Tuesday, March 21, 2006

Inside newspaper articles that make you go hummm.....

Sometimes we are tempted to stay on the front page news, the glamorous ones that make you want to buy the newspaper. But quite often the real important, the long term piece of news, might be buried on page 4 of the second section of El Universal.

That Sunday piece resumes the interview of Perez Vigil, from Conindustria. Conindustria is a serious organization that gathers together the private producing sector of the Venezuelan economy, the industrial one that is. Those are the people on the ground, that suffer directly of the ill advised governmental policies. They are the ones that are in for the long run, not for some political term (although under the reign of Hugo I…). There were two things that Perez was quite clear about.

The first item is that decision to go into MERCOSUR is a political one and needs to be carefully evaluated. Venezuela getting into the Mercosur is the party asking to get inside and thus will have to subscribe to previous agreements without being able to renegotiate them. Besides, nothing happens in the Mercosur that is not approved by Brazil and Argentina. You can observe these days the uneasiness of Paraguay and Uruguay. Venezuela risks very much to be treated the same, as a simple provider of oil. And in addition Venezuela would not get much more form the Mercosur by joining than what it is already getting as an associate, but it would get more obligations.

He also adds a swipe comment at Mercosur saying that in Mercosur conflicts are arranged between presidents whereas the Andean Community is more advanced, already disposing of a parliament, a justice court and other institutions [which I may add is probably one reason why Chavez prefers Mercosur, not willing to have anyone restrain his movements legally]

And he does not show any optimism as to the possible improvement of Venezuela competitiveness. He points out that the main providers of Venezuela, Colombia and Brazil, with whom we already have huge trade deficits (1), do not suffer of the main limitations imposed on the Venezuelan private sector, namely the currency control exchange (CADIVI), price control and prohibition to fire people (which of course blocks new hiring stemming expansion and risk taking by entrepreneur not willing to get saddled with expensive personnel if their venture fails). And another laundry list of restrictions that are not suffered by other folks exporting to Venezuela.

The other item he mentions are the flawed statistics. For example Perez Vigil implies that the -0.4% inflation of February is bogus. His studies on the Central Bank numbers reveal that 18% of the items they went out to check for prices were not available. He points out that they are available but on the street market, not on the shelves of the stores monitored by the Central Bank. As this blogger has pointed out in pictures, empty shelves for this or that are now a frequent occurrence. The reason is the price controls. Thus, many producers prefer to go to street vendors not subjected to state price controls. There it is possible to find the items missing with large mark up above the official price. As Perez dryly comments “This way inflation will drop to single digits, but that is not the reality”.

The other fraud is the unemployment rate. Now you are fully employed if you work 2-3 hours a week. All those that belong to a Mision that gives grants are also considered fully employed. And there are lots of people that have stopped looking for work as the private sector is not hiring.

Recovery? What recovery? As this blogger has pointed out many times, what we see in Venezuela is an artificial boom based on huge governmental spending, lots of imports courtesy of high oil price and a development only of the commerce sector distributing around the imported goods. The so vaunted Bolivarian cooperative sector is as far as one can tell only a marginal participant, mostly in redistribution schemes for governmental agencies. But where are the real production jobs? The new private sector industries?

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1) Perez Vigil states that Brazil exports to Venezuela 1,200 millions USD whereas Venezuela, oil included, exports back to Brazil 200 millions only. In a previous post I also mentioned the huge trade deficits of Venezuela toward Colombia, 889 million dollars just for 2005.

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