Twice in one year, Venezuelan Government officials have said:
“I will turn you into powder”
referring to the parallel or black market for the exchange of Bolívars into US dollars.
Last year, it was Mr. Rafael Ramirez that said it. He is long gone. This year, it was none other than Nicolas Maduro, I am not implying anything by the similarity, other than the fact, that it has been shown how little they have understood the implications of the systems they implemented.
Last year, it was Sicad 2, a sort of glorified Sitme (The previous system)
This year, it was the creation of Simadi, a kludgy system, with little logic or connection with the reality of markets. A system so badly conceived, that I thought it would utterly fail. But I never thought it would fail so fast.
In barely two weeks, Siamdi has become Sicad 2 at a higher rate of exchange of Bs. 170 per US$ instead of Bs. 50 per US$.
Nothing more, nothing less.
And as I said, the system never was free, nor unlimited, nor market driven. All of which guaranteed its failure.
And it failed. Within a week, as shown in this plot (yes, today it was higher):
the parallel market dollar has soared. While the Simadi rate remains at Bs. 177 per US$, any chance that the Government had to succeed failed when: 1) They set the Simadi rate below the parallel rate. 2) They failed to supply the private system with dollars, only giving foreign currency to Government-owned banks and 3) They limited any transaction to Bs. 180 per US$.
As those who had waited for a month for Simadi got nothing, the parallel rate soared, going from 190 to 284 per $ today (That point is not in the graph, which I made up yesterday)
So by now, Simadi has become a glorified or amplified Sicad 2, exept the rate it is Bs. 177 instead of Bs. 50. And the graph above implies that Simadi is dead on arrival. You see, besides my objections before, here and here, by setting and holding the Simadi rate lower, with the parallel soaring, arbitrage becomes too much of an incentive. Go to your nearest Casa de Cambio gets US$ 300 at Bs. 177 and sell it in the “other” market at Bs. 280. The same if you go to bank or broker that gives you higher amounts. You buy it, sell it higher and you make more than a months salary for a fairly good job.
The Government simply screwed in is naive belief that anyone would like to bring their foreign currency back. That with 100% inflation (and higher soon) anyone would not buy currency and wait a few months. Instead, it created this dumb system, forcing each bank to operate with its clients, each broker with its clients and Government-owned banks to receive foreign currency to give to its clients, chosen who knows how, but creating a huge distortion in the system. But even Government-owned banks are not getting enough. And you can bet some of it filters back to the parallel market. It is too nice an opportunity to pass up.
With any normal Government, this would just require adjusting the system and trying again. But this is far from being a “normal” Government. First, they really thought they could control the market They really believed that people would bring dollars back to become rich at Bs. 177 per US$. It did not happen.
And now, it would take as long as to set up the new system, to adjust it. Consult. Check with the ideologues. Check with the President. Check with the military. But most of all, it will take understanding to convince themselves that something is wrong with their system.
After all, they were supposed to turn the black market into powder, not the other way around.
.
The Devil's Excrement 
March 10, 2015 at 3:17 pm
Oh my. I can’t wait to read Moctavio’s posting on this one. They’re broke! Bankrupt. They’re out hawking the family jewels. Their last asset, gold, is being used as collateral…
March 10, 2015 at 6:43 pm
Pawn shop economics, like the DR oil debt bargain. (For the DR.)
March 10, 2015 at 7:32 am
Hello Mo: I can’t believe they tried this again. They tried to raise foreign $$ by asking the retirees to open new accounts and have their pensions transferred. Now with this they thought they would raise $$ by repatriating $$. The level of stupid no longer surprises me. They are using to much of Evos’ product. Mendoza has 1 foot in VE and the other one out the door. Plant in Florida finished new productions line – and the Harina PAN is now shipped from Florida to Canada – not Columbia anymore …. so it is not just Malta now — processing is getting bigger in Florida & Mexico. No significant money going into VE? Conviasa will no longer “finance” the BURRO and they want airport taxes to be paid at the Country of Destination on arrival. (This is after all a courtesy service they provide it is not IATA mandated). I said it before I will say it again, you control the food & Health you can easily control the people. I hope Burro stays on this track. He needs to see hunger walk up his front door and look at him in his face.
