The Christmas season has officially started in Venezuela (LitPolEcon 2/3)

I don’t keep up with Latin American affairs too closely and this will be more of the same to many. But doesn’t it seem like more than more of the same? Scanning headlines perhaps with my most recently posted gobbet in mind and realized I had missed a lot going on in Venezuela.  I think I got distracted once Hugo was gone…   I had been thinking of picking up a recent monetary policy themed dystopian sci fi novel but that is feeling superfluous after a morning spent catching up with recent events.

I’ve mashed together some paragraphs in cod-literary sequence despite the fact that I really shouldn’t even think of dipping into blogging foreign affairs but this sickly vertiginous feeling that I have reading this needs some sort of organizing form for me….I highly recommend skipping the rest and just hitting up Venezuela in your favorite news source. A close to random selection of headlines will yield unending supplies of this.

A 25-year-old Venezuelan who appears on TV in her country and is an accomplished flamenco dancer is the new Miss Universe. Gabriela Isler was crowned Saturday night in the pageant at a sprawling exhibition hall on Moscow’s outskirts. In the excitement just after the announcement, the tiara fell off Isler’s head as she was being crowned by Miss Universe 2012, Olivia Culpo of the United States. Isler caught the crown laughing. Venezuelan President Nicolas Maduro congratulated Isler on Twitter, calling her title a “triumph” for Venezuela, a country that has now won three of the last six Miss Universe pageants.

The Christmas season has officially started in Venezuela, thanks to President Nicolas Maduro, who recently declared it so. Maduro made the announcement at a Socialist Christmas fair in the city of Caracas. According to National Public Radio, the president explained that he made “Christmas earlier because happiness and the Nativity and waiting for the arrival of the baby Jesus, it is the best medicine.” But Maduro’s decision is not as simple, or as crazy, as it may appear to some. Venezuela pays out an annual holiday bonus to government workers at Christmas. Under the new calendar, those workers could receive that money by early December, just a few days before municipal elections are scheduled.

Thousands of Venezuelans lined up outside the country’s equivalent of Best Buy, a chain of electronics stores known as Daka, hoping for a bargain after the socialist government forced the company to charge customers “fair” prices.President Nicolás Maduro ordered a military “occupation” of the company’s five stores as he continues the government’s crackdown on an “economic war” it says is being waged against the country, with the help of Washington.

For Asdrubal Oliveros, an economist at Ecoanalítica, one of the country’s leading consulting firms, this recent bout of food shortages is the result of a series of elements coming to a head. From an over-reliance on imports to price controls and, quite simply, a lack of funds, food shortages in Venezuela have not only peaked but they have lasted longer than ever. For Oliveros, an additional cause for the shortage of basic food staples is the decrease in agricultural production resulting from seized companies and land expropriations. “More than 3m hectares were expropriated during 2004-2010. That and overvalued exchange rate destroyed agriculture. It’s cheaper to import than it is to produce. That’s a perverse model that kills off any productivity,” he says.According to President Nicolás Maduro, the food shortages are being artificially induced by the opposition. He claims they form part of wider plan concocted by the CIA to destabilise his government, sabotage the oil industry and trigger power cuts. In response, Maduro announced the creation of a state council that would inspect private companies to ensure they were not deliberately slowing distribution or decreasing production.

Venezuela “will really have to face difficult policy issues probably shortly”, Lagarde said on the “Oppenheimer Presenta” programme. The IMF head however acknowledged that the institution lacks precise data on the country, which for the past 10 years has refused to submit to the Fund’s annual economic evaluations for its member nations. “It’s very hard for me to tell you what we see because we don’t have the information that we normally work with,” Lagarde said. Former Venezuelan president Hugo Chavez, who died in March, had repeatedly accused the IMF of being an instrument of American imperialism and threatened to quit the Washington-based institution.

Venezuela hopes to wipe out toilet paper shortage by importing 50m rolls. Minister blames shortage on ‘excessive demand caused by media campaign generated to disrupt the country'”The revolution will bring the country the equivalent of 50 million rolls of toilet paper,” he was quoted as saying Tuesday by state news agency AVN. “We are going to saturate the market so that our people calm down.”Finance minister Nelson Merentes said the government was also addressing the lack of foreign currency, which has resulted in the suspension of foreign supplies of raw materials, equipment and spare parts to Venezuelan companies, disrupting their production.”We are making progress … we have to work very hard,” Merentes told reporters on Wednesday.  The government’s main response to the scarcity of food and other staples, such as toilet paper and toothpaste, is a conspiracy theory. It blames an “economic war” waged by the United States and its “fascist” allies in the Venezuelan opposition. On September 20th it sent the national guard to occupy a big toilet-paper factory. Officials said the “temporary” takeover was needed to check for irregularities in production and distribution.

It is a remarkable achievement. Amid the longest oil boom in history Venezuela has in many respects the worst-performing economy in the Americas, even though it has (it claims) the world’s biggest reserves of the black stuff and gets 94% of its export earnings from it. That is the legacy of 14 years of “21st-century socialism” under the late Hugo Chávez. Inflation is over 45% a year and supermarket shelves are bare of many staple goods. Even Nelson Merentes, the finance minister, concedes that Mr Chávez’s revolution has yet to achieve economic success. But oil revenues of $90 billion a year allow Nicolás Maduro, Mr Chávez’s successor as president, the luxury of debating whether or not to change course.

A fire broke out at Venezuela’s 146,000 barrel-per-day El Palito refinery on Sunday, but it was being brought under control and has not harmed operations, the oil minister said.”Our teams are putting out the fire. There is no danger to operations nor to people living near the plant,” Rafael Ramirez told state TV, adding the cause was still being investigated. State oil company PDVSA has suffered a string of accidents, outages and unplanned stoppages for maintenance across its refinery network in recent years, hurting the South American OPEC member’s fuel export capacity.

