Chavez’ Economic non-plan

September 21, 2009


After wondering, arguing, discussing and waiting, we finally have Chavez’ Economic plan…only six months late

or do we…

Let’s see:

There will be 40 measures, but Chavez could not keep his own secret and leaked some of them, among them:

Already implemented: Six Ministers of the Cabinet have received an upgrade and have become Vice-Presidents, so that in Chavez’ words “We can have a more political Cabinet than administrative one”

Is he kidding us? Does he think that 2,000 Barrio Adentro modules have no Doctor because of political rather than administrative matters? And on top of that the people are the same ones that have been incapable of doing anything!

But let’s not get hung up on this, after all, this is the “easy” measure. already decreed, sworn in, more assistants, higher salaries and the like. Meaningless…

The next measure:

An employment program..

Jeez, Chavez got frustrated in 2004 with about eight employemnet programs that never panned out, I guess he is willing to give a try to another failure.


We will sell a bond to lower the lowered “parallel” market

I guess the most significant part of this, was that Chavez not only acknowledged the existence of that “other” market (which is legal), but that he admitted that the Government had lowered it. According to El Nacional, the Government injected US$ 300 million this week, I hear it was US$ 350 million. It does not matter, that rate is simply not sustainable, either you give CADIVI money or the swap market. Both it is simply not possible.

As to the bond, most previous issues have been atomized in such fashion that they have only lowered the swap rate “psychologically” up to the date of the bond allocation. And given international markets, US$ 3-4 billion may give markets indigestion.

In any case, issuing a bond is not a plan, it is like giving aspirin to someone that has swine flu. Monetary liquidity stands at US$ 103 billion, reserves at US$ 33 billion. See the problem,? Liquidity keeps going up, reserves stay around US$ 30 billion. What happens when liquidity reaches US$ 200 billion, or US$ 300 billion. I don’t know when this bubble explodes, but it will and the result will be ugly, very ugly. While it doesn’t, inflation is at 30%, I wonder if anyone has explained to Hugo what this mean to the “people”.


CADIVI will give more money to importers.

Jeez, this is like the doctors in Barrio Adentro, we have been hearing about CADIVI giving more money to importers for months, but nothing happens. Is this an administrative or a political decision?

And the final part of the “plan” that we know about is that the “Misiones” will be revived. Which actually depends more on the “administrative” than on the “political” Cabinet. But Chavez seems to think the second one is more important.

In the end, this is an economic non-plan. These are so far just a bunch of measures, all disjoint, aimed at trying to reduce some distortions in the economy, but they are not part of a plan that attacks the problems of the distortions in the Venezuelan economy.

In the end, it is all political for Chavez. Unfortunately for him, if oil stays at current levels, a year from now, none of these “measures” would make a difference. On the contrary, these are all superficial and temporary measures whose effects will dissipate even before the end of 2009.

(To the Chavez cheerleaders I tell them: Try living on minimum wage with 30% inflation and tell me the Venezuelan economy is doing fine. As for oil, the chart looks positive, it seems ready to break 75 bucks, if it does not, watch out Hugo!!)

10 Responses to “Chavez’ Economic non-plan”

  1. Euro Andres Says:

    My friend, you got the whole point!
    The objective of these measures is to content the damage on the economy until oil rises!
    Thats all they are waiting… They are betting on it

  2. Roger Says:

    To me the plan is to provide Economic Stimulus to countries or the rulers that can advance the Chavez agenda! Plus a few commisions Eh? Much I think is smoke to cover up things closer to home. This is a big election year in LatAm and we can be sure that the malatin business is doing well.
    Cuban Doctors: Castro is saying ” How many more doctor do you want at the usual price per month?” and Chavez is still paying for the ones that are now working in Colombia and married to hot Meztisas!
    The only thing Venezuelans get from all this is more bull shit.

  3. moctavio Says:

    The problem is that the rate can not be quoted publicly, that is what is illegal, but the market is legal and any broker can the the “swap” (permuta) for you.

  4. mol198 Says:

    talk about confusing!I lived there several years and I thought the other market was illegal. So what is all the hush hush about who you can and cannot trade with? The reason I have not sold a property is because I do not trust a broker- if it’s illegal- there is nothing to stop him from taking my money and saying he never got it. ARE THE BROKERS REGULATED NOW THEN? DO THEY NOW ADVERTISE- or do I have to keep using those dodgy people who ALWAYS use iffy citibank accounts in the US. The ones who go walk about when they agree a price- the market jumps the wrong way for them and they sorry I couldn’t come back to you- but when it goes against me – they always say sorry you have to pay up! I will applaud you if you aprove this note- thank you and you know I support you 🙂

  5. maria gonzalez Says:

    Ok my bad, thanks for the clarification.

  6. Mamarracho Says:

    The slew of VCs is old stuff. If I remember correctly it was one of the proposals voted down in the constitutional reform Chavez lost and subsequently shoved down our throats anyway.

  7. Roberto Says:

    What has been deemed “illegal” is to quote the rate, not the existence of the market per se

  8. maria gonzalez Says:


    I think you meant to say illegal in the following sentence.

    I guess the most significant part of this, was that Chavez not only acknowledged the existence of that “other” market (which is legal),

    This can be important for new readers.

  9. Javier Says:

    To me excess liquidity is absorved by inflation along the lines of the Fisher Principle where MV = PT . The (M)oney in circulation times it’s (V)elocity = (P)rice level * (T)ransactions . If we think V is constant as well as the amount of trade or transactions in the economy the formula becomes M = P So the relation to watch is the rate of change in Money in circulation and the inflation rate. Fisher’s formula also explains why prices go up when there is an excess of money. Velocity being constant then it’s like the formula being M = P*T When you elevate the Money supply and the amount of trade or Supply for goods is also almost constant becase you can not change it significantly from one period to another the only way to equalize the equation is by letting inflation run so M = P so the prices for the goods go up to compensate the rise in Money supply

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