Friday, October 19, 2007

Friends don't let friends drive drunk 

Some would say that this blog, or others who have supported many of the changes President Chavez has made in Venezuela, should avoid being critical of the Venezuelan government and its policies.

I would say the opposite. Those who support the tremendous accomplishments of the Chavez government over the past eight years need stand against policies which clearly put at risk all of those accomplishments.

First and foremost among the policies that risk undermining Chavez's accomplishments is that of keeping the Venezuelan currency, the Bolivar, way overvalued. This overvaluation of the Bolivar makes Venezuelan exports to other countries very expensive, so no one buys them, while making imports from other countries into Venezuela very cheap, so they get snapped up by Venezuelan consumers. Hence not only does this overvaluation of the currency undermine Venezuelan exports it undermines Venezuelan industry in its own markets.

There is really nothing contraversial about this. Even pro-Chavez economists such as Mark Weisbrot of the Center for Economic and Policy research can clearly see it. From a report this summer on the Venezuelan economy we have this (highlighting by OW):

"An overvalued currency discourages the development of non-oil sectors, especially manufacturing."

It really doesn't get much clearer than that. Yet from the Venezuelan finance minister yesterday we get this:

There will not be a devaluation because the economy does not need it. There is no economic need for a devaluation, which would only be a source of increased inflation and would only benefit particular interests.

I guess if you plan to live off of nothing but oil there is no need to try to build up your manufacturing base, reduce imports, and maybe even export something apart from oil. Yet right now, even with near record oil prices, oil earnings will barely be $2,000 per person this year in Venezuela - hardly enough to provide for a decent standard of living.

In reality, no one can seriously argue that Venezuela can get where it wants to go just by exporting oil. Yet its current economic policies are preventing it from developing the manufacturing industry it needs.

The more time that such self-defeating policies are pursued the less time and less chance of success a true development policy will have. This doesn't bode well for conserving the accomplishments of the past years, much less building on them.

Maybe Chavez and his ministers undestandably don't hear these things when they are said by people who wish them ill. But they need to hear them when said by people who have always wished them well. And people who understand these shortcomings need to speak out - friends of Venezuela's progress don't stand idley by while its economy hurt and an opening is given for the reactionaries to make a comeback.


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