So, Minister of Finance and former Vice-President for the Economy Nelson Merentes presented the budget yesterday in front of the National Assembly and made us all feel at ease, projecting inflation for 2014 at “only” (my words) 26-28%.
This is actually quite scary, because a year ago he was projecting 28.8% for 2013 ( including the decimal) and now it is almost 50% and in 2009 affable Nelson was projecting single digits by 2012, which he also had projected for 2011.
But the whole speech was quite disturbing, if only because Minister Merentes suggested that the Venezuelan economy faced three perturbations: inflation, shortages and the foreign exchange system.
Well, when you think about it, there is only one perturbation: The Chavista-Madurista Government that imposed the exchange controls that have led to shortages and spent and printed money, causing inflation.
That is a single explanation, a single perturbation. But quite disturbing.
But maybe you can add a second one: The fact that the Venezuelan economy has been mismanaged by non-economists like Nelson Merentes for too long.
Because nobody understood what he meant when he said that inflation is “out of range”. Venezuelan inflation has been “out of range” for too long due to irresponsible policies and Government officials. Inflation is what it is, it has no range, ask Mugabe. Venezuela has the second highest inflation in the world. At least five times the rate of any other Latin American country.
Maybe Minister Merentes should coldly think about the numbers he presented. He is a mathematician after all, he knows no economics, but he should be able to at least understand orders of magnitude, no? For example:
-He proposed a budget of Bs. 550.36 billion Bolivars, US$ 87.37 billion dollars at the official rate of exchange, a full 38.8% higher than that presented a year ago by his predecessor the non-economist Jorge Giordani. But wait! Before you think about that 38.8%, it turns out that since it was presented and up to October 2013, the same budget has been increased by 61%. Yeap! With two months to go the Chavez/Maduro Government has spent a full 61% more than was budgeted.
-And if you compare the 2014 budget to the 2010 budget, as presented originally, which is the only fair comparison, the 2010 budget was only 159.40 billion Bs., so that the 2014 budget is “only” 3.45 times the budget of only three years ago.
-And in his budget, Merentes proposed to issue debt in the amount of Bs. 112.7 billion in 2014, which is an amount almost identical to the projected income of the Government from oil, which will be, according to the same presentation Bs. 114.59 billion in 2014. Think about it, the Government will issue debt equal to the amount of money it will receive from oil. Talk about being irresponsible.
-And in 2013, up to today, monetary liquidity has increased by 35.5%, a huge (and inflationary!) number and that if it grows like it did last year in the last two months, it will end growing by at least 50% by December 31st. (This happens every year, a huge jump in M2 due to seasonality)
But despite all of the above, Merentes called for the need to “investigate” why inflation in Venezuela has been in double digits for thirty years in Venezuela.
There is nothing to investigate: Irresponsible Governments is the explanation. Period.
And despite all this, Merentes projects GDP will grow between 4% and 6% in 2014. Funny, last year he projected 6% for 2013 and we are unlikely to go over 2%.
And, yes, there will be no devaluation…
At this point, the fantasy was complete, I changed channels and turned to watch a more realistic movie about a Martian invasion.