The Devil's Excrement

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:

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?

It has been six weeks since the opposition won the Parliamentary election and many things have happened. But I do not really want to give you a blow by blow analysis of what happens or is happening in the country, but rather try to see and understand the overall picture. Thus, I did not report on the details of Maduro’s speech to the Assembly or many other topics which some may think require some commentary.

But I think is more important to report on the overall picture of the country six weeks after the elections. And what I can say is that there has certainly been some progress, some steps forward, but the whole picture is still lacking, as the country seems to be drifting into a crisis, with probably more steps forwards than backwards, but too much uncertainty still present in the country.

To begin with, I don’t think either side has understood well the message the voters sent in Dec. 6th. On the one hand, the Maduro administration has not understood that the vote against it represents a vote against the consequence of its badly mismanaged economic policies. Despite this, it continues on a path to radicalize the country, blame the economic war, all of which will bring little economic benefit, precisely the only thing the voters wanted him to pay attention to.

The opposition, on the other hand, seems to be understanding its victory as a mandate to get rid of Maduro, which is probably why most opposition voters cast their vote for. But as I have discussed previously, The in between, both the Ni-Ni’s (who don’t belong to either side) and the pro-Chavista voters, were casting a vote to punish Chavismo, but not necessarily because the opposition electrifies them and wants them to run the country. So far, the opposition has said little in how it intends to deal with Economic problems. True, it is little that the Assembly can do on economic matters, but this does not mean that it can not make proposals or counter-proposals, of which it has done little on these matters. Perhaps the only exception is the Bill to give ownership to the Mision Vivienda homes, which was repudiated by Chavismo.

Perhaps the most positive thing to has happened is that there has been acceptance of the victory by the opposition. Even if this has been a reluctant acceptance or not, it is there, whether thanks to the military or not. The opposition found the need for security the first day the Deputies were sworn in at the Assembly, but the routine of at least bi-weekly sessions is such, that the last time the Assembly met in a regular session, there were no significant security forces outside the Assembly building. (The same inside, where reporters and public can now go in without much hassle)

This represents some semblance of the return of normal democratic life to the country, a huge advancement.

And this return to normalcy is also present in an increased access to the media by the opposition. Even if VTV did not want to show Ramus Allup (A negative nomination on which I have opined sufficiently), it had no other recourse but to show his speech right after Maduro’s speech. By now, some of the old/new media, such as Globovision, has begun to hedge it bets, increasing its coverage of the opposition.

More democracy can only be good.

I think it was a negative for the opposition to go back on the swearing in of the three questioned Amazonas Deputies. It should not have done so, if it was not willing to go Constitutional-conflict on the terrible decision by the Electoral Hall of the Court. Given the 45 thousand-plus decisions in a row  by the Court in the last 15 years, it should not have expected anything else.

While it was a puzzle why Amazonas was picked, given how close elections were there, the truth may have been revealed this week, when it was noted that some Chavista Deputies have requested the Supreme Court interpret whether the indigenous representatives to the Assembly should be elected by the population of those States at large or only the indigenous population. Curiously, the opposition had raised this issue in the past , only to be denied, even when Chavismo dominated that vote. Chavismo probably thinks that it can win one of the three Assembly members with this trick and deny the 2/# majority to the opposition, but I doubt it.

Unfortunately Maduro did not understand the message about the economy and seems to still be clueless at this time. Since Dec. 6th. oil has dropped by about US$ 8 per barrel (somewhat less for Venezuela’s oil basket) but the Venezuelan President did not mention any concrete measures in his State of the Union address and his “Economic Emergency” Bill” only include the possibility of more expropriations, despite the dismal failure by Chavismo with them over the last 16 years. He did say gasoline prices should be increased, a decision which is solely in his hands. He should talk less and do something.

And with oil under $30 per barrel (less than US$ 23 for the Venezuelan basket) this means that foreign currency revenues for the country will be under 50% of what they were during 2015. And as Venezuelans line up for food, medicines and even to have their deodorant refilled, one has to ponder how awful things will get in the upcoming months…

Well, sooner than you could say Henry Ramos, the first big Constitutional crisis exploded today, in Venezuela as the Electoral Hall made a ruling that sets up a huge confrontation between powers.

The Hall ruled:

1- The Venezuelan National Assembly is in contempt of the court for not obeying its decision to not swear in the Deputies from Amazonas State.

2- Because of this, says the Electoral Hall, any decision made by the Assembly so far and in the future is completely illegal

3- The Court orders the National Assembly to immediately “disincorporate” the three Deputies.

The decision is quite bizarre in too many ways, but what do you expect from “Justices” some of whom do not qualify to hold the position and violate the law in many cases, as they were card carrying members of Chavismo’s party PSUV?

First of all, the legal concept of taking away the proclamation of a Deputy does not exist. Moreover, there are precedents for this, which are not even mentioned in the decision by the same Hall and the Constitutional Hall of the Venezuelan Supreme Court.

Second, once proclaimed, according to the Venezuelan Constitution, only the National Assembly itself can “qualify” a Deputy. Nobody else can, least of all, the Electoral Hall of the Supreme Court which only rules on Electoral matters. Once the Electoral Board proclaimed the candidate, this is no longer an electoral matter. The same applies to nullifying acts by the National Assembly. It is not the role of the Electoral Hall to nullify such acts, least of all “future” acts, an absurd legal concept.

Maybe these “Justices” do not understand that the Electoral Hall rules on Electoral matters, no on matters which should be the realm, if at all, of the Constitutional Hall of the National Assembly.

