Archive for September 17th, 2013

The Right Diagnosis For Venezuela, The Wrong Hands to Fix Things.

September 17, 2013

fixit

Suppose I wrote in this blog the following about the Venezuelan economy:

“The problems to be solved (in Venezuela) are related to endemic inflation and a productive system that has not responded to the stimulus of government spending, while rentism has deepened the country’s dependence on oil. It can be characterized by inflation above thousand percentage points in the 14-year rule of Chavismo, with food prices rising 1760% in the same period, the highest figure in all of Latin America, with clear signs of acceleration, as May inflation reached 6%, highest in a month, than in a full  year anywhere in Latin America. Production has only grown by 10% in 14 years, the lowest in the region, except for Haiti. The rate of industrialization in this government continued to decline, reaching 13.9% last year, when it had reached 20% in 1986, and non-oil exports went from being 40% of the total, to only 4% in 14 years. The fiscal situation is severe, reaching 15% of GDP, with problems to finance social spending, with oil production in a very problematic situation, despite high oil prices, and the Government has resorted to the Central Bank printing money in order to finance itself.

The causes of the situation have to do with increasing the size of the centralized state inherited from the Fourth Republic, which was unable be transformed from the top and has absorbed in its corruption a large fraction of the Government’s execution. In addition, social spending and production incentives have become inflation, not production, in the presence of a regime and import policies that have harmed the development of production, especially by the issuance of paper money by the Venezuelan Central Bank.”

And suppose then that among the solutions I proposed here that the Government talk to the productive sector to establish clear rules, remove the Board of the Central Bank, reform the tax system, create a monetary stabilization fund, implement a transition plan so that everything that is imported is made in Venezuela and within seven months allow the currency to float freely.

I am sure that more than one Chavista would read that and accuse me of being a capitalist, an ignorant and who knows what else. Because anyone that writes the above is simply saying that Chavismo has failed miserably. No?

Right diagnosis. Wrong hands to fix it.

Except that I did not write that. With small changes, just to make a point, the above was written by a group of Bolivarian professionals, under the title ¿Que Hacer?. led by former Minister of Planning Felipe Perez and contained in the fourth version of a very long document, which is exquisite in its diagnoses of the economic failure of Chavismo, but, in my opinion, fails miserably on the solutions, as it proposes as a solution to the execution problem of the Government  to turn control to communal power.

I had read the first revision a few months ago, but this one is much more detailed. What is shows is that someone that knows economics knows how screwed up the last fourteen years have been. What I find amazing is that in the face of that critique, anyone thinks that Chavismo deserves another chance to screw up. So, if you speak Spanish and have patience go read it, the details on the diagnoses of the economic problems are pretty, pretty good.

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