Tonight Chavez in a single address through VTV announced the long awaited devaluation. I friend called me to tell me the news, I kept watching my movie unperturbed...
See, Chavez who calls for cadenas on the stupidest of motives this time was ashamed enough to announce devaluation sans cadena. In his propaganda goals Chavez has no problem to force simultaneous transmission on ALL TV and radio outlets, for as long as he pleases, for as often as he pleases. That is the cadena. But to announce that we were losing half of our savings, half of our incomes, half of our property, he does that cowardly, at the end of the long Venezuelan holiday of late December early January, on a Friday night, only on the state networks.
I think this is the real news tonight, a reminder of what a coward Chavez is.The devaluation? We were wondering how come it had not happened yet.
As for the devaluation itself, it will affect us of course, pushing the inflation of 2010 to the 50% levels. But we are already at 30% and a lot of the goods that would "benefit" from the dual exchange rate were already purchased at the parallel market rate, comparable to the new one when you factor in corruption.
I did predict a devaluation to at least 3 Bs per USD for the first semester and I am proven right, though earlier than expected (I was thinking February). What I did not preview was the dual exchange rate because the government had fought for so long from returning to the RECADI years of Herrera and Lusinchi where we had several type of exchange rates. That fostered a corruption that chavismo did not want to be associated with. But now that the corrupt bank scandals are on us with all of those overnight fortunes made on currency exchange shenanigans, why not go to a dual exchange?
This one is set wonderfully: what the government buys will be at 2.60 for a USD. What the rest of the people buy will be at 4.3 Bsf, and what the government sells overseas will be at 4.3 Bsf. A sweet deal if ever: the government keeps subsidizing largely what it buys to win elections and get TWICE the amount of Bolivares for what it sells, yet more extra income for Chavez at electoral time. The average? A little bit above 3, as I predicted (pat, pat, pat...)
But there is a reason why Chavez is ashamed enough to go off cadena mode, even though he put the new rate at 4.3 (the low one, the 2.6, is just a fake for Chavez direct electoral needs).
In 1983 the currency was at 4.3, the date of our first major devaluation. When Chavez took office it was reaching 500, about 100 fold devaluation in 15 years. Today it is at 4300 (we chopped three zeroes a year ago), another 10 fold devaluation in 11 years. There you have it, the extent of Chavez failure, even though he got a fortune in oil between 2003 and 2008, a fortune the other guys did not get.
You cannot put any spin on that. Nor on Chavez cowardice.
Por una vez no hizo cadena, asi asi es que se gobierna, mal aconsejado, o será que las luces de su entorno lo hacen adrede? Las consecuencias de este desgobierno serán bárbaras, los acróbatas de la economia gobiernera piensan que tienen una malla para amortiguar la caida, allá ellos, pero pobre el pobre!
ReplyDeleteChávez also announced that the BCV will start to intervene in the exchange market to reduce speculation. This is surprising because that market supposedly doesn't exist and it's illegal. Until now they've been issuing bonds to slow down the black market, this has made fortunes for the well connected. Does this mean they're going to stop the issue of bonds?
ReplyDeleteChavez also announced they're going to stimulate exports. This has to be a bad joke. Everything the government does is depress production and stimulate imports. If someone dares to export instead of selling internally at fixed prices he threatens to expropriate.
The reality is that the devaluation reflects the real exchange rate which is somewhere between the government rate and the black market rate.
ReplyDeleteNormally a country devalues to insure that its products stay competitive in the international markets. But Venezuela does not export anything other than oil - and Venezuela is selling all it can produce which it aint as much as it used to be due to lack of investment in oil production. Diminishing foreign reserves may have an influence too. And we know Thugo spends hand over fist as short term not meaningful social happiness bribes, and to buy support from abroad.
So the big question, is why devalue at this time. Since I have not been in Venezuela in quite some time could some of you help shed a light on this question.
What about the introduction of the two official exchange rates at2.60 and the 4.60?
Thugo bandits will have the 2.60 rate available to them for sure. For them the wide gap between the government rate and the black market rate makes their reward for total loyalty to the supremo of Miraflores - its a huge corrupted bonanza.
