Archive for January 15th, 2014

Maduro: Stay The Course!

January 15, 2014

smileWhat are these guys smiling at?

Lots of expectations today. Rumors of positive change. Bonds moving up. Maybe, just maybe, Maduro was about to change the course of the Bolivarian revolution. There was talk of a fairly competent oil manager becoming President of PDVSA. Of Ramirez moving to Finance, which would have been a bummer. Of Merentes being shipped back to the Central Bank. In the end, the last one was the only one that became true. Ramirez stays where he is and Merentes is replaced by Rodolfo Marco Torres. Pardon me, General Rodolfo Marco Torres.

As for devaluations and distortions in the economy, not much to report. Maduro did say that travelers will have to go to Sicad or better said, use the Sicad rate for their travels. But he did announce that Cadivi will be eliminated, which many interpreted as the elimination of Cadivi for the private sector, and the Government keeping the Bs. 6.3 per US$ rate to itself.

The path is clear: For the Government, extremely cheap dollars, for everyone else, not even Mastercard, only black market.

As For Minister Marco Torres. What can I say? He does have experience in the Government’s financial sector, but not the type I would boast about. When he was a Colonel, he was in Fonden (uups!), was Treasurer at a very touchy time (oh baby!) and then he was moved sideways to Banco de Venezuela and Minister for Public Banks (I think it happened in that specific order, but who cares, really?). Now he is moved to a new Joint Ministry of Finance AND Minister for Public Banks. The revolution has all these supermen with no training that can do the job or two or three people at once.

And yes, there were other announcements, like they are going to go after speculators and crooks. (Seriously!) Or that they will merge the Superintendecy fo Price Controls and the Consumer Protection agency. (Saman is out once again!).

And yes, Nelson Merentes returns to the Venezuelan Central Bank, where he expanded monetary liquidity at such high pace, that inflation is now in the mid fifties. I guess he is being rewarded for his accomplishments, and sent back to keep up the good work, after his failure in Finance.

But in the end, what Nicolas Maduro is saying is that the revolution will stay the course. That he fails to understand the distortions and dangers to the economy. That between ideology and fear, he can’t even begin to attempt to solve the problems of the Venezuelan economy. I have heard of a few people that talked to Maduro this week or last week about the problems. He heard them all politely, but nothing of what was said is reflected in this speech.

In some sense, this is what Maduro has done in the nine months since he was elected (perhaps?) President. He can not make choices. He has not listened. He has tried to please everyone in his unholy Bolivarian coalition. From Marxists to military, from Socialists to enchufados, from radicals to pragmatists, from Communists to Cubans. He has been unable to make decisions, And he continues and will continue to do so, as long as the Bs. 6.3 per dollar rate is feasible or doable. The private sector seems to be relegated to mostly Sicad or the black market. Maduro thinks the State can do anything. Run everything.

That is the model of the revolution. And as I suggested earlier, there will be no collapse this year. But I can say Maduro’s style suggests that the deterioration will accelerate much faster than it needs to. Inflation will be up this year (85%?). So will the black market rate (double?). GDP will contract (-3%?). Shortages will increase. (35%?) The only thing I can say I am sorry about is that I used the title “Clueless in Miraflores” in the previous post.

It would have been even more perfect for this one!