Saturday, January 09, 2010

Give credit where credit is due. 

It's great to have Chavez read my blog and agree with what I've been saying about Venezuela's currency for the past few years.

But damn, couldn't he at least give me some credit?


It is awesome to hear Chavez speaking like this today. Everything he said here is true:

Well, I would only say oil isn't necessarily a curse for Venezuela - it could be something that would benefit the country tremendously. But it is a curse if used improperly and Venezuelans, including the Chavez government, have almost always used it improperly.

Anyways, as awesome as it is to hear these very true and very necessary words coming from his mouth the question still does remain - why wasn't he saying this 6 months ago, a year ago, three years ago, ten years ago? It was just as true then as it is now. And he has definitely acted for the past several years as if he didn't know these things or they weren't true.

I won't speculate on exactly why the change has come - there could be many reasons. But I can only hope he sincerely believes all this and will continue to act upon it.

Here is another video of Chavez speaking (at the inauguration of some new subway stations on the number 3 line in Caracas - another very welcomed but very late development):

Here again, a lot of what he said was very accurate, though there were some things that were incorrect. Further, the incorrect statements along with the off the cuff nature of these comments make his statements not as coherent as they should be. I bet a lot of people who don't already understand these issues - which would be the vast majority of his audience - were more confused by this than educated.

That is why he and his government should have been saying the truth all along. Some of these points are complex, subtle and not easy to understand. It is only by thinking about them and hearing about them over an extended period of time that many people will understand them. Now, the Venezuelan government will have to deal with the fact that many/most Venezuelans don't understand these issues and think they just got screwed and will believe the stupidities now said by the opposition media and political leadership.

Finally, it was interesting to see the comments on the textile industry and how they need to build it up. Sadly, I actually was quite familiar with a small clothing factory in the Antimano section of Caracas that in 2001 had between 20 and 30 employees. The recent economic "boom" and overvaluation of the Bolivar wiped it out. When I was last there, in 2007, they were down to five employees, had sold off much of their machinery, and have probably long since sold off all their machinery and entirely closed down.

Unfortunatley, the government being very belated in recognizing this problem and doing something to fix it probably makes it way too late to help many manufacturers.


Friday, January 08, 2010

Great news or too little too late? 

I have to admit - I am stunned by the news. The Chavez administration, which has steadfastly refused to devalue the Bolivar against the dollar in spite of the absurd exchange rate totally screwing the economy finally devalued!!!!!!!

I was not expecting this at all. Everything I saw made me think they would take the existing exchange rate to the bitter end when things would go pop and the economy would implode.

Stunningly, they devalued, and in an election year.

I haven't had a chance to read much about this, to hear how they announced it, nor to get exact details on it so I don't want to say too much more right now. However, it is a dual exchange rate with a more favorable rate for key imports like food and machinery and a much lower rate for imports that really should be discouraged like cars, consumer electronics, and the like.

If this announcement had come in January 2007, when it should have come, I would be ecstatic.

At this late date I am not sure - the main idea behind devaluing is giving the government more money to invest in social programs and industry (and that money comes from private consumers having less for imported consumer goods) and make local industry more competitive so that it expands. I am definitely afraid that this is too little too late to accomplish those things but we'll look at that more closely in the days and weeks ahead.

I am also anxious to see how the government explains this to people given that for a long time they dismissed it as a stupid and bad idea.

Anyways, this certainly reminds me of the old adage - things tend to happen when you least expect them.


Tuesday, January 05, 2010

Once again, totally messed up priorities 

I have to say, it's bad enough industry in Venezuela is in decline and has been now for a year and a half with no relief in sight. It is bad enough that the government insists in keeping policies that make virtually any manufacturing in Venezuela uneconomical.

But there seems to be an almost irrational hatred for the manufacturing sector.

As has previously been discussed here the government has already ordered large scale reductions in output from the steel and aluminum industries in the east of the country due to the drought induced electric crisis. I have already criticized this as these cut backs on wealth generating sectors of the economy when there are non wealth generating sectors they could make cuts in is crazy.

However, it has now gotten worse.

In today's edition of Panorama we see confirmation that the government actually is willing to shut down all basic industry in the country.:

Sobre el ahorro de consumo en el sector público, Rodríguez declaró en un periódico nacional que “si tenemos que cerrar las empresas básicas de Guayana, porque se está secando el Guri, pues habrá que cerrarlas. Lo otro es dejar al resto del país sin electricidad, y eso no es posible”.

The energy minister says they'll entirely shut down the basic industries if they think the Guri might lose too much water.

Any rational government that was trying to have the country progress, if it thought that things were so bad it could come to that, would already have ordered all air conditioners in the country off (at least in all government offices, shopping malls, private offices, universities, etc), would order stores, restaurants, and malls to close completely for at least 3 days per week, would start turning off street lights, would have banned Christmas lighting, etc., etc. etc. (and WTF: why haven't the bingo parlors already been completely shut down until this crisis if over?????)

But instead of doing those things (and they look like they are already back tracking on the nothing of a sacrifice they asked of the malls) they are willing to take down a huge portion of what little industry the country has and wipe out hundreds of millions or even billions of dollars of wealth.

[As an aside - even their proposal that malls and other businesses can run normally if they get their own generators is crazy. What will power those generators? Oh, that is right, practically FREE gasoline and diesel from the Venezuelan government which in turn will lose the government yet more in revenues. Does anyone in the government even think about this?].

I really don't know what more to say about this insanity. There seems to be either one of two causes for this non-sense:

Either they just plain can't stand industry and want it wiped out.


Given a choice between - what is politically expedient in the short term by not imposing much sacrifice on the public but does greatly impact industry or leaving industry alone to keep producing but taking measures which the public will feel and which will annoy some people - they always choose the former.

Take which ever reason you like. They both suck and the government clearly has a really bad set of priorities.


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