March 10, 2015 at 6:41 pm
You sure about the Harina Pan? The bags we buy in Florida are processed in Texas. (See label.)
We also don’t grow much corn in FL, so it makes more sense for them to be closer to the corn-growing states. Plus, Texas is on the Gulf, for easier export shipping.
March 9, 2015 at 10:36 pm
For how long this disaster will last? Nobody knows. Yes, they had not pulverized the black market currency exchange. It is all the opposite with the greenback getting close to Bs 300 in a relatively short time after the announcement of SIMADI. And they won’t be able either to continue surprising us by pulling billions of dollars out of seemingly nowhere, as it was mentioned in this blog a few weeks ago. Ain’t that many billions left in a totally unproductive economy, heavily in debt, and that depends solely on a commodity that won’t increase much in price for the foreseeable future. Now the other question is: Will the government be able to survive after the country goes into bankruptcy and it is forced to apply unpopular policies? Well, Cuba did it in worse circumstances. The mentors and masters of the current Venezuelan government were able to keep a firm grip on power during the “special period” after the lifeline from the soviet bloc was cutoff. A time when hungry Cubans where fainting on the streets of Havana (I could not believe when a person who is now in the US told me that the government had TV programs at that time to tell people how to prepare a meal cooking orange peels, as well as other recipes better fit for something like urban survival school rather than a government that promised Cubans dignity and prosperity). Of course, Cuba was/is a declared dictatorship, with no dissidence or opposition, and nobody in the whole world had/has any doubts about that. In the case of Venezuela many still think it is an imperfect democracy which is following questionable economic policies, but still a democracy with a somewhat misguided but existing opposition. And the government wants to keep that façade. I think the challenge for the Venezuelan opposition is to not despair, and to corner the government into going to elections this year, and making sure to win it by a wide margin, so no matter what the government does to fix the outcome still won’t be able to succeed. They will then have only two options: accepting defeat or letting the pseudo-democracy mask finally fall off their faces. I have hope that this ugly nightmare will pass. Unfortunately, the prospects for Venezuela’s future are not that great. It will be very poor for years to come while a recovery happens. Much poorer than now. A textbook case of how a country with a decent economy was ruined by a band of incompetent individuals who felt they could, knowingly or not, defy the most basic economic laws.
March 9, 2015 at 11:57 pm
“A textbook case of how a country with a decent economy was ruined by a band of incompetent individuals who felt they could, knowingly or not, defy the most basic economic laws.”
Hmm. That statement seems to have wide application these days. TARP, QE and zero interest rate, for example. If only all oil transactions had to be paid in Bolivares, how different things would be.
March 9, 2015 at 8:06 pm
… Whenever I think of Simadi, Sicad, Siwhatever I think of Nelson Merentes’s rather meaningless smile under his funny mustache while he explains an awkward diagram from an unreadable photocopy. His attitude on TV always appears to be either overly optimistic or completely naive.
You have to wonder: he’s been the one architect to all these funky, failed non-solutions to the fx black market. If it were me, I’d be real embarassed, I’d go under a rock but just looking at the guy, it seems he really enjoys the spotlight. He’s just having a blast.
March 9, 2015 at 7:19 pm
it worked for one day the difference was only 20bs I thought this is cool I don’t have to ask my wife for money
March 9, 2015 at 7:14 pm
hi sorry not that much of an important comment but during all this I used my credit card in epa it was a short lived novelty experience.
March 9, 2015 at 12:34 pm
ANNEX
1. Antonio José Benavides Torres [Commander of the Central Integral Strategic Defense Region of the National Armed Forces, former Director of Operations for the National Guard; born June 13, 1961]
2. Gustavo Enrique González López [Director General of the National Intelligence Service and President of the Strategic Center of Security and Protection of the Homeland; born November 2, 1960]
3. Justo José Noguera Pietri [President of the Venezuelan Corporation of Guayana, former General Commander of the National Guard; born March 15, 1961]
4. Katherine Nayarith Haringhton Padron [National Level Prosecutor of the 20th District Office of the Public Ministry; born December 5, 1971]
5. Manuel Eduardo Pérez Urdaneta [Director of the National Police; born May 26, 1962]
6. Manuel Gregorio Bernal Martínez [Chief of the 31st Armored Brigade of Caracas, former Director General of the National Intelligence Service; born July 12, 1965]
7. Miguel Alcides Vivas Landino [Inspector General of the National Armed Forces, former Commander of the Andes Integral Strategic Defense Region of the National Armed Forces; born July 8, 1961]
March 9, 2015 at 12:27 pm
Obama aplica nuevas sanciones a siete funcionarios venezolanos.