Mr Maduro claimed recently that in meetings at the White House earlier this year a plan was hatched to engineer the “total collapse” of the Venezuelan economy in October. A huge power cut affecting 18 (out of 24) states on September 3rd was due to sabotage, he said, as was a refinery explosion last year that killed 49 people. This month he set up an army-backed task-force to tackle the supposed plot, with the help of 0800-SABOTAJE, a hot-line. Mr Maduro has produced not a scrap of evidence for these claims. The private sector wearily promised to collaborate. After all, said one business leader, “we already face 50 to 100 inspections a month of various kinds, so what is one more?

Who had been in the plane? What had it been doing in Venezuela? Was it involved in the drug trade? Why had it gone up in flames? And where was the crew? Those key questions remained unanswered Thursday afternoon, two days after Venezuelan military officer Vladimir Padrino Lopez posted the photo of the blackened, smoking ruins of the plane, which he identified as a small Hawker passenger jet. The mystery was threatening to create a row between two nations whose diplomatic relationship has been particularly rocky in recent years.  Venezuelan President Nicolas Maduro, meanwhile, gave a speech on national television Wednesday in which he boasted that 30 airplanes linked to drug trafficking had been brought down while in Venezuelan airspace since the passage of a 2012 law aggressively targeting such planes. The last such plane, he said, had “recently” been taken down in “national waters.”Despite Maduro’s contention that the Venezuelans are adamantly fighting the drug traffickers, U.S. officials have long suspected Venezuela’s socialist government of maintaining ties with Colombia’s left-wing rebel group, the Revolutionary Armed Forces of Colombia, or FARC, which is believed to be heavily involved in large-scale cocaine smuggling operations.

Foreign exchange has been largely allocated by government fiat since 2003. On the black market, the dollar commands more than six times the official exchange rate of 6.3 bolivares. The government handed out more hard currency in the second quarter, which may have boosted growth. Mr Merentes is more pragmatic than his predecessor Jorge Giordani, a Utopian Marxist. Following a 32% devaluation in January there is talk of another, or even of floating the bolívar, though Mr Giordani, who is now planning minister, opposes this. Opportunists who delight in the profits to be made from graft and arbitrage, are happy to go along with him.
While regime leaders squabble over how best to conserve the legacy of Mr Chávez—now known, North Korean-style, as “the eternal leader”—economists debate how long Venezuela’s foreign-currency reserves can stand the current rate of attrition. They have plummeted by around a quarter this year, thanks in part to the fall in the price of gold, of which they largely consist. Liquid reserves amount to less than a month’s imports. There could be another $20 billion or so in opaque off-budget funds, but up to a third of this may be earmarked for specific projects. This week Mr Maduro was in Beijing, where he confirmed a fresh $5 billion credit line (with strings attached) and $15 billion in long-term oil and mining investments.

Sources:
http://www.latimes.com/opinion/opinion-la/la-ol-venezuela-christmas-november-maduro20131107,0,6525888.story#axzz2kMCLg0er
http://www.theguardian.com/world/2013/may/16/venezuela-toilet-paper-shortage-50m
http://latino.foxnews.com/latino/entertainment/2013/11/10/venezuelan-crowned-as-miss-universe-2013/
http://www.foxnews.com/world/2013/11/10/miami-herald-reporter-freed-by-venezuela-after-two-days-detention/
http://www.reuters.com/article/2013/11/10/us-venezuela-refinery-idUSBRE9A90HB20131110
http://www.usatoday.com/story/news/world/2013/11/09/venezuela-seizes-stores/3486581/
http://www.iol.co.za/business/news/lagarde-sees-storm-clouds-in-venezuela-1.1605076#.UoENtuKmYT0
http://www.bloomberg.com/news/2013-11-07/venezuela-inflation-hits-16-year-high-as-shortages-rise.html
http://www.theguardian.com/global-development/poverty-matters/2013/sep/26/venezuela-food-shortages-rich-country-cia
http://www.theguardian.com/global-development/poverty-matters/2013/sep/26/venezuela-food-shortages-rich-country-cia
http://www.economist.com/news/americas/21586850-adjustment-and-reform-are-economically-essential-politically-impossible-maduros-balancing

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One comment on “The Christmas season has officially started in Venezuela (LitPolEcon 2/3)
  1. jacksundance says:

    Wow! Venezuela is a Libertarian pontificate’s socialism-bashing wet-dream come true! So I will link to someone more articulate than myself instead of just rehashing the party line for ya:

    http://bastiat.mises.org/2012/04/turning-rich-natural-resources-into-scarcity/

    Price controls have been going on since Diocletian and before…it’s honestly just a problem of computation: the producers know their input prices and the reality of bringing something to market whereas central planners do not care because they can just print money or use taxation to buy things. That huge difference in the approach to making a living/generating income is what sets the wankers in the blood-stained ivory towers apart from the entrepreneurs and business men that have actually had to use real materials and organize real, personal wealth and available labor into a workable production plan out of a market economy (free market or some hybrid thereof). Well that and all the guns the governments have at their disposal to push something through: the emperor’s new clothes be damned! The free market ain’t perfect, but trying to manage the thousands of small choices consumers and businessmen in a market economy have to make day-in, day-out to survive is fucking impossible for a central planner. It’s just the natural elegance and efficiency of distributed, selfish computation versus single-threaded, single-minded utopian despotism. Oh wait, forgive me, selfishness is verboten in a socialist paradise… [OK so I rehashed and pontificated a little bit]

    More on price controls:

    http://mises.org/econsense/ch34.asp

    http://www.econlib.org/library/Enc/PriceControls.html

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