Thursday, March 08, 2007

Boom pains 

If you listen to the opposition you know that the Venezuelan economy is going to hell. And they are right. There have been sporadic shortages of food in supermarkets. You have to wait from six months to a year to buy a car. And apparently there are chronic power outages in some parts of Venezuela. What person would possibly want to live in such a country?

Actually, most Venezuelans would. The reason being that these problems aren’t the result of true shortages or declines in goods available. Rather they result from Venezuelans having their standard of living go way up (doubling for most people!) and their level of consumption going way up with it.

So the reason there are “shortages” is that consumption is booming so fast supply is having a hard time keeping up with demand. That is what happens when you have record automobile sales the last two years running and then have the sales rocketing up another 50% the first two months of this year. It is also what happens when food consumption goes up 9% last year and is apparently going up another 10% this year.

And lest you think this is only happening with cars and food it is actually breaking out all over. For example, in today’s Ultimas Noticias it was reported how the electric distribution system in western Venezuela is not doing well. Apparently blackouts and other service disruptions are becoming more frequent. So do we have have another example of the Chavez government running the economy into the ground?

Sort of, in the same way as with automobiles and food. See, from the article it turns out that the culprit behind the blackouts is booming electricity consumption. Up until 2003 electric consumption in Venezuela has been growing at a “normal” rate of 4% which the electric grid can keep up with and ensure a reliable supply. Unfortunately for the poor electric companies Chavez has the economy on such a tear that electric consumption has been growing in Venezuela at the rate of 10% per year for the past 4 years. Yes, you read correctly – electric consumption has been growing 10% per year. I guess that must be the result of all the new refridgerators, washing machines, dryers, microwave ovens, TVs and other appliances that Venezuelans are buying.

So you see, what there are in Venezuela aren’t real problems or real shortages – what there are is growing pains resulting from extremely rapid growth. “Boom pains” if you will.

By the way, there is another important twist to all this that bears paying attention to. It has been a common theme parroted by opposition apologists that whatever good is happening with the Venezuelan has nothing to do with Chavez – it is all the result of oil prices having gone up. Funny thing though, oil prices have gone down significantly since last summer. Yet the Venezuelan economy booms on.

What is that about? I guess maybe it isn’t all about oil. Maybe its Chaveznomics!


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