Thursday 5, February 2004
Today, CADIVI, the infamous agency set up to manage the currency control exchange of Venezuela reaches its first anniversary! Now the street value of the Venezuelan Bolivar (Bs.) reaches twice the official rate.
If it was easy to accuse the general strike of 2002/2003 to provoke the recession of the first semester of 2003, when we reach the conclusion of the first year of CADIVI it becomes clear that the ongoing recession is due more to CADIVI than to anything else. As a matter of fact, the weak "recovery", so vaunted by Chavez in the last quarter is more due to a relaxation of the the CADIVI control than to any regained economical confidence.
I have made up a little graph based on the chart published by El Universal yesterday, in turn based on the central Bank numbers. I rounded up the numbers for clarity.
The economical record of the Chavez administration is quite clear: a failure. There is no excuse for 1999-2001 since during the constitutional change he had all in hand. Real opposition only started in 2002 and after the February 2002 devaluation. The bad 2002 results are a consequence of the policies of the earlier 3 years. 2003 just built on that. I would like to stress that the Central Bank figures are based on a price control scheme and thus they must report the official price. The real inflation of 2003 is likely 10 to 20% more than what appears on the graph!
Simply said, there is no possible real and long term recovery when the private sector has no confidence in the administration financial management. And even less if the public sector tries to control it.
Tonight on TV an economist, Ricardo Haussman, said that one problem with Venezuela is that the government did not trust society and in turn most of society did not trust the government. Because the government of Chavez basically did not trust society at large, he tries to control every one of its aspects. I would modestly add that this phenomenon pre-dates Chavez, but he has elevated it to an impossible level.
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