Archive for October 11th, 2015

Venezuela’s Vital Signs by Paul Esqueda

October 11, 2015

I have been under the weather for a week now and the two articles I have been plotting in my mind have not been able to get completed. But fortunately, my good friend Paul Esqueda, who has written here before, sent me the article below, which is timely and something I was worrying about, since about ten days ago Venezuela’s Minister of Finance “promised” investors in New York to  publish some of the missing data. But to this day, we are all still waiting, including Paul:

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The vital economic signs of the country constitute key information in fundamental decision making by all individuals and organizations operating or planning to operate in Venezuela. The Venezuelan Central Bank has not published the main economic indicators of the country in the last nine months, particularly inflation (Consumer Price Index) and gross domestic product (GDP). This is in total contradiction with what is stated in the by-laws of the bank in its Article 31, which is a national act of Congress. It clearly states that “The Central Bank of Venezuela will be guided by principles of transparency. In this regard, without prejudice to their institutional responsibilities, the Central Bank will keep informed in a timely and reliable manner the National Executive and other State agencies, public and private, national and foreign and the public in general on the implementation of their policies, decisions and resolutions of the Board, reports, publications, research and statistics to have the best information on the evolution of the Venezuelan economy, without compromising the confidentiality rules as appropriate in accordance with the Constitution. In fulfilling the mandate above, the Central Bank of Venezuela will perform regular monetary policy meetings and publish the minutes of such meetings through the means which it deems appropriate, including use of the most advanced computing services.”

What are Venezuela’s official vital economic signs? If you are entering the workforce or retired or considering retirement, is your projected income sustainable and sufficient in the long term for a decent living? How are companies currently operating in Venezuela planning their operations without reliable information? Are there any potential investors interested in Venezuela in such state of affairs? These questions and many others would have to rely on second hand sources (IMF, IADB, Dolar Today, and the Devil’s Excrement among others) to find answers for the moment. The current Venezuelan Government has chosen to let uncertainty reign by providing no information based on the fact that there is a state of “economic war” There is no formal official declaration of war against any specific entity so that excuse just adds to the uncertainty and to the overall country risk.

The vital signs of a person’s health are typically body temperature, pulse, blood test results, ability to breath and move about. When an individual is found outside the normal parameters in all the risk factors, the medical doctor can make informed decision about next steps to improve the person’s health. An extreme situation may require putting the patient in the extreme care unit on a respirator with all his/her vital signs being monitored 24 hours a day. The vital sign are critical to determine whether to continue life depending on the prognosis. What is the state of the Venezuelan economy’s health? What is the general perception of the credit rating experts? The rating of Venezuela ranges from CCC and Caa3 (S&P, Moodys and Fitch) as of 19/11/2015 which qualifies the economy as “extremely speculative.” Is Venezuela in a nonresponsive state by not releasing the main economic indicators? When a patient is in a nonresponsive state, he/she has no knowledge but those around him/her do know. Is the average Venezuelan conscious of the gravity of the situation? Are lenders pulling the plug on Venezuela? Where is the transparency declared in law of the Venezuelan Central Bank? Is it a crime to mismanage the economic future of all Venezuelans with evident violations of the law?  Undoubtedly history will pass the final judgment.