Will the Venezuelan Government Devalue in 2012?

December 24, 2011

The guessing game has begun. Will the Venezuelan Government devalue the currency at the beginning of 2012? Clearly a devaluation is needed, Venezuela has become very expensive,  liquid reserves are quite low, imports are soaring.

If it were an economic decision, the Government would devalue. Because it is not, it is all up to Hugo the almighty and the opinion of his minister of Planning and Finance Jorge Giordani. It has been reported that there is a report sent up to Chavez suggesting the currency be devalued. The question is what will be the decision.

Up to a few weeks ago, I thought that it was unlikely that there would be a devaluation. I have changed my mind. The odds are that there will be one, I put it at 60-70% probability. Why? Because of the deterioration of the international reserves and the Government’s infinite belief that they can control inflation using intimidation. Similarly, last years devaluation was dceided by Giordani and was larger than anyone expected, so an adjustment seems likely.

How much? That’s much harder to guess. I would think about Bs. 5.5 for the official rate and about Bs. 6..75 for the SITME rate.

Only a guess. We shall see how wrong  I am…

(P.S. Chavez says GDP will close at US$ 300 billion, for that to happen the economy would have to grow 26.9% in 2011, as GDP closed at Bs. 1.016 trillion in 2010 according to the Central Bank. Divided by Bs. 4.3, that gives you US$ 236.27 billion. If there is a devaluation, then it’s smaller. I wonder why that mistake was made…)

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Where in The World is Hugo?

December 23, 2011

The Mercosur Summit ended three days ago. Everyone left. The question is: Where in the world is Hugo Chavez?

There was no “arrival” of Hugo Chavez in Venezuela. No announcement. No shots or video of the President arriving. Nobody has seen him since.

So, where is he? And is this anyway to run a country?

He is likely in Cuba getting treatment. He went to Uruguay not only to try to get Venezuela admitted as a full member of Mercosur, but also as a way of going to Cuba via the back door.

We will likely “hear” from him on Christmas Day, but unless he returns before Sunday or he left a video, we are unlikely to see the Venezuelan President until next week after treatment.

Some doctors had predicted this trip, but as most things surrounding Chavez, we may never know.

Such are the ways of the revolution!

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No Mercosur for you, Hugo!

December 21, 2011

Despite pressures from the Government’s of Brazil, Uruguay and Argentina, as well as Hugo Chavez showing up at the Mercosur Summit, the much ballyhooed “political compromise” to allow Venezuela’s full membership in Mercosur, thankfully did not materialize. The political solution was simply to change the rules so that not all countries had to approve the country’s admission as a full member, bypassing in that way this requirement, which implies every single country is satisfied that the democratic standards are complied with by the country requesting admission.

But Paraguay would not play ball, not the Paraguayan opposition that refuses to approve Venezuela’s entry because they don’t believe the country satisfies the democratic requirements, but that country’s Government, likely fearful of the reaction by the opposition if they are bypassed.

Shame on Dilma Rouseff for backing this proposal. The Brazilian President was a victim of abusive Governments, but seems to feel naively they can not come back in her lifetime to haunt her. I hope she is right, but allowing abuses to continue in one country will simply allow all countries in the region to relax the defense of human rights and this will eventually lead to a backlash against those that allowed it.

Meanwhile, Hugo comes back to Caracas (or direct to Havana for treatment during Christmas?) having lost the battle that he decided to play with a full court press, including his physical presence in Montevideo, where he blamed power and obscure forces for the delay in Venezuela’s entry into Mercosur.

A victory for Paraguay, a small country battling giants, something Chavez would have hailed two decades ago.

A victory for Venezuelans, who at least know that Chavez will have to watch what he does to keep the pretense of democracy.

A loss for the leaders of those countries trying to make the defense of human rights more “flexible” , all “left wing” leaders who now that they have attained power have forgotten their fights when others abused their rights. But they will try it again, if Hugo’s health gives them a chance.

But for now: No Mercosur for you, Hugo!

Posted in Uncategorized, Venezuela | 59 Comments »
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The Venezuela Money Printing Machine is Running at Full Speed

December 19, 2011

I had not looked at monetary liquidity M2 in a few months. This number measures the amount of money in the economy, including bank deposits.

I checked it yesterday and it had reached again US$ 100 billion at the official rate of exchange, in fact, to be precise, it is at US$ 102.3 billion after reaching US$ 100 billion on December 2nd, according to the Venezuelan Central Bank.

And yes, and I say it reached that number again, for the second time in the country’s history. You see, a year ago it had reached US$ 100 billion (US$ 113 billion to be precise), but then the Government through the magic of devaluation from Bs. 2.6 to Bs. 4.3, instantly pushed it down to US$ 68 billion on January 1st.

