Archive for January 18th, 2016

The Santero Economics Trinity

January 18, 2016

Trinity_knot

Some people took offense at my last post on Santero Economics when the new VP for the economy was named. They thought the term lacked seriousness in an economic debate.

I disagree.

When I first introduced the term, I was making two analogies, one to the famous Voodoo economics term that Geroge Bush Sr. coined referring to Reagan’s economic ideas, but more importantly, I defined why the term was justified by defining what Santeria was and comparing it to the current framework for economic policy in Venezuela and I quote my post from July 5th. 2015:

“Santería, which is composed of a set of beliefs taken from various religions, which are some times incoherent and even contradictory and which are based on hope, spiritual beliefs and ideas with little fundamentals. Thus, we can characterize the current policies as, Santero Economics, as the policies are equally incoherent, based on hope and many times go against each other, with no relation to known economic principles and fundamentals.

And today, I complete the cycle, first it was Tony Boza’s ideas, then Salas’ and now with a description of the foreign part of the Santero Trinity, Spanish economist Alfredo Serrano, who has recently espoused his seven steps to solving Venezuela’s Economic problems.

I will not go over all seven of them in detail, but this reminds me of an article which is somewhere in this blog in which someone suggested Chavez was proposing a society which had nothing to do with who Venezuelans where and ignores their habits, culture and idiosyncrasies. Serrano’s proposals seem to ignore the reality of Venezuela and Venezuelans today. In fact, it seems to ignore the reality of what Chavismo has brought on Venezuela in the last 16 years too.

Let’s look at the proposals:

Proposal #1: The State of “Misiones Sociales” requires an economic mirror; for every social mission, an economic mission is needed to unleash new productive forces internally. To do this, public procurement must serve as the economic muscle in favor of the new democratizing social metabolism. We must pursue  the economic multiplier effect derived from the Social Revolution.

Jeez, I really don’t know where to start, let’s do it at the beginning: Which Social Mission are we going to work with? Has Serrano made a diagnosis of the current status of those “misiones”?  The way I understand it, the educational misiones, Ribas, Robinson and Sucre are sort of half-assed right now, as people are not getting neither the instruction, nor the money, nor the promised programs. And if they were, how would you propose to promote Mision Ribas, for example, as an economic force, when you pay people to study. Do you want them to study or to produce something? My understanding is that it promotes people not working as the “beca” to study is more than enough to live on, or at least as good as also working.

And I don’t see how the health “misiones” can be leveraged economically, least of all, when Barrio Adentro is 60-70% abandoned.

I mean really, tell me how this can be turned and “leveraged” into production, when half of it is simply not functioning:

misiones.jpg

I mean, pick your favorite Mision and tell me whether is active or not and, if it is, whether it can be leveraged into a new-fangled metabolism for economic production. His words, not mine. Mercales show lines and shortages, Barrio Adentro is barely alive, people are not getting their “beca” for Rivas o Sucre.

I mean, really? What country is Serrano talking about? And how is he going to do it?

Let’s move on

Proposal 2: It is necessary to sort out what can be produced and what is not. A productive Revolution requires getting down to work with the new economic engines, considering: a) the real added value that can be generated internally, and b) the outer limit imposed by global value chains. Nothing would produce new goods if it is just for importing much of the value added.

Sounds wonderful! But isn’t that what the Government claims to have been doing for the last ten years? And isn’t the fact that the Government did that, “prioritizing,” that we have shortages, lines and empty shelves?

Are we going to import Martians to do it this time around? Or Chinese? (They are here already). Or Cubans, to see if this time they get it right? Because it seems that all the Government has done in 15 years is do exactly that and the results are sort of lacking…(More than sort of, but let’s be magnanimous)

Proposal 3: Not everything is a matter of engines; it is also  a matter of actors. The democratization of the production system is a necessary and sufficient condition in the new economic era because it is the only way to break the current oligopolistic dependence. The communal power must be essential pivot in the new economic order, both productive and distributive issue and marketer. The commune has to stop being economically marginal; the output is certainly not a neoliberal communal output.

Uff! As someone once said, “Como se come eso?” (How do you eat that stuff?)

First of all, we are talking about a crisis that needs to be resolved TODAY, not in five years. People need to eat, for example. People in the communes are concerned about making ends meet, getting stuff that they can’t get, standing in line and surviving under current hardships. What are you going to do? Bring a whiteboard telling they have to produce milk, meat, tomatoes, mangoes chickens and rice?

Has this guy ever considered how it is different to breed cows in the tropics? Or to grow any sort of plant? Does he know about how the Government nationalized and destroyed Agroisleña, the only provider of technical advise, seeds and even funding to the small producers? In order for the communes to get into any of this  “productive” stuff, you would need to return Agroisleña (now Agropatria) to its original shape, before you can even think about educating, teaching and training the communes to produce really basic stuff. And the Government that destroyed it is supposed to do it?

Really?

To say nothing of obtaining the required medicines and vitamins to grow a healthy chicken, which have been lacking for months even to producers that have the money. To say nothing of being able to buy the cows that can produce milk in the tropics, feed for them and the medicines for when they are ill.

All very long term and you need a lot of money if you ask me.

4. We must avoid falling into the  neoliberal trap to address the issue of foreign exchange from the exclusive focus of the nominal value. Is it important to discuss the exchange rate? Yes, as long as previously defined what the new currency allocation matrix. At a time of scarce foreign exchange, it is crucial to choose how they will plant to flower currencies other real economy in the shortest possible time. It requires a kind of acupuncture so he is they will be given an anti-inflationary,  productive use and pro growth to the available foreign currency.

The “neoliberal trap” of focusing on the nominal value is because keeping the nominal value artificially and incredibly low is what has given rise to the biggest corruption racket and trap in the history of Venezuela and dozens of billions of dollars lost to Government officials as well as to exports to Colombia, which the Government has for years been unable to stop.

Again, will we have Martians running this? Does Mr. Serrano even understand what is happening in Venezuela every day and how inefficient, corrupt and incompetent Chavismo has been in the face of all these distortions?

I will skip 5, but here is 6:

6. Faced with restrictions outside, it is essential to make progress on tax sovereignty. There is enough room to do a tax revolution based on principles of social justice. It must implement a plan to combat fraud and tax evasion. It needs to raise in whatever it takes to ensure social and productive investment, and preventing external shock has negative impact internally.

Really? Who will pay this tax? Social justice when professionals make less than $30 a month? Again, who will pay? Companies? Which ones? What is the magnitude of this revolution or uncollected tax? Does Mr. Serrano understand even who pays taxes in Venezuela? Does he know the cutoff for yearly income to pay or not taxes? Does he know that banks make money by buying tax free bonds from the Government, which will be impossible to sell if they were not tax free? Really, with an economy with a 10% GDP contraction the solution is a tax revolution? Please…

And the best is the last point. I dont know where Mr. Serrano has been, but here is point 7:

7. Another answer is to return to the regional path effectively. It would surely trigger special margin Sucre plans to import priority goods bypassing the dollar. It is essential also import new paths without dollar, Mercosur, with some compensatory methods, while a new map of investment is achieved from the region.

Well, I will not even comment on this,  the “regional path”, enough said, wonder what Macri thinks?…but I have to wonder, has this guy ever been in Venezuela for any length of time?