Archive for February 8th, 2007

Interesting day in economic news

February 8, 2007

—Government and AES agree on price for Electricidad de Caracas: Interesting show, the revolutionary Government pays above market price, while the capitalists say they lost money, but their investment in Venezuela was “the best one they ever made anywhere in the world”. The truth is that the Government will pay US$ 900 million plus the company will pay a dividend of some US$ 120 million before the transfer. Given that AES sold EDC’s Colombian affiliates, it’s stake in CANTV and it’s affiliate in El Salvador, they probably came out even in the end. The Government paid top dollar, expect the same in CANTV, above Slim’s price.

—Economist Pedro Palma, says that about 20% of imports are made via the parallel market, not far from our own estimate of 25%, but certainly not close to the Government’s mythical 5%.

—Agricultural Ministry says production went down 7% in 2006. Jeez, I wonder whatever happened to all that land taken over by the Government in full production. Could it possibly be that nothing has been done with it? Recall the infamous Land Bill has been in effect for six long years, but it appears to have had no effect. You can’t blame Chavez for the failure of this program, like everything else that does not work, but another Chavez, his brother Adan, was in charge of the Land Institute for two years. In the end you can blame Chavez, just a different one.

—Moody’s says PDVSA is “at risk”. I wonder why?

—Central Bank says 26.1 % of the items in the CPI are scarce, up from December. I wonder what happened to Sunday’s statements that nothing was scarce?

—One month after the new Cabinet was sworn in, we still have nothing but a vague anti-inflationary plan. The Minister of Finance said the goal is to have inflation close at 10% for the end of the year. Given that January inflation was 2% and inflation has been accelerating, this is something out of Fantasia.

There was a still secret agreement between supermarkets and the Government and reportedly, meat will reappear at supermarkets tomorrow. there goes my diet!

—In a puzzling move, the Board of the Central Bank, increased the “optimum” level of international reserves to US$ 30 billion. This means that the autocrat Dicator will be violating the law if he asks for the transfer of US$ 8.7 billion from the international reserves to the development fund Fonden. With current level of reserves the law would only allow a transfer of less than US$ 5 billion or so. Puzzling because they are asking for a fight with this, an interesting one at that.