Thus, since the first of the year monetary liquidity has increased by 49%, or 57% since one year ago.

That’s a lot of new money out there. A lot of printing. That’s why inflation is so pesky, if rather than blame speculators and the oligarchs, the Government allowed M2 to rise more slowly, then inflation would ease.

It may sound like a chicken and egg problem, what comes first? The printing of money or the inflation? Well, I can assure you that if the rate of increase of M2 is double that of inflation like it is today (inflation is around 27%), inflation is surely going to go up. More so when the amount of goods available for sale has not increased much, certainly no more than low digits, while the amount of money has gone up dramatically.

It is simply too much new money chasing the same amount of goods.

And the amount of goods can not be increased via imports much. Imports this year are running more or less at the same pace as last year and right now, the ability of the Venezuelan Central Bank (or CADIVI) to give more money is quite limited. You see, a year ago when M2 was also US$ 100 billion, international reserves were about US$ 30.2 billion, of which gold was about US$ 16 billion. That is, “liquid” reserves (reserves-gold), with some caveats, was about US$ 14.2 billion. That is about six months of imports via CADIVI.

Today, reserves are down to US$ 27.7 billion, of which gold is about US$ 21 billion, that is a much smaller cushion of US$ 6.7 billion in liquid reserves and now the gold is harder to sell or pledge, because it is here. It would have to be shipped abroad first. Thus, the liquid part of reserves is slightly more than one quarter. A little more than three months, that’s all.

The worst part, is that the Government is very unlikely to devalue in 2012, because a devaluation would give inflation a push and you know who wants to be President forever. Thus, as the Government spends ahead of the 2012 election, to give people a felling of well being, M2 will increase more and more, making the idea of removing exchange controls more difficult. A year ago, there were Bs. 9.8 for each dollar in international reserves, today there are Bs. 15.9 for each dollar at the Venezuelan Central Bank (including the gold, of course). In a year, any attempt to remove exchange controls would require a bigger devaluation and more foreign currency to be able to defend a floating rate.

Barclays estimates that inflation in 2013 will reach 36%. The Government will pull all of the stops, decrees, bills and threats in order to slow down price increases. Unfortunately, this is a very difficult game as inflation accelerates, as the private sector may decide not to sell or make goods at a large loss. Then scarcity will increase and politically and scarcity seems to carry more weight with voters than inflation.

And no matter who wins the election, there will have to be a very significant adjustment to the rate of exchange in 2013. And thus, more inflation. The mirage of lower inflation moves further into the future, while the Government ignores the fact that it is the main driver behind it.

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The Arrogance of Chavez’ Foreign Advisers

December 18, 2011

Juan Carlos Monedero spews out his brand of revolutionary BS for Madrid’s ABC newspaper

The paid ideologues and advisers of the revolution, like Juan Carlos Monedero above,  are truly arrogant and superficial. After a decade of living off the failed revolution, this is all they can say about what has happened in Venezuela. Some random choices with my comments:

-Chavez has learned to think for himself.

Really? When did this miracle take place? Last Year? Does it mean he no longer needs you? Shouldn’t it be the other way around, he should have been able to think by himself before he got to power rather than learn on the job, screwing up everthing?

-A large part of the budget has been devoted to opening schools so that people can think on their own.

Funny, the record of building schools by the Chavez Government is simply dismal compared to that of the failed IVth. Republic, where did the money go?

-The advance in social terms is spectacular.

Really? Spectacular? Where? Did you read Luis Pedro España’s book on poverty in Chavez’ first ten years? And why didn’t you answer the question about the money? To compare Mexico with Venezuela just because they produce oil is simply ignorant and evasive. Why not Nigeria? Did you also advise Mexico?

-UNESCO has declared Venezuela as a territory free of illiteracy.

Jeez, you still believe that BS? You are “critical” about the world, but have failed to note that illiteracy was not high to begin with in Venezuela and that there was never any such Unesco certification? Have you ever seen this link? Or is this one more official for you? Unesco gives no such certifications! Or have you ever read Francisco Rodriguez’ work? Or you are just not that “critical”?

-The largest indices of crime are in Central America and Mexico, not in Venezuela.

Again, the question was about Venezuela, the country that pays your vacations, not about Mexico or where are  the largest rates of crime. When Chavez got to power Venezuela was not even in the radar in the top ten of crime in the world, now we compete with those countries you mention. You say ten years is not enough, sorry it took ten years to get us to where we are in crime.

-The Bolivarian Government has preferred to pay with high inflation than with 5 million people without jobs like in Spain with low inflation.