Finally, it is sort of stupid to rule invalid decisions by the National Assembly that are taken without the three “questioned” Deputies participating in the vote. If they had nothing to do with the decision, there was nothing illegal about it.

But the real conflict arises and will explode now for the simple reason, that the National Assembly can simply not accept the decision for political reasons. Since the decisions are illegal, backing down would imply that the Court would simply stop the elected National Assembly from doing anything in the future.

And the key word here is “elected”. A Court that was not elected by popular vote and under questionable circumstances from a legal point of view, can not pretend to be above the popularly elected National Assembly.

Moreover, I think the National Assembly has no other recourse but begin proceedings against the same  Justices, something that they can do. Thus, we go into an infinite loop of non-recognition of one by the other.

Who will be the referee in such a battle?

Meanwhile, the economy gets worse, the price of oil goes down and the Maduro Government devotes itself to talking about the removal of Chávez’ pictures form the National Assembly building.

Clearly, there is no interest in attacking the economic problems and distortions. Even more clearly, there is no intention in recognizing the qualified majority obtained by the opposition.

Who was it that said Chavismo was democratic? Yeah, sure!

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?)

                                Picnic-pit stop for lunch at the beach on the last day of the year

The Devil is biking around the Big Island of Hawaii for the next few days. From there, he wishes every one of his readers a wonderful 2016 and may prosperity and peace come to our beleaguered country, Venezuela, in 2016.

As predicted in my next to last post Constitutional clash is set for the swearing in ceremony of the new National Assembly, as the newly and illegally named Supreme Court Justices of the Electoral Hall admitted a seventh request to have the effects of the December 6th. election suspended.

Up to today, we had known that there were six such requests. They had been introduced on December 28th. against certain Deputies elected on Dec. 6th. But on the 29th. an additional request was introduced to suspend the effects of the whole election in Amazonas State, which implies that the Court is saying that the Electoral processes in which three opposition Deputies and one Chavismo Deputy were elected are temporarily suspended.

The whole process was clearly set up by Chavismo to attempt to negate the 2/3 majority by the opposition on the new Parliament. But the whole process in itself stinks:

-One of the “Justices” considering the cases voted for herself as a Deputy.

-The lawyer that introduced the case is a public employee, which is illegal.

-The members of the Electoral Hall were on vacation and suddenly decided to end it.

-The opposition had recused all of the members of the Electoral Hall, which implied they had to resolve that, before the cases could be considered.

What is most interesting is that the opposition’s interpretation is that the decision by the Electoral Hall is not applicable, because the election is over, the candidates had been proclaimed and the request can no longer be executed. According to this interpretation, the Deputies had been proclaimed and thus the Electoral Hall can no longer suspend the process and at this point only the National Assembly itself (Art. 187 of the Constitution) can “qualify its members and know about their resignation…”

Thus, the MUD argues the Court has no Jurisdiction on this.

In fact, the article linked above, the best article on the subject, also notes that in the absence of these four Deputies, the opposition would still retain the 2/3 majority, because it would be counted on the basis of existing Deputies, not possible Deputies.

But perhaps the weirdest thing about the case, is that none of the races involved in Amazonas are close. The closest is that of Deputy Nirma Guarulla elected by 2,260 votes out of 63 thousand and some votes, a difference that seems very difficult to overturn.

The rest are almost impossible, as the Deputies elected by list split the votes in half and both got elected, one for the opposition and one for Chavismo. (They got 63 thousand of roughly 64,000 votes between the two of them)

The final election affected is that of the indigenous representative for the south, which was a runaway victory for the opposition candidate:

which won by about the number of votes that the second place candidate obtained.

Thus, it is unclear at this time what Chavismo aims to do with these results. A place like Aragua had much smaller differences than these, but these cases were rejected by the Court.

In any case, a clash of Constitutional powers is set to take place on Jan. 5th. as the new Assembly will admit all of those elected.

What will the Court and Chavismo do?

And once the Assembly starts working, its next step may be to increase he number of Justices and/or question the validity of those recently elected.

Meanwhile Maduro announced his new “economic” measures, which were so stupid that it is not even worth mentioning…

Ah! It’s Christmas. At last we can relax for a couple of days and think about nice things, enjoy family and toast to life!

So, while you are relaxing, I leave you with these Venezuelan Christmas mysteries, in no particular order:

-Why do hallacas have capers in them, if we don’t have them in Venezuela?

-Why did Chávez choose Maduro?

-Corolary: Why did Cabello not fight Maduro once Chávez died and later he staked his future on Maduro’s fate?

-Why do some Venezuelans follow Niño Jesus, others San Nicolas and then some Santa Claus?

-Does anyone who is not Venezuelan understand what Gaitas have to do with Christmas?

-And why are nacimientos (nativities) shrinking?

-And why do Venezuelans celebrate the night before Christmas and sleep and watch movies on the 25th.?

-And what’s the true story with the attempt to revoke 22 elected Deputies at the Supreme Court this week? Did it happen or not?

-Does anyone remember that people would paint their houses right before Christmas or was that a family tradition?

-Have you ever seen a “Furruco” factory?

-And why is midnight mass called Misa de Gallo (Rooster’s Mass)?

And on that note, Merry Christmas to all the readers. Thank you for reading, commenting and hanging on for so long. That Santa Claus, San Nicolas, El Niño Jesús (Yes!) brings you everything you wanted and don’t drink too much Ponche Crema (Or do!).

Best from the Devil!