Santero Economists Take Over Economic Policy In Venezuela

January 7, 2016

gabinete

Organizational Chart for the new Venezuelan Cabinet named by President Maduro

 In July, I suggested that even with the upcoming elections, Santero Economics, the peculiar form of economic management that has taken over Venezuela since Maduro got to power would not go away with the Legislative elections. Yesterday President Maduro named his new Cabinet (Chart above, there are so many Ministers that it is essentially unreadable) and it is clear from it, that the Santeros have taken over.

What Maduro did, was to make Luis Salas Vice-President for the Economy. Salas is the center piece of the Santero Economic team as he represents one third of the group (together with Tony Boza and Alfredo Serrano, who is not Venezuelan, that has kidnapped Maduro’s Economic mind (yes, it’s meant to be cynical!) over the last three years.

There are some positives, like naming Economist Rodolfo Medina to the Ministry of Finance. Medina is a Professor of Econometrics at Central University, he is no Milton Friedman, but at least he knows and understands traditional economic theory. He is accompanied by Jesus Farias, a communist Economist, who at least has been proposing that there should be a single exchange rate, who will be the new Minister of Foreign Trade and International Investment, a newly created post, which only proves the level of ignorance involved in forming the Cabinet. Uber leftists Ricardo Menendez remains in the post of Minister of Planning.

One of the first problems of this team is precisely the level of incoherence involved. How will Medina, a practicing economist talk to Salas, a 100% Santero Economist? How will Farías argue with Salas, when Salas is against many of the ideas proposed by Farias?

 For the last three years, Salas, Boza and Serrano have imposed economic thinking in Venezuela, despite the fcat that they did not occupy any Ministry. They are the “creators” of the concept of “Economic War” as the explanation fro the large levels of inflation and the scarcity that is present in Venezuela. Their solution to the economic problems is more controls, more supervision, more taxes and fighting the oligarchs who are responsible for everything.

 While the foreigner in the Santero Economic think tank, Serrano, is an Economist, Salas is a Sociologist and Boza claims to be a Popular” Economsit”, whatever that may mean.

What these people do, is to disregard the body of work of economic knowledge, based on theory and experience and construct arguments (not theories) to suggest that body of knowledge is simply incorrect. There are no publications involved, just some self-published pamphlets which contain no equations, only graphs of empirical data, and hyperbolic and false statements to supposedly support their views. I linked Boza’s pamphlet last July, here are Salas’ Economic “postulates” for lack of a better word.

Among the many things that Salas posits, is that the law of supply and demand is vulgar, that monetizing the deficit is not inflationary, that inflation onl occurs because of speculation, that in real life inflation does not exist and that it all is an economic war, much like that waged against Allende in Chile. Thus, the solution is simply to be tougher, increase controls over prices and make the private sector pay more taxes.

 Which means that santero Economics will prevail, inflation and scarcity will accelerate and little will be done by Maduro and his Cabinet to attack the distortions in the Venezuelan Economy. Not only does Santero Economics not work, but those in the Economic team do not have the coherence or managerial capability to accomplish much.

Except for the pain that this implies, what this means is simply the acceleration of the demise of the Maduro Government, who will bring down Chavismo with him. There will be no change in direction now and given the past, those recently named will not exit the Cabinet fast if they obtain no immediate results.

This bodes badly for Venezuela and its people short and medium term, but at the same times sets the stage for promoting an outcome in which Chavismo no longer leads in the country.

(Two questions for the new VP:

  1. If the law of supply and demand is “balurda”, can he comment on why oil prices have come down in the last year and a half?
  2. If creating money does not cause inflation, why not print infinite money so that everyone is very rich?)
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34 Responses to “Santero Economists Take Over Economic Policy In Venezuela”

  1. BT Says:

    Speaking of Ricardo Haussman, he has stated that Maduro should default but wouldn’t because Maduro’s cronies have bought the bonds to fund the debt and to default would mean they would lose vast quantities of money.

    Despite what Salas states, commies are more greedy than capitalists.

  2. Vitor Says:

    Communist economist reads like geocentrical astronomer.

  3. Lee Kuan Yew Says:

    The only “economic theory” ALL of those regime monkeys know about is how to steal as much as possible, as fast as possible.

    People still dream that there could be some wise, new economic measure to cure Vzla, a dying patient full of cancers. Under a high school drop-out bus driver, and a drug-dealing poorly educated thug. Under the Mega-Thieves who truly dictate all Economic policy, the PDVSA heavy-weights, the Derwicks, all the special-interests Billionaire who really have all the influence and the power, through massive bribes and monstrous cash regalitos..

    What a bunch of corrupt clowns.. Ricardo Haussman knows more about Economic issues than all of those thugs Combined, and then some. None of them would last a day a policy makers in any half-civilized country.

    To even start fixing Cleptozuela’s atrocious, abysmal economy, extremely tough, unpopular, austerity measure would have to be taken immediately.
    Everyone knows what they are, except “el pueblo”, of course.