Click to access venezuela_sancion_funcionarios.pdf
March 8, 2015 at 7:41 am
In trying to understand the exploding black market one would have to assume that this is the main reason:
Jesús Casique: Según una fuente del BCV prácticamente no hay dólares para el Sicad y el Simadi
http://www.noticierodigital.com/forum/viewtopic.php?t=1078303
According to a source in the central bank there are no dollars for Sicad or Simadii
March 8, 2015 at 12:54 am
Milk is such an emotionally loaded commodity that a lot of manipulation goes into it that we wouldn’t stand for in say lettuce. Baby needs Coeslaw is not a vote winner.
March 10, 2015 at 6:36 pm
Now THAT’S funny!
March 7, 2015 at 10:31 am
Miguel, this is all the consequence of the exchange control. You had an old post, many years ago that talked about that. You should resurface it.
As for price controls…. Some price controls can work, it depends on the setting. When you want to protect an important local industry, they can be implemented. Here in Canada the price of milk is fixed and it seems to work. Sure I pay more for the milk than my american friends, but that is a price I am willing to pay to have a local flourishing high quality milk industry.
The problem with the Venezuelan economy is that there are just two extreme models that are considered: either the cuban model or the neo-liberal model. IMHO both have failed for Venezuela, we need something in the middle.
March 7, 2015 at 12:12 pm
Although I don’t particularly like how the phrase “neo-liberal model” is used, in the sense that it refers to models of the modern democratic states of America and Europe, I would argue that Venezuela has never had or tried such a model, and therefore, it cannot have “failed”.
March 7, 2015 at 2:10 pm
You have to remember Venezuela is a feudal country. No country has become prosperous by going directly from feudalism to “neo-liberalism”. It is almost as utopic as the communist utopia and ends up in more underdevelopment and new coups and commies and the like.
Neither the USA nor Western or Central Europe got to capitalism and other such things from the feudalistic stage. South Coreans and Japanese learnt the way. Why can’t we?
Unfortunately, we want to go directly to the end.
March 7, 2015 at 4:10 pm
I am having a problem with some of the labels we use for various political models. Firstly because they are usually emotionally charged and thus elicit strong negative or positive reactions that interfere with dispassionate analysis and debate. And secondly, because we can’t all seem to agree on exactly what the labels mean.
We need an objective way to define and describe political models — something that would work like a Pournelle Chart, but with more axes than just two, and that actual values could be assigned to. That way, political “science” might actually be moved into the realm of science instead of merely opinion.
March 7, 2015 at 6:32 pm
Price controls generally mean setting max retail prices–not minimum–correct? So I don’t understand your milk example, for more reasons than one.
Is it to protect against U.S. imports, which I doubt. So why doesn’t Canada just let the price go where it’s going to go, especially with the year to year cost/expense vagaries of dairy farming?
Protecting the dairy industry, I understand. But I don’t understand what the govt. is doing that barring competition from imports, the free market wouldn’t do on its own.
Does the govt. get a hefty tax from it?
March 8, 2015 at 9:44 pm
Ira, there is indeed a quota system for milk here in Canada. It is a complicated system but it works. You can have the two visions here:
http://www.theglobeandmail.com/news/national/time-to-lead/canadians-dont-know-the-price-of-milk/article1315665/
March 10, 2015 at 6:36 am
Bruni & Ira, please keep in mind that the Globe and Mail & Sun are Center/Left slanted papers. They like the Liberal Party in Can. Can. does pay a FMV for milk taking into consideration USA subsidies given to the Dairy market there and the deregulated industry in Australia and mix all that up in a bag and exchange it into US $ we all are within a 10% margin of each other. The 10% margin is for extra logistics. Canada is big. Cows are not on street corners. Better info at the DairyFarmers of Can. web site or
March 10, 2015 at 6:35 pm
I understand that there’s reasoning to protecting certain industries. But I guess I have a problem defining the Canadian dairy situation as price-controlled, as industry regulated. For example:
Are retailers given a maximum selling price?
