Archive for April 19th, 2014

Maduro First 365 Days As President Of Venezuela

April 19, 2014


A year after supposedly being elected President of Venezuela, Nicolas Maduro is still trying to figure out how to do his job. Growing up under the shadow of Chávez, Maduro had or has little idea about how to manage the Venezuelan economy. He thinks that he can follow the path of his Master, but the Master left the economy in bad shape and there are few places where the regime can find the funds required to stabilize the über-distortioned Venezuelan economy. Add to this the internal bickering between the various factions in Government and it took Maduro almost a year to make changes to the foreign exchange markets of Venezuela, which Chavismo thinks is the most important piece of any economic policy.

In fact, it thinks it is economic policy.

But other than the Maduro administration admitting a much higher rate of exchange, the new Sicad-2 foreign exchange system has become a Sitme-like repeat monster, which shows little of the supposedly “free” and “transparent” aspects that the Government promised. But what can you expect from the brainiacs that surround Maduro?

And as the world expects that the Maduro administration will become pragmatic, we have seen little of the sort. But somehow, good “sources” tell analysts stories of a future unification of all exchange rates at the Sicad-2 level, a noble goal, but one as vaporous as Chavismo’s pragmatism or Chavista “ideas” for that matter. The time for Maduro to make an adjustment was then and maybe still is now, but not next year, when the economy will be in worse shape, the Government’s popularity will be at its lowest ever and a Parliamentary election will be looming in the horizon.

Call us skeptical, but we just got over this new “free” and “transparent” fx system being promised.

Meanwhile, while Maduro blamed everyone for the economic problems, he doubled inflation to 57% per year, shortages increased dramatically to levels such that the scarcity index is no longer published by the Venezuelan Central Bank and monetary liquidity increased by a whopping 75.3% during his first year, mostly due to the Central Bank lending to PDVSA.

Economic “stupidity”, more than economic “war”

And rather than seek expert help, Maduro relied on the same clueless advisers that led Chávez and him to where we are, promoting the man who has destroyed PDVSA, Rafael Ramirez, to Economic Vice-President, as if Ramirez had any training on the subject. And it shows.

And rather than recognize the failures of the policies of controls and intervention, Maduro, who has even less of an idea on economic issues than Ramirez, went for more controls, more intervention and more imports (overcharges and “guisos”) by the Government. Price and profit controls on everything were imposed and right before the regional elections, Maduro declared war on prices, forcing merchants to sell below cost, increasing his popularity, but accelerating scarcity and the overall deterioration of the private sector.

Way to go Nico!

And just to make things a little worse, the Government did not include its debt with importers from 2013 in the foreign currency budget, slowing down both local production, manufacturing and imports, something that is still going on today.

Not exactly what needs to be done. But rather than try to change direction, now Maduro wants to declare another war on the economy. This time around, he wants to increase taxes, introduce an asset tax, since taxes from profits have gone down, given the lower profits, if any.

Talk about clueless. With deeply negative interest rates, those that have assets will soon learn the wonders of borrowing to the hilt to buy things that can be hidden, like dollars, or acquire others, all under the subsidy of the Government. Some economic model!

Meanwhile, Venezuela not only finances Cuba under incredibly generous (or is it stupid?) terms, but even the meek Comptroller takes offense on the Cubans ripping Venezuela off, overpricing up to 9,000% (no error there!), importing unnecessary products, the Cubans not sending even 1% of certain orders, storage costs, delays and mismanagement.

It is an extension of the Cuban economic model, applied to rob Venezuelans.

Stupid Solidarity Forever! (SSF!)

Meanwhile, Maduro seems to be trying to juggle the military, the corrupt, the radicals, the so called “pragmatists”, his family (or Cilia’s) and Chávez’, as well as combinations of all of these, including Diosdado.

Houdini would be proud!

And as if this was not enough, Maduro decides to repress protests, jail the leaders of the same and have a dialogue with anyone but those protesting. Remarkably, the opposition shines on national TV, but you have to wonder, who does Ramos Allup represent in the end? Could he get elected to anything? How many people like him, including his wife?

But the beat goes on, Maduro is a clueless President, the country is rudderless, with nobody really proposing an alternative model, beyond applying more order and knowledge to the current one. Everyone fishing to see what morsel they can grab. Even the opposition supporters have by now drank the Kool Aid that the real manufacturing sector has made heaps of money off the Government and that the airlines, car companies, pharmaceutical companies and the like deserve not to get paid.

They should ask themselves: Am I better off than in 2000 and their answer will be the same as that of those companies.

But Maduro is really happy, he believed what Rafael said about the economic model being right and successful. He still wonders why there are meetings all the time and nothing ever gets done. And Cilia prods him to keep on repressing, who cares about human rights and the like?

At least she is safe!

And crime is rampant, but the pretty revolution does not even care for its own supporters. Have you noticed? Even the deaths of Government supporters are not investigated and punished. Maduro is worried because that is the number one concern of the “people”, but he think he can’t control crime if the opposition leaders do not help.

And like in Catch-22, so it goes…

Maduro’s Government is 365 days old, how many more will the country have to endure?