    To start re-emerging from the bankrupt abyss, the first think is to STEAL just a little bit less. Not to embezzle every freaking oil barrel, already sold and paid fro by the Chinese until 2050.. Not to steal every cent on every bogus contract, in every corrupt industry on the country. At every level, not just the top sharks, the medium and lower levels too, the 37 laughable, putrid ministerios with 4 million thieves and leeches.

    THAT’s how you fix an economy.. with Laws, Jail and Justice. No more impunity. You just free the coroto, supply & demand, how complicated is that?
    Do we need 50 “economy” corrupt clowns? of course not. What we need is a little bit of honesty, and to go back to 2+2 = 4.

    Keep on dreaming that poor Jose Guerra is going to find a magic economic potion, a criollo macro-economic panacea unter mazburro, diablodado, ramirez and vladimir.. Dreams are free.

  4. Alirio Says:

    Uber leftist Ricardo Menendez? Uber driver?

  5. M Rubio Says:

    There is nothing to eat here.

    • Dr. Faustus Says:

      That sent a chill up my spine. Pray for all the people of Venezuela.

      • M Rubio Says:

        I’ve been seeing something lately that I had not seen before. People arrive at my bodega, buy bread or crackers and sardines, and then open the can and eat them right then and there. The word is the same from all of them….”there’s nothing to eat in this pueblo”. Heck, even the restaurants aren’t opening because there’s no meat, chicken, pork, or rice or espagueti to cook and serve. It’s a mess.

  6. captainccs Says:

    >>> If creating money does not cause inflation, why not print infinite money so that everyone is very rich?)

    There are two kinds of money: gold money and fiat money. Gold money is a commodity and it behaves like a commodity. When Spain flooded Europe with American gold and silver it caused widespread inflation. In fact it devalued gold and silver. But fiat money is worthless, it is just a promise with nothing but good faith to back it. It does not behave like a commodity but more like air in the atmosphere. You can add a few cubic miles of air to the atmosphere and no one would breathe more than they do now. Fiat money is not inflationary as has been shown by the great diversity of money printing called quantitative easing, etc., etc., etc.

    You can put all the money you want in banks, if they don’t lend it and people don’t borrow it, the velocity it imparts is zero — hence no inflation.

  7. Floyd Says:

    The far left has never allowed facts and reality interfere with their beliefs, so why start now. lol.

  8. Juan Largo Says:

    Not only is the new economic “plan” based on pipe dreams and basura, but as noted, it only accelerates the end of Chavismo. Still, the new assembly has the right and the duty to do at least a cursory, forensic economic assessment to know where the hell we are. To look at the actual bank account, so to speak, the hard numbers. Problems is – how do you do this:

    A few days ago, in El Uinversal, Michael Rowan wrote:

    Unknown Facts

    Since 1999, it has been increasingly difficult or impossible to analyze the actual situation of Venezuela because the facts about its situation have been hidden, fictionalized or destroyed. Understanding the problem comes before realizing the solution. So, the first order of business to find and publish the facts.

    There is more unknown than known about Venezuela’s facts of life – and death. First, start with the money. How much came in and where did it go? For years, there have been two sets of books, a public budget and several off-budget funds that received and spent public monies without accounting. In order to fix the crises of hyperinflation, soaring debt, and price and exchange controls, the money’s got to be accounted for.
    ——–

    It’s impossible to imagine the Chavista’s EVER handing over the ledger, if a comprehensive one actually exists, and the harder the assembly presses for one, to scream out loud that “the money’s got to be accounted for,” the more explosive the situation will get – that’s for damn sure.

  9. Dr. Faustus Says:

    There is an obvious question here that everyone seems to have overlooked. If Maduro’s government is truly dominated by Santero Economics, and as Moctavio has indicated ‘won’ every recent/important economic debating point within Chavismo, why haven’t they cut all ties with western creditors and banks? The nuclear option. We don’t need you, or your stinking badges! To hell with the IMF. To hell with Wall Street. We don’t owe anybody, anywhere, any money! Yes, a default would indeed have catastrophic consequences, but maybe NOT to a so-called ‘santero economist.’ Is THIS the road they are headed down? A default in the very near future? Perhaps this is the significance of appointing a nutter like Salas as economics Czar.


    • Another road this heads them down to is expropriating ALL private business. It’s the only way they can survive.

      • Dr. Faustus Says:

        Yes, that’s a real possibility. There is, however, something deeply incongruous with having an idiot like Salas as your economics Czar and, at the same time, continuing to pay 10 billion dollars in annual interest payments to the evil capitalists. It doesn’t make sense. At some point this year, sooner rather than later, Salas will suggest to Maduro the nuclear option based on his deep knowledge on how real economies are suppose to work. A default. Why should we pay our hard-earned foreign currency to the scum-of-the-earth, when ALL of OUR oil money should belong to us? It’s how they (Salas etc) think.

  10. TV Says:

    Don’t go public with questions like the #2. The answer may well be “Yes, good idea! Why didn’t I think of that?”, with policy alterations to discover this new revelation.

  11. Ira Says:

    Miguel, there isn’t a person here who doesn’t love you to death.

    But at least me, and I’m sure others, feel that this isn’t the time to worry about macro/micro economic issues.

    There are so many bigger fish to fry to put Chavismo in its grave. More important fish.

