Wednesday, December 26, 2007

Those who don't learn from history are... 

Right now Venezuela is through a combination of smart policies (spelled O-P-E-C) and luck (spelled I-R-A-Q enjoying a big oil boom. A very big one in fact.

So big that it rivals the one from the 1970s.

Of course, we know how the one from the 1970s eventually came to an end and the country didn't have much to show for it. A big part of the reason why it was left with little more than memories was explained by Fernando Coronil in "The Magical State" when he stated (p. 248):

During this period, the explosive expansion of circulating money created opportunities for profit which did not depend on productive investments or on efforts to increase productivity of labor. High profits could be reaped through a variety of speculative ventures, in real estate, commerce, and construction. Local capital was particularly attracted to those areas in which it could quickly capture a portion of the "circulante" - the money in circulation. Between 1974 and 1976 the rate of private investment in industry actually declined and reached the 1972 level until 1976. The expansion of production that did occur during this period (11 percent in the manufacturing sector) resulted from the increased utilization of installed capacity. Commerce on the other hand, expanded at a rate of 36.9 percent, reflecting a significant rise in imports. The boom, far from stimulating private investment in industry, created conditions which reinforced the traditional orientation of capital toward investments in areas leading to large and immediate returns.

Well of course, 2007 is not 1974 ... or is it? ... and Hugo Chavez is not Carlos Andres Perez ... or is he?

Lets take a look at some numbers from the current oil boom:

Yes, manufacturing is growing, but it is now growing less than 10%. By contrast, commerce is booming at well over 25%. No wonder one sees new shopping malls all over Venezuela but few new factories.

And while non-oil exports are going nowhere (so much for "sowing the oil") imports are increasing at simply spectacular rates of between 40 and 50% per year.

Anything look familiar here? I think so. Eerily familiar in fact.


This page is powered by Blogger. Isn't yours?