March 10, 2015 at 11:30 am
A guanteed minimum price protects the supplier, manufacturor or grower as apposed to a maximum price protecting the consumer.
March 7, 2015 at 9:55 am
This financial debacle might be just what the doctor ordered to get rid of the Chavismo cancer. Crime, daily murders, loss of liberties, escasez, desempleo, opresion, economic crisis apparently is not enough to get our ignorant, uneducated masses pissef-off enough.
Apparently it’s gonna take downright Famine for the people to revolt. And that’s gonna be after the so-called “elections”, of course.
March 7, 2015 at 11:44 am
The flaw in your theory is that weakened people lack the strength to revolt. In a diabolical way, they are geniuses. See China, i.e. The Great Leap Forward.
March 6, 2015 at 10:25 pm
Venezuela is now a nation of beggars!
The 12-nation UNASUR group called on every country in Latin America to do what they can to ensure Venezuelans have access to staples after a delegation met with President Nicolas Maduro. Secretary General Ernesto Samper said UNASUR would create a special commission to strengthen distribution chains.
http://news.yahoo.com/embattled-venezuelan-president-seeks-international-support-143719182.html
Socialism at it’s very best!
March 7, 2015 at 7:06 am
Yeah, what happens when they don’t pay?
How long do you think the “help” will last.?
$$ no hay!
March 7, 2015 at 8:07 am
This is what doesn’t make any sense.
March 7, 2015 at 12:06 pm
Did the UNASUR delegation even meet with anyone in the Opposition? Have they even brought up the issue of political prisoners?
What chips did Maduro call in to buy this media show?
March 7, 2015 at 8:12 pm
They did, but with Argentina and Brazil as the group leaders, Samper as a politician with a lot of baggage, and the Colombian government only concerned with denying the FARC sanctuary next door, little help or relief can be expected from Unasur.
March 6, 2015 at 3:11 pm
Sounds remotely familiar…
George Kennan’s second 1957 Reith lecture, on Communist Russia’s world-view: “They have systematically employed falsehood not just as a means of deceiving others and exploiting their credulity but also as a means of comforting and reassuring themselves. It has seemed to them at all times easier, and in no way improper, to operate on the basis of convenient falsehood than on the basis of awkward truth”
March 6, 2015 at 2:52 pm
Socialists always look for a Masia to feed the masses, with forty loaves and fish! Not accepting that socialism itself can’t work! Why? Because human nature is one of the strongest forces, right up with sex drive (no pun intended) People are selfish by nature, and will never change, sure there will be the occasional Mahatma, but I wouldn’t wait for one to feed my famaily give me a Henry Ford and his famous five dollar a day salary any day! And now socialists after the debacle of Chaves have a new hero in Spain with Pedomos! Let’s see how many free lunches they can saddle future Spanish generations with!
March 7, 2015 at 8:06 am
Ford paid well not out of some altruistic mission or because he was a nice guy:
It made business sense, and saved him a fortune over the years in not having to replace and retrain workers.
Capitalism.
March 6, 2015 at 11:57 am
I was reading a news item from Spain. Apparently, they have an “Accounts Court” – Tribunal de Cuentas where they look into how the public money is used. They were giving grief to the minister of health because when he was a mayor he rented some premises for 12,500 euros when the recomendation from accountants was to rent for 10,000. Also some items that the owner should pay is being paid by the city. Something that would not raise a brow in Venezuela but obviously potential corruption.
Account Courts is something to think in the Venezuela after the gang is overthrown. As long as the court has real teeth.
March 6, 2015 at 11:33 am
I didn’t hear Maduro utter the phrase in question so I could be wrong, but I bet he said “Te convertire en polvo” no “Te convertire en polvora”. Powder is polvora, Dust is polvo. Maybe he uttered a “really” explosive phrase…. I don’t know.
March 6, 2015 at 11:37 am
A ese lo pulverizaremos
March 6, 2015 at 11:46 am
Translation: We’ll turn that one into dust.
March 6, 2015 at 11:56 am
or powder, depends on what it is made of
March 6, 2015 at 11:59 am
Ha! ok, keep your powder fresh.
March 6, 2015 at 2:46 pm
Meanwhile Maduro is bombing the Venezuelan economy until the rubble bounces.