As to the two Venezuelan F-16 going out to intercept the US plane over Venezuelan air space. Isn't it funny? He sent the US made planes who are barely flying due to lack of spare parts. I can see him talking to some other fat Air Force General now "Well mi gordo if the US counter attacks our F-16 planes, it will not be a big lost. We can barely fly those Yankees F16s for much longer since we lack spare parts. Let's get some value from out of the pile of gringo junk in propaganda currency. If they are downed, I will have an excuse to replace them with Russian attack planes and we get a chance to increase our swiss account by a few millions. MANDALOS GORDO MANDALOS YA! You can hear the Fat Air force General outside of Thugo closed Miraflores office doors ->hahahaha
Alejo, VZLA Paraiso Perdido
Well it had to happen - election coming & all - but it is quite a jump. A 100% devaluation.
ReplyDeleteThat has to hurt but it shows just how desperate & "seat of the pants" he runs things. His "advisors" probably told him there was not going to be any money to buy the AN elections & his was his solution.
Lots of questions to be answered:
What happens to the travelers now outside of the country using their CADIVI credit cards?
What will happen to the permuta market on Monday?
What will happen to the prices of consumer goods nest week? Many were already priced at the parallel rate.
How can he now say that salaries in Venezuela are the highest in SA when he just cut them in half? Is he going to double them on May 1?
How will he explain away his promise to never devalue?
It's going to be an interesting week.
oh well...better there than here....oh wait !! we have Obama, so maybe not that far off for us too.....
ReplyDeleteDaniel, I did not know that this WAS NOT a cadena. Thanks for letting us know...that's typical Daniel, who goes beyond the straightforward. Chapeau!
ReplyDeleteDaniel, one of the many reasons the international left loves Chavez is the so-called "worker-controlled" industries. There is only one (as far as I know) in Venezuela, Alcasa. The whole concept is flawed on its face but they've kept Alcasa afloat for years with subsidies so they can maintain the facade of "cogestion." Well, it looks like this workers' "paradise" may be falling by the wayside in the need to save energy.
ReplyDeletehttp://www.reuters.com/article/idUSN2212796520091222?type=swissMktRpt
Of course the government is busy saying employment is gauranteed.
http://www.rnv.gov.ve/noticias/?act=ST&f=4&t=116838
So, either this white elephant stays afloat, at everyone else's expense, to bolster Chavez's image with his sycophantic followers or they face reality.
Daniel
ReplyDeleteWhat a coward - agreed. Just makes me want to vomit to think that soemeone like this and his cronies can get to run a country. I feel sorry for everyone left behind.
One small correction - from 500 in 1998 to 4300 today is only 10 fold at best devaluation, not 100
Interesting. Also, just a few years after he named his currency fuerte, he has to devaluate. It's coming to the end soon. And really, the bolivar has devalued to 6, hasn't it?
ReplyDeleteHope your film was good Daniel, however Chavez face was worth the watch. This is not anymore the good old Chavez we were so used to, on top of the world, making jokes, popular discourse. This Chavez looks for his words, looks wasted and reminds me of a line in the Godfather III, "power runs down those who don't know how to use it". Would never vote for him if only because he looks like a looser now.
ReplyDeletemedio criollo
ReplyDeleteyes, it was a typo. already corrected.
if you read the way it was put, reminding readers of the oil bonanza that chavez enjoyed but that was not there for the previous devaluation cycle, it should have been 10 and not 100.
but worry not, we might well reach the 100 before chavez leaves office. a frightening concept.
the thing is that a 10 fold under chavez is IN FACT worse than the 100 fold before. then it was a time of hyperinflation and lax controls, whereas since chavez came to office the world has been tightly controlling its inflation. as a matter of fact chavismo in its earlier period also controlled inflation until ideology and populism got mixed up with unbridled narcissism.
in other words: having a 50% devaluation when your neighbor has a 20% one is no big deal. but when your december inflation is almost equal to your neighbor YEARLY inflation, then things are way different and much more damaging. the chavez 10 fold is at least as bad as the 100 fold from before.
can anyone confirm exporters will be getting 2.6 for their dollars if they decide to bring them back to Venezuela?
ReplyDeleteNo, better don't confirm. It is Saturday...vamos a la playa, lalalalalo.
Daniel, I should have known the announcement was going to be today. Those announcements always take place the day after my sister emails me saying the whole family is going for some days to the beach.
What else can we expect from this coward Thugo!
ReplyDelete1979 Boat People said...
ReplyDeleteWhat else can we expect from this coward Thugo!
1) Devaluation was inevitable. Should have been done years ago.
2) What else? Anything is possible. The sky's the limit.With Thugo, there will always be something.
Sure wish I could visit VE again, but not under this administration. (And, there goes any future purchases of Pampero Anniversario.)
ReplyDeleteot but this is insane:
ReplyDeletehttp://www.laprensadigital.com.ve/?tag=oficinas-publicas