By now, Venezuelan Government authorities have become extremely arrogant and appear to be losing perspective about what Venezuela is in the grand scheme of things. High oil prices have become like a powerful aphrodisiac or expensive liquor and they are simply drunk, hallucinating with their empty and idiotic ideas, while trying to gain the political respect of other leftwing countries in the region. I can imagine the laughs in private of those same foreign Governments, when they talk about what a fool the Venezuelan leader and his collaborators have become. They are the noveau rich in the neighborhood that thinks that because they have a Porsche and they neighbor a Honda, they are richer, so why not help them? The truth is the neighbor has a Honda, because he understands the fragility of his wealth, while the man with the Porsche thinks his car proves he is smart.
Thus, Venezuela announces that it will send Uruguay 43,800 barrels of oil and derivatives a day, with 15 year financing and 2% interest. On top of that, Venezuela will give the poor people of Uruguay a two year grace period in payments, much like the agreement with Cuba or should I say with Dictator Fidel Castro. And I can hear the Uruguayans laughing all the way to the bank at the naiveté of our esteemed President, who is apparently so ignorant, that he does not realize that Uruguay has a much better standard of living than our poor and beleaguered country. In fact, Uruguay’s standard of living as measured by GDP per capita is not only bigger than ours, but it is almost three times larger than Venezuela’s. And three times larger when you are talking about GDP per capita is simply huge. It is, for example, the same ratio that exists between Canada (US$ 30000 per capita) and Chile (US$ 10,000) per capita. Or the ratio between the US (US$ 37,800 per capita and Uruguay (US$ 12,600).
But these guys are so intoxicated with what they believe to be the richness of Venezuela, that they will now subsidize Uruguay, buy US$ 500 million of Argentina’s debt (another country with a much higher standard of living than Venezuela, close to Uruguay’s) and continue to ship 50,000 barrels of oil a day to Cuba, all of them free. And they not only show their ignorance with their actions, but they ratify it with words, as exemplified by the Minister of Energy Rafael Ramirez who fills his mouth saying that the agreement with Uruguay will not affect the cash flow of PDVSA, because he states “it is only a marginal volume of barrels for the company” . Yes, it is only 1.65% of PDVSA’s production, but another 2% is being shipped to Cuba under similar terms, making it 3.65% altogether. And we don’t know how many more agreements they will sign in the next few months.
This in a country that just devalued its currency by 12% in order to cover the fiscal deficit for 2005, once again directly affecting the purchasing power of the poor, who barely have enough money to eat. As usual, it is only politics that matters, whether nationally or internationally. We need to spend, so let’s devalue, we are rich, so at some point we will not have to devalue under this strange economic concept these ignorants have. It is truly a new form of Voodoo economics.
And Government figures continue vomiting their ignorance, as in the case of the mediocre Mathematician-turned-Minister-of-Finance Nelson Merentes, who explained to the country (the world was not listening, of course) that the devaluation yesterday” is part of a plan being advanced by the Government to obtain larger economic growth and more “social inclusion”. He added: “If we want to have a strong Bolivar in 2007, we have to take measures on 2006-2005; this is one of those progressive measures to be able to obtain growth and strengthen the Bolivar starting in 2007”.
I hope not too many economists are reading this and wonder what it was they studied at the University. This is the first time I have heard that devaluing allows for economic growth. Hey Nelson! If that is true, why didn’t you devalue by 50%? Imagine the growth it would have generated!
But these are the same promises that were made by exactly this same economic team in February of 2002, when the Government was forced to devalue the currency sharply, after using these innovative neo-voodooian economic concepts which sprout from the brains of the Giordani-Merentes team. Or is it simply ignorance?