March 6, 2015 at 10:01 am
If the Bank of England was not able to defend the pound sterling (and made Soros rich by trying) why should Chavismo be able to defend the bolivar. Sorry but it’s mission impossible. It has never worked and it never will.
To revive the economy you have to let people work and make money. No one is going to work to make a loss.
And the problem did not start with Maduro or even with Chavez. It started with Luis Herrera back in 1984. It’s the same stupid socialist mentality at work.
March 6, 2015 at 10:08 am
With M2/Reserves at Bs. 85, selling dollars at 6.3 for basic foodstuffs is the same as giving them away for free (and note that 15 billion of the reserves is in illiquid gold). The current systems of subsidies is absurd and only promotes corruption and arbitrage. In the bad old days, subsidies were direct to those that needed them.
March 6, 2015 at 9:39 am
Sorry for the double post: technology problems. This blog does not have an edit (delete) facility.
March 6, 2015 at 9:30 am
What now? This: At a certain point, 99% of people in Venezuela will stop accepting Bolivars and only do business and accept payments in US Dollars. It is called spontaneous Dollarization. It happened in Zimbabwe in November 2008. Venezuela is not quite at that point yet, but, it may be looming on the horizon the way Maduro and his cohorts are behaving. You will then have a stable economy, but you will not grow much. Healthy economic growth will only return with a sensible government with sensible and proven pro-growth economic policies.
March 6, 2015 at 11:08 am
The problem with that idea would be that there are enough dollars or Euros to allow people to buy stuff in foreign currency.
The problem is being created by the exact opposite.
There are few dollars in the market – certainly not enough to drive the country.
Where would your jose average get his hands on foreign currency to buy things?
March 6, 2015 at 1:26 pm
Island Canuck,
1. At 89 000 000 000 000 000 000 000 00 % hyperiinflation (the peak in Nov 2008 in Zimbabwe) your local currency is actually worthless. Venezuela is far from that level and far from spontaneous Dollarization – at the moment.
2. When your local currency is actually worthless you HAVE TO deal in USD, Brazilian Reais, Colombian Pesos, Argentinian Pesos, Euros, Pounds, etc. There is no other way to avoid complete anarchy and despair/disaster.
You are correct that – at the moment – there are not enough USD to replace the entire Vz money supply in a way the economy could function.
If hyperinflation were to get to the levels Zimbabwe experienced, a lot more Colombian Pesos would circulate in Vz.
The Zim economy is very small: USD 5 Billion at the bottom in Nov 2008.
So, maybe you are right: spontaneous Dollarization would only be possible if a combination of enough (a great deal more) Colombian Pesos and USD were circulating in the economy. Over a period of 10 years that is reasonably possible. Zim was in hyperinflation for 14 years.
Zimbabwe, having a border with South Africa, had a big economy which supplied food and whatever they needed right next to them. SA supermarkets had stores in Zim at the time. So, closeness to SA and the 14 years of hyperinflation plus the extreme levels of hyperinflation made spontaneous Dollarization relatively easy over there.
March 6, 2015 at 1:36 pm
Zimbabwe today uses more than 5 currencies as official: USD, SA Rand, Euro, Botswana Pula, British Pound at the start in 2008. Later on they added more, one being the Chinese Yuan.
March 6, 2015 at 10:28 pm
Smith, “spontaneous dollarization” is a great term to explain the inevitable next stage It happened in Argentina, Uruguay and Brasil a couple of decades ago when they experienced their periods of high inflation.
What I don’t understand is how could there still be a rate of exchange quoted in Dollar Today.
In order to be a market there has to be buyers and sellers, WHO IS BUYING BOLIVARS?
In the stock market when the price of a stock falls and everybody is selling they suspend transactions on that stock,
If you are an exchange house in Colombia would you take any amount of Bolivars for real dollars? 280, 400, 800 …. or any amount, what do you do with the bolivares, buy toilet paper?
March 7, 2015 at 8:57 am
My guess is that the connected gangsters buy the bolivars. If I get a subsidized dollar from the government (to buy medicine, let’s say). I could get that dollar for 6.30 BsF and sell it in Cúcuta for 300BsF. A profit of what? 4600%? I’ll let the economist here figure that one out but seems like a tidy business to me. As for the medicine, I will call my agent in Germany and tell him to send me an empty container of (wink, wink!) medicine. If some inspector asks, the medicine sold instantly as it arrived to the shelves. They can probably provide receipts too. If someone in Germany inspects, there has been some mix-up.
