As foreign analysts talk up the “pragmatism” of the current Venezuelan Government and Venezuela and PDVSA bonds soar, one has to wonder where the money is. After all, with shortages and inflation at an all time high, you would think this “pragmatic” Government would make a huge effort to reduce shortages by giving our foreign currency to importers to guarantee supply.
In my mind, the moment is now, not 2015. With the Government’s popularity at 21%, this is the time to adjust an really be pragmatic. Instead, the only “pragmatism” has been that the Sicad 2 rate was higher than anyone expected. The rest, is so far wishful thinking, from currency unification, to any increase in the price of gas.
It is a case of “Show me the money”. So far, I have seen very little.
Thus, bonds go up on three acts of faith:
-The Government is “pragmatic”
-Oil will not go down in price.
-The parallel funds have the money the Government says
(And there is a corollary: The political cost of defaulting is too high. Ummm, I have heard that before: The political cost of firing 20,000 PDVSA workers is too high. The political cost of jailing Leopoldo Lopez is too high and so on and so forth, you get the idea)
Meanwhile, let’s look back at Cadivi approvals for imports in 2012 (no data for 2013):
Well, today, Cencoex released the number for the first four months of the year, and this is the same data for imports:
Well, this 2.827 billion in four months for imports, which is equivalent to US$ 8.481 per year, substantially below the US$ 18.2 billion of 2012. And if you think Sicad 1 or 2 explains this, let me remind you Sitme was around in 2012 at daily average levels near or above Sicad 1 and Sicad 2 combined so far this year.
That is a factor of over two difference. So, if you have felt the shortages this year, the quantitative explanation is right there: A third of the money, a third of the goods. And shortages, of course, create inflation, as there is too much money chasing too few goods.
So, if the Government has so much money in the parallel funds and if oil is high and you have become ¨pragmatic¨, why not use it? What are you waiting for?
For the Government to reach 10% in popularity? Really?
Which only leads to the question Luis Herrera used to ask: ¿Donde están los reales? (Where is the money?)
I have absolutely no idea, it may not even exist…