Archive for December 31st, 2013

Venezuelan Central Bank Joins The Dark Side

December 31, 2013


While not wholly unexpected, yesterday’s bimonthly inflation report was a disgrace, which signals a change in the institutionality that the Venezuela Central Bank had managed to maintain during the last fifteen years under Chavismo. In some sense, the surprise was that it did not happen before, that for better or for worse, the technical side of the Central Bank had managed to prevail somehow in demanding that the data be fudged as little as possible.

And the data for November for November and December was a terrible 4.8% for Venezuela’s CPI in November and a “projected” 2.2% for December that the monetary authority takes to signal a change in direction and a slowing of inflation. Never mind the dreadful 7.5% for Food and Beverages in November, nor the 56% inflation for the year, nor the hiding of the fact (in a graph in page 2) that the scarcity index was at the high for the year.

But whether the data is believable or not is irrelevant. It is the language of the communique, the irresponsibility of it all that is simply unbelievable. The institution most responsible for the current levels, via its lonas to PDVSA, of inflation passes the buck, blaming the economic war and politics and failing to assume its mandate as being responsible for controlling prices.At the same time, it sucks up to Maduro, by suggesting that the supposed improvement in the numebrs for Decemebr is thanks to the actions of the Government on Commerce.

But it is the ideology and the politics of the language that is shameful, that reduces the Central Bank to a tool of the Government, as the Central Bank suggests that some nebulous sectors of the opposition took advantage of Chavez’ death to “artificially deteriorate economic variables” as an “authentic economic war” was waged on the population, which was only stopped by the “Government’s offensive” in November.

But there is no mention of the irresponsible lending to PDVSA and other Government institutions, nor of the dramatic and doubly irresponsible growth in monetary liquidity, nor of the continuous deficit spending by the Government, nor of the decimation of the productive sector and the total failure of the Government in its attempt to substitute it.

The whole report is simply a disgrace, a shameful yielding to politics and ideology and a refusal to admit the crass errors of the mediocre economists (and other strange professions) that today occupy the Board of the Venezuelan Central Bank.

It was the day that the Central Bank joined the dark side, after fifteen years of attempting to avoid submitting to the political pressures of Hugo Chávez, they now become servile to his fake substitute.

Who will the blame when the numbers deteriorate once again in 2014 in violation of the mandate given to them by the Constitution? How will they hide the upcoming scarcity and even higher levels of inflation? Or will they also blame the coming devaluation on these mysterious forces that are nowhere but in the midst of the Government and the sadly dependent Central Bank?

Another tragedy in Venezuelan history and a disgraceful chapter in the history of what was once a very professional Central Bank.

Added: BTW, Maduro was almost right on the magnitude of inflation, he suggested -5%, but he got the sign wrong, the magnitude almost right. Shows how clueless he is.