March 7, 2015 at 8:52 am
Roberto, When there is no foreign-exchange rate for the Bolivar, it will stop having any real value at all. No foreign exchange rate equals zero real value for the Bolivar or any currency.
Who buys Bolivars? This is what everyone eventually does during hyperinflation: http://www.jsd-africa.com/Jsda/V12No6_Fall2010_B/PDF/The%20Politics%20of%20Money%20Burning%20and%20Foreign%20Currency%20Exchange.pdf
The stock exchange can halt the trade in the falling stock because it only trades on that stock exchange. That is not the case with currencies where parallel markets always exist when there is a profit to be made.
March 7, 2015 at 9:08 am
Everyone needs Bolivars. I change some periodically for my expenses when I go there. Some peopleneed them to ask for official dollars and pay for them, others to pay taxes. There are too many reasons, but not enough to supply what is needed.
March 7, 2015 at 1:07 pm
Here is the best article about what happened in Zimbabwe written on the last day of hyperinflation:
http://www.thezimbabwean.co/business/mining/16506/demystifying-the-burning-process.html
March 6, 2015 at 9:05 am
Uh, so, like, what now? You cannot NOT sell foreign currency to the business community. The whole economy would collapse in a few weeks. So now what…?
March 6, 2015 at 6:07 am
Miguel,
Two years since Hugo’s death. How long can he hang on?
Joe McEvoy
March 6, 2015 at 5:13 am
Does anybody know why The BC reserves increased by almost 2 bi this week. China´s loan, Dominican republic and citgo bonds were already included before this week. Citgo was the last one and was like 2 weeks ago.
March 6, 2015 at 8:49 am
Perhaps they did something with the gold reserves?
http://hoyennoticias.com.ve/nelson-bocaranda-lo-revela-en-sus-runrunes-guisos-dorados/
March 6, 2015 at 9:10 am
I thought so but to me it looks like counting the same assets twice.
March 6, 2015 at 2:19 am
You are right, Miguel, but this won’t change, I think, as long as the opposition or some part of it eloquently explains why.
But they have no courage to say so. Capriles will keep talking about how bad devaluations are and that we shouldn’t be sending oil to Cuba for anything but market prices and that is all true but that all fails the point.
Nobody wants to denounce openly about the arbitrage mafia.
They should focus on that: the arbitrage mafia and how every single system Chavismo implements is just designed to keep their top brass rich.
March 6, 2015 at 6:40 am
It’s a very tempting argument you make but I stumbled on the word “just.” The currency control regimen also was designed to limit capital flight and allow the importation of staple foods, medicine and capital goods at subsidized prices. According to the UN food consumption went up dramatically and Venezuela became a country with less inequality than many others. During the global economic collapse Venezuela maintained progress while real hunger became a reality for millions of citizens in First World countries. Sure, Venezuela has all that oil and these gains were made possible by it. Yet we know that oil wealth is a curse too and that reality is being played out right now.
IMO a major failing has been that Venezuela did not develop sufficiently in agriculture, industry and dare I say ethics.
To honest people in the opposition I dare them to come up with a plan to have full shelves in the stores and do that not by price rationing but by putting more on the shelves and continue rolling back poverty, to recuperate ground that’s been lost over the past couple of years.
You might know that I recently spent three months in your country. This was not some Solidarity Tour, I mainly stayed with working class and lower middle class relatives and friends, not particularly politically involved. I saw some things that Northerners like me are not used to, like a father having to find a piece of medical equipment to bring to a hospital so they could properly treat his kid, armed FANB soldiers inside a Wallmart type store and brazen cops shaking me down. This kind of stuff going on while people on both sides of the divide are looting and stealing the country blind is outrageous. Thing is people not being able to get enough nutritious food, underdevelopment, shortages of human solidarity are not Chavista inventions and seem to be features of the oil curse.
How to break the oil curse – will it take the return of The Man Who Walked On Water?
March 6, 2015 at 9:49 am
You don’t need price controls to subsidize food imports.