Truly pathetic, we have both, high inflation and half the work force does not have formal jobs. Have you ever thought about the effect of high inflation on the poor? You clearly have no clue.

-(Chavez’ Government) needs more time to solve the historical structural problems , linked to corruption, inefficiency and the rentist culture and clientelism as a way of life.

You must be kidding me? Chavez’ Government has promoted corruption, inefficiencies and has been the champion of enhancing the rentist culture to say nothing of clientelism.

With advisers like this, no wonder Chavez has taken it upon himself to begin to think on his own.

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The Curious Downfall of the Heir Apparent to Hugo Chavez

December 17, 2011

It was one of the biggest political surprises of the last few months, if not years, when Hugo Chavez announced that his Foreign Minister Nicolas Maduro, would be the candidate for Governor of Carabobo State in 2012. Maduro had been considered Chavez’ heir apparent if it became necessary for the Venezuelan President to step aside in 2012 due to health reasons. In fact, many people, including yours truly, believed that Chavez would name Maduro as his Vice-President some time in the very near future, replacing Elias Jaua, who is not popular among various Chavista factions.

That all was not well in Maduro-land was barely noticeable last week when his wife, Cilia Flores, was replaced in the leadership of Chavez’ political party PSUV by none other than Diosdado Cabello, once also considered Chavez’  clear successor. But Flores had been in the doghouse for a while, as she had been removed early in 2011, before Chavez’ illness surfaced, as President of the Venezuelan National Assembly.

It was unclear why the sudden change of heart for Maduro, who had been acting in roles beyond that of Foreign Minister, including being the main speaker at a service held for Hugo Chavez in Manhattan and being part of the commission studying the changes to the new Labor Law. Maduro was also the only Cabinet Minister to go back and forth between Caracas and La Habana, when Hugo Chavez received treatment for his cancer in that city between June and September.

Chavez’ announcement was made the day after Maduro received an ovation that apparently irked the President, but I am sure there is much more to the story. For now, Chavez is in the search for a new Vice-President, with most betting that it will remain all in the family with his son in law, Jorge Arreaza, the current Minister of Science and Technology, being named Vice-President early in 2012*. His current Vice-President Elias Jaua, had already been nominated as candidate for Governor of Miranda State by Chavez a few months ago in what was believed to be an elegant way of disposing of Jaua.

Chavez is making daily changes to his entourage, with rumors that new important military appointments will be made soon. For now, none of the groups fighting for power feels they hold in a solid position, as the downfall of the heir apparent may simply be a signal by Chavez that he has yet to make his mind up. When he does, Maduro may be back, in another sideways move by the Venezuelan President.

*I don’t think that Arreaza can be Vice-President if I understand what “parentesco por afinidad” means in Art. 238 of the Venezuelan Constitution, which bans the VP from being related by blood and/or affinity to the President. I believe, but I am not 100% sure that Chavez is related to Arreaza by affinity.

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A Gallery of Chavismo “cursileria” (Tastelessness)

December 14, 2011

Yes, I read Tal Cual and saw the magnificent Guardia Nacional “cursi” tribute to Chavez that Daniel and Quico posted, but just did not have the time to post about the symbolism (Why so many indians? Really? Jesus Christ? Who is the guy in red?)

Thus, since I am late to the party, but the painting just has to be in this blog, here is a gallery of similar cursilerias from Chavismo, including today’s masterpiece:

Nativity Scene:

Bolivar and Hugo, or is it the other way around?

Merging his profile with the flag:

I guess Bolivar does goes first:

Just art

Sometimes Jesus comes in last:

and please don’t ask who is the guy with the beard, I have no clue.

Posted in Uncategorized, Venezuela | 45 Comments »

The Devil Excrement at work…in Norway, as a smør shortage hits that country

December 13, 2011

While I usually don’t write about other countries, this one is too cute to pass up. Thanks to my Norwegian friends I learn that in that oil rich country there is a shortage of butter due mostly to protectionist policies imposed by the oil rich Government. Prices have reached absurd levels, like US$ 109 per pound and the like.

People are giving smør, as butter is called there, as gifts.

Now, there is an idea, a kilo of powdered milk for Christmas, I think I just finished my shopping…

Amazing how well these concepts work everywhere.

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How Did Crime In Venezuela Ever Get to Where It Is today?

