 % you can travel. If not the reality is your holidays, or the likes, were unintentionally directly subsidised by Hugo.
      Why not go to Merida for a couple of days ?

    • Island Canuck Says:

      Bob, from someone who lives here & earns in Bolivars I find your comments extremely harsh.

      Supposedly the black market is illegal & punishable by jail time (read the law) although I never heard of a case involving individuals.

      How are we supposed to get currency & stay within the law?
      The only solution was CADIVI.

      I honestly don’t believe that they will shut travelers out.
      The current credit card system works more or less smoothly.
      Perhaps a little more control to catch the cheaters but they announced measures to be installed in the International airports to register out going users. Fine with me. Even at a more realistic rate.

      You say why not go to Merida. Great idea.
      Now when they can control the security & shortages in the country I’m all for that.
      In the meantime I would like to spend my once a year vacation from working 7 days a week for 11 months of the year in a civilized & secure country with no shortages. For that I need dollars at a price in keeping with the Bolivars we earn.

    • moctavio Says:

      My understanding is that it has not been eliminated but you will have to pay the Sicad rate.

      • Island Canuck Says:

        Which is fine.

        The stupid thing is the complete lack of information.
        Would it have hurt them to provide an information realease so that people wouldn’t be all stressed out with their vacation & travel plans.

        My poor daughter who has a airline tickets bought & paid for to Panama in February with Venezolana is in a complete stage of panic.

        She has all her carpetas ready to present to the bank.
        She & her husband have been saving for months for this trip.
        Then to top it all off the airline has been suspended.

        What a country.

        • Ira Says:

          They’re going to Panama, and actually plan on coming back?

          All I hear are good things about Panama these days.

        • Carlos Says:

          Take it easy Canuck…CADIVI is still working, just run and file the carpeta.. .. a friend’s daughter filed a CADIVI traveler forms (carpetas) last friday and today she got the SA (approved) code..
          Now ..the VENEZOLANA mess is a different story… hope they will get money to pay insurance and your people will be able to travel

      • Carlos Says:

        6.3 or 11.30 SICAD or 20.. they all are dirty cheap when black market rate is flying near 75…
        It is an extremely profitable arbitrage deal.
        Now the worst… Almost every credit card holder in Venezuela is using the internet 400 bucks…I do not how many souls but I would not be surprised to read above 1 million …
        Then there is a huge share of these that also traveled or used the traveler allowance (2000 to 3000$ each).
        Assuming as true the 5500 MIllions US$ CADIVI said were granted to consumers, we have more than 1 million travelers.
        But.. worse … because for each traveler CADIVI has to pay overpriced tickets to the airline.. for instance American charged 2500-3000 US$ at 6.3 for a 3 hours trip to Miami, more than the 2500 traveler allowance. Same story for Peru, Ecuador, Panama, etc charging unacceptable 3000 US$ per ticket to CADIVI..More reasonable were European airlines prices..
        A ticket from Venezuela is very cheap for consumers paying in bolivares but is outrageously expensive for CADIVI who pays in dollars the overprice..
        In my simple metric a traveler actually costs between 5000 and 7000 US$
        to CADIVI and the larger share is for the airline. Even though CADIVI is owing money to airlines the true is that airlines received these funds during 10 years and they will receive again.
        Airlines are the ones collecting the big stake in the CADIVI travelers mess. The most profitable flights in the world.
        IMHO, it would be cheaper to grant 3000 US$ to people and let them save it, trade it for profit or pay airline and travel expenses.

        • HalfEmpty Says:

          I see what you are saying Carlos. But aren’t these (insane) revenues only in receivable form? I would discount the hell out of an of those receivables.

  4. Kepler Says:

    Miguel,
    Do you have any idea what this guy studied that he became so linked with the state banking sector? I mean: beyond shooting at innocent people in 1992, what did he do? What are his formal qualifications for the job? Seriously?

    And do you know something else about his role with FONDEN?
    I posted about him in German but I couln’t find a picture of him that I knew would be free for use, so I selected one of Moe Howard from the Three Stooges.

  5. MN Says:

    Olá Miguel, falo de Portugal. Ontem e hoje causou alguma perplexidade os valores de um contrato de construção da autoestrada Caracas-La Guaira, de 19 kilómetros por uma empresa portuguesa, num contrato de 3.400 milhões de €. É normal uma autoestrada de apenas 19km, apesar dos túneis e viadutos, ficar tão cara ? Ou é mais um negócio estranho ?
    http://www.jornaldenegocios.pt/mercados/bolsa/detalhe/auto_estrada_na_venezuela_conduz_teixeira_duarte_a_subida_de_quase_20.html

    • Kepler Says:

      No soy Miguel, pero puedo preguntarle a un par de ingenieros civiles que conocen bien esa zona.
      Gracias por el enlace.

    • moctavio Says:

      MN: No se mucho de precios de carreteras, pero esos projectos de infraestructura siempre son mas caros con este Gobierno. Esto fue adjudicado sin competencia de ningun tipo.

    • Eduardo Says:

      La parte más cara son los viaductos. Un costo razonable para un viaducto, con el ancho con los carriles que mencionan es 120,000 USD por metro de longitud. Eso da unos 90,000 € por metro.

      Los túneles cuestan menos. Las carreteras muchísimo menos.

  6. Javier Cáceres Says:

    Migel:
    The title for this ne could have been ” Maduro:stay the curse”

  7. Dave Hill Says:

    Sounds like time for a counter-revolution and Venezuela isn’t an island like Cuba. The iceberg is close, but the government is partying too hard to see it.
    Comical how Marxists see their own failed policies as a solution to their own failed policies. This applies very well to the idiot ministers of the European Union in Brussels.

    • Ira Says:

      “Comical how Marxists see their own failed policies as a solution to their own failed policies.”

      I don’t think I’ve ever heard it expressed better and more succinctly!

  8. agla Says:

    Does any one know what happened to Giordani, in this shuffle? I ask because his whereabouts is a good indicator of the heading financial and economic issues will take…….

  9. Island Canuck Says:

    Just announced by the Vice President:

    ND.- El vicepresidente de la República, Jorge Arreaza, se refirió en una entrevista en el Canal del Estado a las medidas con respecto a Cadivi. Según explicó, todos los trámites ante el organismo “siguen siendo los mismos hasta que se hagan otros anuncios”.
    opinan los foristas
    “Quienes tienen familiares en el exterior estudiando, quienes necesiten viajar, esto no significa ningún tipo de trauma”, agregó, al tiempo que destacó que aún no se pueden dar detalles sobre el nuevo mecanismo porque lo están estudiando.
    http://www.noticierodigital.com/2014/01/arreaza-los-tramites-de-cadivi-siguen-siendo-los-mismos-hasta-que-se-hagan-otros-anuncios/

    No word on the Cupo Electronico

  10. Noel Says:

    Maybe President Maduro is a student of Alexis de Tocqueville, in which case he read that the most dangerous time for a bad government is when it starts to reform itself.


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