Tuesday, September 04, 2007

The booming Venezuelan economy

The Venezuelan economy is lovely humming along. Today we are treated with two economic numbers that will show to the world again that Chavez is a master economic planner and that all countries should follow his lead, and make their presidents "president for life". Well, not all of them deserve this as richly as Chavez does.

El Nacional (subscription only) tells us that the industry of personal armored vehicles is experiencing a boom. This year 1700 cars will be modified and armored. That is a stunning increase of 42% over last year. In Colombia where a real war goes on "only" 3000 cars will be modified this year whereas in Brazil which has at least 6 times the population of Venezuela armored vehicles are barely three times the number of Venezuela.

Interestingly in Venezuela the type of protection sought is more against common robbery whereas in Colombia or Brazil the largest share of the market is held by people needing protection against mob like gangs who manage real weapons. Note, even the protection against your local robbers is about the same price as the car you are protecting. This is no gadgetry, this is big money paid by people that are simply scared enough of the crime in Venezuelan streets. Ah! and the waiting lists are long. It will take you ate least 2 to 3 months between the time you decide to sign the contract to protect your car and the time you might get it back from the shop.

Of course, such high growth rates do affect inflation. The August numbers have erased the Sales Tax drop of 2% in June. Between July and August the inflation rate has eaten this "reduction" which allows us to suspect that the real inflation of Venezuela is probably running at a monthly 2% pace. In fact the Central Bank, still somewhat autonomous until December as it is preparing itself to be taken over by chavista statisticians that will manage somehow to invent negative inflation, reports that the price increase just for food items is 2.2% for august. This, my friends, in an economy where all the basic staples are subjected to price controls. Meanwhile the Central bank acknowledges a total inflation for the year of 17.2%, significantly above the 14.9% annual rate of August 2006.

Anyway, now that I think of it, I suppose that an armored vehicle makes sense when you face off the demential traffic of Caracas, and the fights to get a parking space at the few supermarkets who carry such scarce items as fresh milk or white sugar.

-The end-

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