    And the rest will hopefully fall into place.

    • Boludo Tejano Says:

      There are so many bigger fish to fry to put Chavismo in its grave. More important fish.

      When the BCV prints money at Maduro’s command- or at the command of his flunkies- hyperinflation will result. Hyperinflation will not assist the survival of the Chavista regime. Which means that paying attention to economic policy- and those who formulate economic policy- is not focusing on trivia.

    • captainccs Says:

      >>>But at least me, and I’m sure others, feel that this isn’t the time to worry about macro/micro economic issues.

      Ira, I agree with you entirely. Politiking is not the solution, on either side. The productive economic machinery must be repaired and the people must be prepared for the pain that the removal of price controls brings. It was this lack of preparation that brought CAP down when he ruled imperially. No one since has dared touch the price of gas but it must be done. There is a very difficult road ahead.

      I don’t know how to sum it up better than: “It’s the toilette paper, Stupid!”

      Maduro had a bad image among the Chavistas from day one. Let him continue making stupidities a bit longer and it won’t be the opposition that brings him down but the people sick and tired of queuing up to find nothing to buy. He wants to paper Caracas with pictures of Chavez? Let him and use the newly free press to tell the people how wasteful this is, how it takes food out of their mouths.

      I confess I never believed that Chavismo would die in the ballot box but it clearly did. Was it the US telling Cuba to stop messing here if they want to normalize relations? Was it Chavismo cracking from within? Who put a stop to the Bolivarian motorcycle thugs? All this I don’t know but the power has returned to the people. Use it. Use it wisely. Let Maduro/Santerismo implode.

      The military said they are 100% behind Maduro. Anything else would be treason against the commander in chief. But you can believe them as much as you can believe any politician or central bank chair(wo)man. Who but the military could have kept the Bolivarian motorcycle thugs off the streets?

      • Rory14 Says:

        ” Let him and use the newly free press to tell the people how wasteful this is, how it takes food out of their mouths.”

        What is this newly free press you speak of? Yes, press is allowed back at the AN but has the situation really changed? Am I wrong, or are opinions critical of the regime still not allowed back on TV without punishment?

        And there still are only a few periodicals around that are critical.

    • moctavio Says:

      Ira: It is very important, people are suffering and with these guys, they will suffer more. Things are going to get worse, but with these clowns, it is going to get a lot worse first. In both cases Chavismo dies, but it is worse for the people to have the clowns be in power.

  12. NET. Says:

    Answers to 2 questions: 1) International imperialist conspiracy, led by the U.S., of course; 2) Not enough printing presses, or larger denomination bills (but, we’re working on this).

  13. Caracas Canadian Says:

    What a team….Salida, Bozo & Jamon Serano. This will end like Syria or Cambodia. The only good thing is that this will hopefully destroy any vestiges of Chavismo and out of the ashes a newer and better Venezuela can emerge.

    • moctavio Says:

      The reason that I have been almost adamant that there will be no change is that I know some of the inside bickering that has been going on within the Government in the last year. At each important point, the Santeros won. They just won again…

  14. Artemisa Says:

    I worked with Rodolfo Medina at the Ministry of Finance and what he knows is to record public budget transactions, which are less than 25% of all public account transactions. This means, he has no idea how no-budgetary things works, including PDVSA-BCV cuasi fiscal operations. And I bet he’s clueless about public debt, banking, stock market… He might be a professor in Econometrics (well, not anymore -poor students-) but one thing is a model with academic data and another one is trying to guess what to do with the lack of accountability of most of the government finance.

    • moctavio Says:

      I greatly appreciate your comment Artemisa. I have heard mixed things about him. But it is important that , at least, he deals with economic theories and concepts in the real world, while Salas makes up weird theories. Remember in Venezuela it is rare to have real economists be Ministers of Finance, we have had engineers, sociologists, mathematicians and who knows what else. Obviously, while I am a Physicist, I have great respect for hard core economists. While Economics is not an exact science, its basic principles are known. If you stray from them you are in trouble. We are in trouble. Thanks again. .

      • captainccs Says:

        >>> While Economics is not an exact science, its basic principles are known.

        Devil, I discovered a long time ago that the man on the street is stupid until he is put in a government job. Instantly he becomes wiser than Salomon and smarter than Einstein. Until he loses his government job when he goes back to be as stupid as the rest of us.

        Classic economics is not just inexact, there is a lot wrong with it but that is the subject for a different blog.

  15. Artemisa Says:

    I worked with Rodolfo Medina at the Ministry of Finance and what he knows is to record public budget transactions, which are less than 25% of all public account transactions. This means, he has no idea how no-budgetary things works, icluding PDVSA-BCV cuasi fiscal operations. And I bet he’s clueless about public debt, banking, stock market… He might be a professor in Econometrics (well, not anymore -poor students-) but one thing is a model with academic data and another one is trying to guess what to do with the lack of accountability of most of the government finance.

  16. captainccs Says:

    Do any of these guys now where to buy toilette paper?

  17. Noel Says:

    The real voodoo Economics! Although it is off subject, I wonder whether the three congressmen who were sworn in are there to stay?


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