Saturday, March 21, 2009

Chavez's "paquetazo"

As I am ready to go to bead I think it is fair to mention that tomorrow we are supposed to hear of the economic crisis package that Venezuela will finally chose to adopt, way behind most of the world, and way, way behind serious countries. Of course, all the postponement by chavismo due to its fanciful daydreaming of oil prices climbing back up fast, due to the need to make sure the beloved reader can be president for life, due to too many years of politically successful populism, have resulted in measures that will be tougher than what could have already been done last fall, including, gasp, the first price increase in gas in ten years. Yeah, that is right, it is possible that Chavez might do the very same thing that he used to justify his coup in 1992: the drastic economic measures that affected so much the people of Venezuela and resulted in the "caracazo" (they did not, really, but revolutionary lore is too time consuming to dissect in this post).

But Chavez will not do it. In fact after today massive rally in Maracaibo to support Rosales, where among other thing the opposition decided to put the blame squarely on Chavez, he might postpone for yet a few more days the announcement. But let's assume that tomorrow indeed he will try to counter Rosales hit of today. He will probably tone down whatever "package" he has in mind and will dedicate most of his speech to insult Rosales and the opposition. How will that help the country I need not insult your intelligence with it.

In fact the government tonight is for sure feverishly working on how to distance itself as much as possible from the "paquetazo" image, that the Venezuela political body has internalized since 1989. It is also trying with equal desperation ways on how to put the blame of the measures on the opposition. That this one has had no say whatsoever on the country polices since at least 2004 is no obstacle for chavismo. However I suspect that the folks that he managed to fool once again a month ago might not be so lenient this time around. After all how can Lorenzo Mendoza be accused of the economic crisis when Chavez is threatening to take away his business. I mean, you really need to be weak minded to buy the idea that a guy about to lose all and perhaps even face jail was able to direct Venezuelan policies for the last 5 years. Even more, "harina P.A.N." has not been missing since 2004, and remained affordable. This might not be true anymore AFTER Chavez implements his "paquetazo".

So, what should this "paquetazo" include? As far as I am concerned it should include the following measures, some applicable maybe progressively, but all completed by the end of the year.
devaluation from 2.15 to the USD to at least 3
increase in V.A.T. to 15% for many items
income tax up (but not business income)
multiplying gas price by 10 to get back to its price level of 1998
duplication of the price of electricity, cooking gas and water

and this ONLY with the hope to retain enough resources to keep financing the social programs misiones!

In addition just to allow for the production to restart on more solid bases and to decrease significantly our dependence on food importations you need to at least:
improve CADIVI hard currency access to all agricultural activities
end price control on at least some items to make sure that at least some sectors of the food chain are covered (free rice while continuing control on corn, for example)
stop land seizure and invasion, or at the very least guarantee property as long as specific items are grown
improve safety and labor relations in the country side
limit food importations as much as possible, and do them at prices reflecting the country's production costs, that is, no subsidy on imported feedstuffs!

and I am not touching other area of production in Venezuela: I just try to imagine what it would take to keep at least "essential" programs working and stopping the growth on our dependency on food imports.

And what we might get? Forget about the second list, that would mean that Chavez renounces his demented agricultural policies. Not going to happen. On the first list you might as well cross the devaluation. Gas price hike would be a meager 2-3 fold. Taxes will be increased across the board, including a tax on business values just as these might get unable to pay it due to the recession coming. Maybe some agencies would be restructured with people becoming jobless to make some limited savings. Plus a collection of small showy measures that even put together will not amount to much.

The result? Nothing will be solved; however the measures will be enough to feed the inflation pump and soon enough any temporal relief felt by the state will be annulled, not to mention an aggravation of the recession. And that will be at best because if Chavez resorts to his announcement yesterday that he might grab the bank reserves at the Central Bank we could even end up having bank runs as people get scared for their hard earned money. The recession and inflation that would follow that would be disastrous.

But all in all it does not matter: I think that Chavez waited for too long and judging by the increasing workers protest he is facing a very hot summer.

-The end-

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