Better..But Really Better?
We’ll head Down The Rabbit Hole in a bit but first…There’s been a lot of talk lately about the economy in Venezuela getting better. It’s hard to imagine it getting worse after over four years of hyperinflation and eight years of recession. They’re on track to have positive growth this year so, for the sake of the Venezuelan people, we can only hope. Given Maduro’s track record I’ll have to wait until the next 8 months are over because he has shown an incredible ability to screw things up. I hope I’m wrong but it does beg the question…the economy is better…but is it “really better?”
Caracas Chronicles had a piece titled “Is Venezuela Doing Better?” They posted a voluntary poll on their website and 59% of Venezuelans still in Venezuela said NO with 74% of Venezuelans abroad saying NO. They asked the question of those who replied “better”, What is better? The feeling seems to be “a decrease in lines to buy products (Venezuelans wait in line for everything),the availability of products, and fewer protests.” among those who say better. On the flip side, those who say no contend “higher cost of living, less purchasing power,and quality of public services”. In the unlikely event that Venezuela does manage to see double digit growth (a big if) it would take 9 years of double digit growth just to return to where Venezuela was pre- Maduro.
The OVF (Venezuela Observatory of Finance) launched a new instrument to track how much money a family needs per month, the CBGM. It consists of 25 food products for a two thousand calorie diet, transportation of 40 trips per month, as well as utilities, cooking gas, and phone. For March they came up with 841 bolivars or $187. That equals about 5 monthly minimum wages (after Maduro’s 18 fold minimum wage increase). CENDAS reported a number of $471 bolivars which would be about 15 minimum wages.
What do these numbers mean? Well, whether it’s five monthly minimum wages or 15 it’s clear that the average family in Venezuela is not exactly prospering. The good news is that not so long ago it took well over a hundred minimum wages to buy the basic basket. That said, the usual pattern for success after a Maduro minimum wage increase is that after 3-6 months things are right back where they were. I guess we’ll have to wait a bit to find out if things really are better for the average Venezuelan family.
Then we have Caracas Chronicles also reporting that SENIAT (tax authority) announced it will sell the fiscal equipment that stores can buy to implement the IGTF (foreign currency/cryptocurrency tax). The tax has already been in effect for over a month, causing chaos all over the place, so they’re a little late. It’s also worth noting that if, as previously reported, the new machines cost between $600 – $1,000 it would be the cost of 5-10 employees for a month. See what I mean about the Chavistas propensity to screw things up? It also remains to be seen how much it will impact sales ie; growth.
And on the oppression front we have IAPA reporting that outlets investigating corruption in Venezuela underwent raids, threats, and persecution of journalists and 3 major outlets were blocked.
On that note, let’s head Down The Rabbit Hole….
We’ve touched on expropriations but here are some shocking numbers.During the Chavez years the Venezuelan government expropriated 1,147 companies or facilities. Under Maduro accurate information is hard to come by but estimates put the number as of 2019 at between 1,800 – 2,000 total expropriations for the Chavismo years. Compare that to fellow socialist ally, Ecuador. Over the same time period they expropriated less than 10% of Chavismo’s number. Maybe that’s another reason migrants are fleeing 21st Century Bolivarian Socialism in Venezuela and not fleeing Ecuador?
How about a little comic relief? One trait that seems common to authoritarian regimes is their penchant for making demands on the international stage. Maybe it’s because they are used to being the big fish in a small pond but, whatever the reason, they seem to do it all the time. Here’s one of countless examples from the Chavistas.
At one time Venezuela was a leading member of the economic/political bloc called MERCOSUR, referred to as the “South American Common Market.” A few years ago the member countries, most of whom had been screwed on deals by the Chavistas, voted to drop Venezuela from their organization. No Venezuelan representative was invited to the meeting as the bloc had made numerous overtures to the Chavistas to change their ways to no avail.
Venezuela’s VP was Foreign Minister at the time and traveled to the meeting site to demand entrance.She was greeted by a MERCOSUR representative who informed her that without an invitation she would not be admitted.The Foreign Minister, Delcy Rodriguez, was incensed and demanded someone meet with her immediately. She was shown to a conference room and was told someone would be in to speak with her. After a few minutes (I probably would have made her wait longer) the same woman that had shown her to the conference room returned. When Delcy demanded to know who she was going to meet with…immediately! …the woman informed her, “That would be me.”
As badly as Chavismo crippled production you would think imports might be up. The stuff has to come from somewhere, right? Well, no. In 2012 when the economy was headed towards trouble but still in reasonably good shape due to the massive borrowing and high oil prices, the import numbers were up. Contrary to all their “smoke and mirrors” statements about increasing productivity the Chavista economic model was to import whatever they needed and pay for it with oil revenues and money borrowed from the Chinese and Russians. 2019 estimated imports called for imports to be down 83% from 2012 levels. So, they’re not producing goods domestically and they’re not importing them. Where are they getting what they need? Short answer, it’s a “let them eat cake” kinda’ deal. Chavistas drink champagne and the rest of the population is struggling to find water.
Note : This was written in 2019. In the last couple of years, due to Maduro’s waiver on import taxes, imports are up. In typical Chavista good news/ bad news fashion the increase imports hurt domestic production and the increased availability does nothing for the average Venezuelan as they can’t afford to buy these imported products.
Oh, and just so you know, I didn’t forget about exports. The 2019 estimated exports were $21.8 billion, down from $98 billion in 2012.This leads us to the precipitous drop in GDP. According to a July, 2019 IMF (International Monetary Fund) report, for the period of 2013 – 2018 the economy contracted by 65%. Overall the economy went from $350 billion to $70 billion (2019 numbers) under Chavista stewardship. As I’ve said before, these are numbers reserved for countries ravaged by war,natural disasters, etc. For Chavismo it’s business as usual.
In case you didn’t know, Venezuela used to have an impressive amount of gold reserves. As recently as 2011 they had over $30 billion in gold in vaults around the world. To great fanfare, Hugo Chavez repatriated almost all these reserves , supposedly to protect it from those who would sabotage “The Revolution.” The cameras were rolling and the flashes were popping (figuratively) as the gold arrived, was loaded onto trucks, and driven through the streets of Caracas in a parade-like or circus-like atmosphere. One had to wonder where it was going and more importantly what would happen to it (as if we didn’t know). That over $30 billion was down to under $8 billion in 2019 (under $5 billion today). If it weren’t for the narco-trafficking dollars coming in those reserves would be completely gone by now.
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