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Message: Sounds like Hugs is on big trouble!

Sounds like Hugs is on big trouble!

posted on Jun 12, 2008 12:49PM

Thursday, June 12, 2008


Economic news
One wonderful thing about Venezuela lately is that I do not need to write much on economics. After all it has become quite clear that things are not going well, and that it is plastered on all papers around the world, thus I need not to convince anyone.

Doubt me?

Should I mention that outside of oil industry private investment in Venezuela is lower than what some Central American countries receive? That the perception of mess, disorder and insecurity coupled to corruption had made Venezuela as one of the least desirable places where to invest?

And what about the increasing cost of doing business in Venezuela? Should we include inflation as a business cost? Heck, in May it was a stunning 3.2% in spite of an inflation control agenda set up earlier this year which is on its way to halve the growth rate. But when you look at the numbers from May 2007 to May 2008 we are told, with the already "improved" numbers of the Central Bank, that the wealthier part of the country suffered a total inflation of 29.6% and that the poorer part of the country suffered an inflation of 35.9%. That is right, in this socialistic wonderful revolution the poor suffer more than the rich. You gotta love the irony! And how come? Because food inflation was 47.3% in one year and of course lower incomes are the ones who spend relatively the most on food. Chavismo has dilapidated our oil fortune in massive food plans like Mercal and PDVAL, in food subsidies, in massive importations, and all for nothing.

No wonder that last night Chavez did again a marathon cadena to offer yet again a new economical plan. The only positive highlight would be a flexibilization of CADIVI requirements for some people (which probably will fire up corruption). The other alleged highlight was the elimination of the business transaction tax, but that effect has already been integrated in inflation and folks are not going to lower prices for that, much less after the disastrous May number. Unfortunately all the negatives remained, such as only helping business linked with the state: the same cronies who have been sucking as leeches from the state for the past 3 years will be the ones allowed in and we have seen how efficient they were, at leeching, not producing. Neither were words to offer people to have a little bit more security with their property. Electoral band aids all, and of dubious value. Expect no improvement from this plan except perhaps a little bit more stuff on the shelves, but at higher prices, and only until November....

No, the reasons why the economy keeps floundering are mismanagement and total lack of understanding of which are the factors that move the economy of a country. For that you can listen to Miguel's interview at NPR which will tell you, through the example of the stupid gasoline subsidy, why things are not going well in Venezuela, and why if if it were not for a barrel at 130 we would have collapsed long ago. If the government would have at least the courage the sell gas at cost, then maybe we would have a more realistic price structure and a better chance to bring down inflation at more reasonable figures.

All in all, do I need to translate this Weil cartoon today?
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