December 12, 2011

It was 1988, Venezuelans were truly upset about crime. Imagine that! That year, there were all of 1,600 homicides in Venezuela, all of 9 homicides for 100,000 people.(I am using Veneconomy statistics)

Then came the Caracazo, the violence of that fateful day made numbers soar and that year, the number of homicides soared to 2,513. The coups in 1992 did not help numbers, 3,336 people were killed in 1992, doubled the number of 1988. And with it, gave way to the outrage and dissatisfaction that led to Hugo Chavez being elected. By the time Hugo came to power, 4,500 people were killed in Venezuela in 1998.

Today, the National observatory for Violence says there were 17.600 homicides in 2010, 57 deaths for each 100,000 inhabitants.

Almost seven times as much as of 1988 (per inhabitant)

Almost triple (per inhabitant) than when Chavez got to power.

These are homicides, the actual killing of a human being. Say nothing about the increase of theft, kidnappings or petty crime. The Government and people don’t even look or think about those numbers.

But look at the other side. According to the same Veneconomy numbers, when in 1998, the year before Hugo Chavez became President, the police made 118 arrests for each 100 homicides. Yes, they would detain more suspects than crimes, but they would be released.

Today that number is down significantly. How much?

Venezuelan police detains nine suspects for each 100 homicides.

That’s right. For each 100 people that lose their life only NINE are detained, many released when they are found not be involved.

Can Chavez be blamed for this?

You bet!

To begin with, he was the guy who refused to swear he would uphold the old Constitution, Yes, he created a new one, but he seems to have ignored it olympically.

But for 12 years, Chavez simply minimized security as an important issue. He dismantled a fairly competent police management created over the years, replacing them with former or active military with no clue as to how to fight or control crime. Meanwhile Chavez even justified stealing if you are hungry, much the way the Supreme Court decided to decriminalize invasions of private property today.

A prelude of new things to come.The end result will be the same, until the invaders take over the Justice’s property.And they will.

Meanwhile, the fight against crime becomes a struggle. Start with the numbers of weapons. After 13 year without control (and it wasn’t great before that!) the number of pistols, rifles and the like has also tripled. Unless you go and try to reduce that, there will be no progress.

Follow that with jails as full as they have ever been, where the jailed are innocent, half guilty and guilty, but now they all train for a new career in crime under one single roof. Ready for the real world next time the Minister for Prisons decides to lighten up the numbers.

Or take a Justice system that follows now the orders of the big honcho, jailing all those that make it alive to the prison. Yes, Hugo has discovered the crime problem and the cops are dealing with it the most effective political way: Kill them!

Do I need to go on? Not really. In the end, the question is not how we got here, but how do we get out of this?

Which goes back to Daniels’ question: Why do these opposition guys/gals want to be  President?

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Barbarians at the Gate: Chavista Hordes Set Fire to UCV’s Aula Magna Over Election Loss

December 10, 2011

The picture above is that of the fire set last night by Chavista hordes at Univerdad Central’s Aula Magna, a magnificent concert hall/auditorium, designed by Carlos Raul Villanueva and whose acoustics were fixed by Alexander Calder. A picture of the concert hall is shown below:

As votes were being counted for the election of Student Union President and other positions, more than 40 motorcyclists, their heads covered, invaded the university shouting “Castro-Communist Chavista Hordes” trying to disrupt the counting and burn the electoral material. They had incendiary bomb and tear gas canisters (wonder how they get them?) which they used to disrupt the process and scatter people away from the university.

Their problem? That once again Chavista forces not only lost a student election, but the Chavista candidate, Kevin Avila, received less than one out of each fifteen votes, as the three opposition slates received over 7,700 votes to Avils’a 500. Fortunately the data was preserved and the votes had been counted when this happened.

Kevin Avila is a Chavista student leader which was expelled from the University for violent behavior against the President of the university, but was quickly reinstated by the Venezuelan Supreme Court in one of those flash rulings that only those that support Chavez receive.

The total rejection of Chavismo by students and the fact that more than 50% of the students showed up to vote, despite threats of violence by the Chavistas to scare away the vote, was too much for Avila and his fascist comrades, as they roamed the university at will without any sign of security forces near the university attempting to detain them as they came out (The University is autonomous and the police does no enter its campus, but there are only well-defined narrow entranecs that can be controlled by security)

Is this is a sign of what we will see in 2012? Is this how Chavismo will act when and if it loses the Presidential election in 2012? That is the scary part. As Chavez spoke to the radio last night, claiming to be fine and jogging, these barbarians were trying to burn down Universidad Central de Venezuela, one of the leading educational centers of the country, which ironically nurtured most of the university graduates in Chavez’ Cabinet and where Giordani, Merentes and Navarro worked all their lives. Shame on them and on the Government for allowing this to happen. But more importantly, shame of them for staying silent in the face of the type of fascism that they claimed to ahev spent their lives fighting.

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