The Devil's Excrement

Top left: Cases of malaria. Top right: Number of maternal mortality cases per 100,000 inhabitants

Source: Acuerdo Social

This one is somewhat of a puzzle. In two articles yesterday and today in El Universal, we are told that the Government’s chain of popular supermarkets Mercal has not imported any food for a month and a half. Moreover, the graph below taken from El Universal shows how since June sales of food (in thousands of Tons) have dropped significantly. 70% of the food sold at Mercal is imported, so either funds for Mercal have been reduced, people are buying less there due to either prices being less competitive or shortages at Mercal stores or management of Mercal has become more inefficient. (Currently Mercal has no sugar, black beans and milk). The article also says that the number of people who have been to Mercal to shop has dropped by 41.5%.

Curiously, the President of the Venezuelan Federation of Medical Doctors reported on Thursday that 45% of the Barrio Adentro modules are now closed.

Note: The data in El Universal only went to Nov. 21, so I simply assumed that sales during the last week in November were equal to one third of the sales of the first three weeks of November to plot the graph.

Government officials, from the new Minister of Finance to members of the Financial Commission of the National Assembly have been arguing that the “parallel” or “swap” rate is irrelevant for setting the price of imports because 95% of all imports are made at the official rate of Bs. 2,150 per US$.

Is this true? The answer is no and it comes from official sources.

Unfortunately for the Government control is not yet total over information, so you can find the plot below in the CADIVI (the Foreign Exchange Office) website of dollars approved on average each month by that office. Then you can go to the Central Bank website (under External Sector) and find that for the first nine months of 2006, a total of US$ 24.2 billion were imported. Well, from the plot below, you can add month by month (including taking account holidays) and you come up with the fact that CADIVI approved in those nine months a total of US$ 18.38 billion.

What this means is that the difference implies that at least 25% of the imports, not the 5% claimed by the Government, went through the parallel market. Why at least? Because the amount given by CADIVI is for everything, travel, dividend and repatriation and the like, so not all of the US$ 18.38 billion is for imports. Thus, the percentage is even larger.

Thus, these guys are either ignorant or are trying to deceive us with their 95%. You can even calculate the inflationary impact of the spike in the parallel market recently (It reached Bs. 4,450 today):

Last year, the average parallel rate was approximately Bs. 2,700 to the US$ , thus the weighted average cost of imports was Bs. 2287, given the 25% that was purcchased at the parallel rate. If we assume a parallel rate of Bs.4,000 to the US$, this weighted average would become Bs. 2,612, an increase of 14% over 2006. Of course, not everything is imported, but neither are products stamped with a label saying “Bought with CADIVI dollars”, which allows merchants to increase prices pretty much at will. As I said in October: The seams are beginning to show some rips…much faster that some people expected.

And the parallel market is indeed quite significant, despite all of the Government’s claims to the contrary.

From the CADIVI website on Jan. 24th. In blue: The total amount of foreign currency approved daily on average each month since 2004. In red: The total amount actually purchased or given out by the Venezuelan Central Bank. Days are banking days in a month.

Below is the evolution of the average price of a barrel of the Venezuelan oil basket for the last 52 weeks. A good rule of thumb is that one dollar up or down represents US$ 1 billion more or less in revenues for the country.

Source: Bloomberg

You can now find all of the graphs I have posted since the election in the Pictures section

And obviously I had to go and steal this plot for my collection from Daniel’s blog. This shows the budget as a percentage of the amount of money the Government spends on the gasoline subsidy which largely benefits the well off who own cars (also generously subsidized at the official exchange rate by the Government). Note in particular that the total amount spent in healthcare is barely 23% of the subsidy. This is clearly the irrational revolution or the revolution without rationality.

Earlier I showed a plot of net foreign investment in US$ in recent years. The following plot shows a long term view of private investment per inhabitant in constant 1984 Bolivars since 1920 (This means that the Bolivars are adjusted for inflation taking as reference 1984). Notice the dramatic drop since the peak in the 70’s (When coincidentally the low in poverty occurred), Notice we are down to the 1940’s. Even if you include Government investment, the total in recent years barely rises to double what it is in the most recent data in this graph. I am trying to get the plot for total investment. Government investment has never been more than Bs. 3,000 per inhabitant, with peaks at that level in 1978, 1982 and 1992.

From “Politica Economica” in Acuerdo Social.

A longer term view of poverty levels in Venezuela to give readers more of a historical perspective than the previous graph from 1998 shown earlier. I could not find a table with these numbers earlier than 1998, but there is a graph in the source below. Thus I took a picture of the graph and blew it up to get the points year by year using the data from the UCAB. (The data seemed to be plotted twice a year in the graph). Notice how poverty went down with the oil boom in the mid-seventies, but rose through the Luis Herrera era, despite a windfall in 1980. There is a dip with the second Caldera presidency as 1998 approached. The peak in 1996 was due to the financial crisis in 1994-95.

Source INE and UCAB in Policies for Social Inclusion by Luis Pedro
Espana in “Un Acuerdo para alcanzar el desarrollo” page 81,
Publicaciones UCAB (2006)

Note: I am now storing all these graphs in the Pictures section, so that they will all be in one place. For some reason, only the last ten can be seen there using the calendar on the left, I will try to figure out why and fix it.

So much money, so little accomplished, not one year better than any between 1990 and 1998.

Source: CONAVI, MINFRA

Poverty and critical or extreme poverty in Venezuela since 1998 as measured by the Social Studies Institute of Catholic University (UCAB) or the National Institute for Statistics. Poverty is defined as having an income less than the basic basket of goods for consumption. Extreme or critical poverty are defined when the income is less than the basket of foodstuffs, which in the case of the National Institute for Statistics is exactly 50% of the other one.

The differences between the two sets of data up to 2004 were mostly methodological, with UCAB using the CPI as calculated by the Central Bank and INE using its own measure for food inflation and multiplying it by two to obtain the general index. The data for 2005 from INE has been questioned, since it is so inconsistent with that of UCAB and the Head of INE talked about changes in methodology without specifying them. The 2006 data should illuminate the difference, since food inflation, which is what INE uses was 26%, compared with 17% for the general index, thus the INE change in 2006 should be larger than that of UCAB’s due to the methodology. In the 1970’s poverty had a historical low of 22% and critical poverty of 6%.

Source INE and UCAB in Policies for Social Inclusion by Luis Pedro Espana in “Un Acuerdo para alcanzar el desarrollo” page 81, Publicaciones UCAB (2006)

School desertion by age in Venezuela in 2005

Educacion para superar la probreza y alcanzar la equidad. Mariano Herrera and Luis Pedro Espana in “Un acuerdo para alcanzar el desarrollo” page 141, Publicaciones UCAB (2006)