It's The Economy,Stupid
Before we wrap up this week’s Down The Rabbit Hole segment let’s talk about one of my favorite subjects,money. Caracas Chronicles had a lengthy piece titled “What’s The Truth About Venezuela’s Economy And What Predictions Make Sense.” As I read it I kept thinking about that famous quote from James Carville to Bill Clinton, “It’s the economy,stupid.” That’s the biggest reason why the Chavistas will never have free and fair elections, Maduro’s 15% approval rating aside. Sure, nobody really likes the guy, even his own party. Sure, the Maduro regime are Human Rights violators. Sure, it’s evident that their willful neglect of everything that effects the population, beginning with access to food,water, and electricity, constitutes crimes against humanity but the driving force behind Chavismo never holding free and fair elections (the crimes against humanity are related to this) is, when it comes to elections there’s one issue that’s always front and center with voters…it’s the economy,stupid! (my apologies) There has never been a more mismanaged economy in the history of the world than Venezuela under 21st Century Bolivarian Socialism.
So, where are we today and where are we going? Well, The March inflation numbers are 1.4%, put out there by the BCV (Venezuela Central Bank) versus 10.5% put out there by OVF (Venezuela Observatory of Finance). It’s worth noting that the BCV didn’t publish inflation numbers for years when Venezuela was in the throes of the second longest bout of hyperinflation in the history of the world. We also have economic growth projections for the coming year which differ wildly. CEPAL predicts the economy will grow at a 3% rate, which is inline with most estimates, and then we have the outlier of 20% growth by Credit Suisse. Any growth at all is big news as Venezuela has been in recession ever since Maduro took power in 2013.
Economist, Jose Guerra, says that the monetary conversions (removing 14 zeros from the currency under Chavismo) are an “accounting disguise”. The Venezuela government hasn’t released GDP data since 2019 but may resume now that it seems the hyperinflation period may be over (2017-2021)…or is it? In another month we’ll know the impact of Maduro’s foreign currency/cryptocurrency tax which will have a “ripple effect”. Here’s an example:
Let’s say someone buys corn from a farmer using dollars.(add 3%) Then they pay the driver to get it to the industrial silo.(add 3%) Then you have to pay the processing guy. (add 3%) Then you pay to get it to the wholesaler. (add 3%) Then the wholesaler sells it to the retailer. (add 3%) We have quickly gone from a 3% tax to a 15% tax.
At the end of April the tax exemption for imports expires (they pay no VAT which gives them at least a 10% advantage over domestic producers). Last year the government promised no more extensions although they’ve been known to go back on their word (constantly). They said they want to support Venezuela-made products. If that happens it will be inflationary. If you look at inter-annual rates of inflation the two rates, that of the BCV and OVF, are not that far apart, both being in the 250% – 275% range. I know it sounds high but coming off of one million % hyperinflation it’s quite the improvement.
The difference in the goods and services basket is also quite striking. In 2012, pre-Maduro, the basket constituted 20% of most family’s income. Today, with the 95% poverty rate and the massive devaluation, that number, for most families, is 100%
The article went on to say that the ponderations used by the BCV are unknown. “What’s going on there? Who knows?” I can tell you what I do know. The Venezuela economy has been a basket case since Maduro took power in 2013. It was actually a basket case under Hugo Chavez but the effects were masked by record high oil prices for a record high length of time and the unprecedented borrowing of massive amounts of money. I can remember, as a foreigner, having to exchange currency throughout the Chavez and subsequently the Maduro years. In the early days I exchanged $500 at a time and I could put it in my pocket. At one point I was down to exchanging $50 at a time, due to the rapid devaluation and inflation, and I needed to put the money in a grocery bag. People, me included, may not notice all the other horrible things the Chavistas do, especially now that they’ve got total control of the news, but putting food on the table can’t be avoided. There can never be free and fair elections under Chavismo because “It’s the economy,stupid!”
Now let’s head Down The Rabbit Hole”….
With the appearance of Juan Guaido on the political scene in January,2019 the level of media repression, including issues like the Univision interview, reached new highs (or lows, depending on how you look at it). Whenever Guaido would speak at a rally or would lead demonstrators the government would block Twitter, YouTube, Google, etc. At times they would shut down the internet altogether unless, like me, you had satellite internet.
On the morning of the failed uprising of April 30th, 2019 I was pleasantly surprised by being able to watch events unfolding live on CNN via my DIRECTV service. Well, that didn’t last long and the transmission was yanked off the air. After a brief search I found coverage on BBC but that was short-lived as well.Soon it seemed like everything was blocked although it came back bit by bit as it appeared the uprising would fail.
It was, for me, a taste of what journalists in Venezuela experience every day whether it;s putting out information or trying to get information. Since the big blackout in March,2019 and the subsequent smaller blackouts (in many areas it’s a constant thing) it’s hard for journalists to connect to the world. Besides lack of power and internet service they have to contend with persistent shortages of food,water, gasoline, etc…just like almost everyone in Venezuela. In many parts of Venezuela journalists don’t just jump in their car to go cover a story. They jump in their car to go wait in line for gasoline…or get cooking gas…or water…or whatever.
A good comparison of Venezuela vs the real world can be found in lawsuits related to journalism. Various members of the regime file lawsuits against media outlets and/or journalists all the time in countries outside Venezuela and they are almost immediately dismissed. Compare that to the 2019 award to Diosdado Cabello by a Venezuela judge of $5 million. Cabello, who most believe is the most powerful member of the regime, sued the website, La Patilla, for posting a three year old article from Spanish newspaper ABC regarding his links to drug trafficking. He knew he couldn’t get anything in a Spanish court but he could go after La Patilla in a Venezuela court and get $5 million for “moral damage.”
The courts are also helping the regime keep a lid on statistics it doesn’t want made public. The members of the National Assembly Finance Commission were stripped of their parliamentary immunity opening the door for the Chavistas to go after them. The commission, in 2019, was missing 5 of it’s 12 members who became part of the 14 National Assembly members in exile.
Summary : So where are we now? Well, the government owns 13 TV networks, 65 radio outlets, 1 news agency, and 5 newspapers.Through CONATEL’s public/private coop they control 235 radio stations, 44 TV stations, and 120 newspapers. All this while Maracaibo, the nation’s second largest city has NO NEWSPAPER, due to the government withholding newsprint which the government controls.
We consumers of media were treated in 2019 to the story that musician, Karen Palacios, was being released from prison (shortly after the UN report on the Maduro regime’s Human Rights violations). In May,2019 Ms. Palacios was notified her contract with the National Philharmonic would not be renewed. She posted her frustration on social media, was arrested the same day, and imprisoned for…wait for it…violating…yes, The Anti-Hate Law. What wasn’t reported on government media was that she had been ordered released by a judge two weeks after her arrest. Nothing happened for over a month and then (after the UN report) she’s miraculously released. By the way, she’s on probation and prohibited from speaking to the media. What more do you need to know?
That will do it for the week. We’ll be back Monday with more news and our next segment of Venezuela : Down The Rabbit Hole… Until then…
Have a great weekend everybody!!!
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