March 6, 2015 at 10:03 am
Sorry, that should read: “You don’t need exchange controls to subsidize food imports.”
March 6, 2015 at 2:01 pm
During the global economic collapse Venezuela maintained progress while real hunger became a reality for millions of citizens in First World countries.
For succinct statements on overall “progress” in Venezuela during 16 years of Chavismo, I suggest you consult Devil’s Excrement: Killer Facts About Chavismo In 140 Characters. Also note that the stats tend to be from 2011-2012, before the collapse in oil prices. That is, the comparison of Venezuela to the rest of Latin America will be even worse for Chavismo with more current data.
Food stamps are an example of how lower income people can get cheaper access to food without all the corruption inherent in exchange rate arbitrage.
Ciao.
March 6, 2015 at 4:36 pm
This is my second attempt at reply.
I have often wondered why ( to the best of my knowledge), no one important in Venezuelan politics has proposed that all food be bought and sold at free market prices which would incentivise Venezuelan agriculture and agro industry – be it private, government or communal/cooperative , possibly with directed assistance from the government. In the US we subsidize poor people’s food purchases through food stamps, various negative income tax payments, unemployment insurance and so forth -,programs that famously reach our 47% “Lucky Ducky” population (including me). I agree with many who say these programs are too stingy and do not reach all who need them but we don’t have 1/3 of staple food items being smuggled into Canada and Mexico either. Could it be that in Venezuela honchos politically affiliated on both sides are neck deep in smuggling or is it just a Venezuelan thing that I just can’t understand?
March 6, 2015 at 5:16 pm
Chavez introduced the current model of price controls. Most of the opposition opposes price controls, they have failed over and over in Venezuela. Chavez’s original coup was agaisnt markets and so called “liberal” economics, which I think is just common sense economics and icentive based economics.In the 90’s there were direct subsidies. The military controls the smuggling, I dont see how there are “sides” as the military is behind Chavismo.
March 6, 2015 at 2:23 pm
Eugene, the patient is too far gone for full shelves. If i were Maduro I would resign and move to Havana. But whoever replaces him will need to introduce the dreaded “Libreta de Racionamiento” we have had in Cuba (I assume that being a communist you know how that works?).
March 6, 2015 at 4:52 pm
I replied earlier on your interesting blog because for some technical reasons that I don’t understand this blog wouldn’t do it but it appears the glitch has been fixed.
I am an ex small c communist who believes in God and so by definition I can’t be a Marxist but I am not a rabidly “anti” “ex” so while you mischaracterize me you don’t quite insult me.
My country had a flawed but effective food rationing system that made sure that soldiers and war production workers ate. A similar system was in effect in Great Britain till around 1960.
So, rationing food is not automatically evil. It seems to have worked fairly well in Cuba till 1990 or so.
I know more about Venezuela than 99% of my compatriots but I don’t call myself an expert. If you want my opinion I doubt that many Venezuelans would accept such a system.
March 8, 2015 at 12:10 pm
I answered your comment on my blog. Rationing didn’t work in Cuba. Communist party and secret service big wigs had their own special food delivery service. They ate well as the rest of us had to risk the black market and lived as skinny poorly dressed slaves of the “dictatorship of the proletariate”. What Marx didn’t tell you was that “proletariate” means a small group of very cruel and arrogant communists. Venezuelans are now learning the ugly reality hiding behind those fancy Marxist-Leninist slogans.
March 9, 2015 at 12:58 pm
Roberto Ampuero fled Chile for East Germany in the wake of the coup against Allende, a consequence of his being a member of Juventud Comunista. While a student in East Germany he fell in love with a Cuban. They married and moved to Cuba. As his wife was the daughter of a high-ranking member of the Nomenklatura, they lived a very comfortable life.
Over time he saw more and more that he didn’t like about Cuba’s totalitarian system. His wife was quite comfortable with their lifestyle. They separated- a separation for ideological reasons. Divorce followed. Roberto Ampuero did not eat as well after he was separated from his Nomenklatura in-laws. As in Animal Farm, some are more equal than others.
Roberto Ampuero was eventually able to finagle a trip to East Germany. He eventually returned to Chile and the West, and has been a successful author. I highly recommend his book
Nuestros años Verde Olivo [NOOK Book] , which you can purchase as an e-book from Barnes and Noble for only $2,99.