Nothing Is Simple
We’ll go Down The Rabbit Hole in a sec but first…In a follow-up from an earlier dispatch this week we have a piece from the Atlantic Council with the headline “Getting Venezuela’s Historic Humanitarian Accord Up And Running”. Since the signing of the agreement between the Venezuela opposition and the Maduro regime for a UN-managed $3.2 billion humanitarian fund utilizing frozen Venezuelan assets around the world to help the Venezuela people it’s been slow going getting the project operational.
There has been a lot of finger pointing about what is taking so long but here are a few of the salient points.
On the UN side of things they’re moving slowly and carefully due to concerns about the reputational risk of implementing a program that has drawn comparisons to the Iraq Oil For Food Program that was rife with mismanagement and corruption.
Another issue is getting the Maduro regime and the opposition to agree upon the location and amount of the funds that need to be transferred.
Once the location and amount of funds is agreed upon the next step is arguably the most difficult. The Maduro regime must formally request the funds be transferred to the UN. Despite their protestations to the contrary, the Chavistas have no interest in this happening in a timely manner.
As long as this drags out they can use the non-operational status as an excuse for not returning to the negotiating table with the opposition for free and fair elections, something which were it to actually happen would mean the end of Chavismo and 21st Century Bolivarian Socialism.
So, for this $3.2 billion to reach the Venezuelan people we first need coordination and cooperation between the Maduro regime, the opposition, the US government (in general), the US Treasury Department (in particular), the UN, and financial institutions and countries holding the assets.
Then when the assets are transferred to the UN fund the UN will have to coordinate with various agencies within the UN system including WFP (World Food Program), PAHO (Pan-American Health Organization), UNICEF (UN Children’s Fund), and UNDP (United Nations Development Program).
Then these various agencies will have to coordinate with numerous NGOs for the aid to actually reach the Venezuelan people.
Remember, the Maduro regime recently forced the Red Cross to dismiss their entire board of directors and threatens to prosecute them so the NGOs have their work cut out for them.
In short, this ain’t happening any time soon. When it comes to Venezuela, nothing is simple.
Now, lets head Down The Rabbit Hole…
Chapter 5/ continued…
…At the same time this was happening the government was printing money at an astounding rate. They kept increasing the minimum wage between 4-5 times per year and funding it by creating money out of thin air. The money supply increased 3,000% in 2018 alone. The hyperinflation genie was out of the bottle.
The earlier example of the three currency exchange rates was from January, 2018. By April, 2018 here’s how it looked :
DIPRO – 10 bolivares/dollar
DICOM – 60,000 bolivares/dollar (average for the month)
Black market – 880,000 bolivares/ dollar
At this point the minimum wage was 1,800,000 a month or just over two bucks. Here’s a snapshot of a few prices from 2018 :
Vegetable oil – 748,367 bsf (bolivares fuertes, after Hugo Chavez lopped off three zeros from the bolivar)
Cheese – 2,160,950 bsf (non imported)
Chicken – 2,299,500 bsf
Toilet paper – 400,000 bsf (two rolls)
Ground beef – 1,150,000 bsf
Pair of shoes – 6,000,000 bsf (non-designer brand)
As you can see, food was becoming a luxury and having to work more than three months to buy shoes isn’t doable. Over the next several months things would get much worse. The monthly minimum wage would reach a low of just over 60 cents/month when converted on the black market (the only real rate). Prices were so out of control that stores were weighing cash instead of counting it. Financial institutions were having difficulty because their systems weren’t able to process transactions in the trillions and beyond so they were amending statements with a note that the figures represented them dropping decimal places. Something had to give and Maduro had already shown he wouldn’t listen to anyone’s counsel on economic matters. He even blew off recommendations from Russia and China, his two biggest creditors.
People were using bolivar notes in various denominations to make things like handbags. Street vendors offered bills instead of napkins because they were cheaper. When riots and looting occurred and people came in to assess the damage the floor would be littered with bolivar notes from the register or cash box. They weren’t even worth picking up off the ground.
So what does Maduro do? Wait for it… He announces on August,2018 a complete economic overhaul including massive devaluation, a new currency (the “Sovereign Bolivar”), a 3,000% increase in the minimum wage, and all these changes would be tied to the government’s already discredited and utterly fraudulent and failed cryptocurrency, “The Petro”. He proudly proclaimed that, once again, no one with any knowledge of economics, finance, or business had any input regarding these changes. It was purely a Chavista invention and was a new way forward for “The Revolution” and the world. “Viva la Revolucion”!!…again.
The new currency, the “Sovereign Bolivar”, designation bsS (bolivares soberanos), would lop five zeros from the “Strong Bolivar, designation bsf (bolivares fuertes), which had lopped off three zeros from the bolivar. So, let me get this straight, one new bsS would be the same as 100,000,000 of those boring old pre- Chavismo bolivars. Uhh…OK…and we won’t even get into the details of “The Petro” here. Again, the failed cryptocurrency deserves it’s own chapter.
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