Dakazo 2 and Technocrats

The advantage of distance is that one has no time to follow closely what happens in Venezuela nor the ability to self drown in useless details. Thus the mind clears up and one starts seeing "things". I see a "dakazo 2" in play and I see an avid embrace of technocratic managed inflation by the regime. The poor guys do not have much of a choice: the drop in oil prices is not a mere circumstantial affair and something must be done even though as it is always the way in Venezuela the decisions are not the right ones.

The "dakazo 2"

As this blog has often repeated the regime is paralyzed since Chavez death because any economic measure it may take will hurt one of its pillars. Weakness inside chavismo being what it is, there is no way the regime can risk alienating any of its bases. Though the apparent dismissal of Ramirez away of the oil money may indicate that the situation is bad enough that settling accounts between factions cannot be avoided anymore.

But price of oil is going down in a way that will last for a year or two. The regime that needs oil at 120 USD a barrel to survive will be lucky if it gets it a 80+USD.... the solution to the financial crush is very simple: stop sending oil to Cuba and force the Chinese to renegotiate previous agreements that are apparently too skewed China's way. But this is not an option so there is only one way for the regime to get the missing dollars: force the private sector to bring back its dollars held overseas.To do that you simply stop honoring CADIVI/Cencoex USD debts and force private sector to save its good name and reputation by paying. Also, it is assumed that the private sector will not let its business go bankrupt in Venezuela and in the end will accept to bring back currency, knowing that it will possibly never be recovered.

Hence the "dakazo 2", a new way to steal dollars from the private sector to boost the regime popularity, just as Maduro did last November forcing commerce to sell under price and leaving the country with semi empty stores since then. Go and visit a DAKA store today.....

Unfortunately it will not work.

For one thing it is safe to assume that half of what has been taken out of Venezuela under Chavez is already spent, invested, placed in real estate, wasted, whatever. That money cannot go back, it's gone, period.

We could be optimistic and assume that half the bullion could be recovered because it is in stocks, in reserves or in the accounts of Venezuelan companies overseas who may decide to save the home business. But they will not do so for very simple reasons. With an inflation of 100%, with insecurity, with a regime that seems still only too willing to expropriate stuff like Polar, there is no viable risk calculation for a business to bring back dollars to save the company in trouble: it would be throwing in good money over bad.

Let me put it under a practical light: if I have, say, 2 million dollars overseas as working reserves for the business, I could use maybe 100, or 200 to buy spare parts or specific chemicals outside of Cadivi/Cencoex. But I AM NOT GOING to use that money to buy the more significant amounts required to import raw materials that the regime wants to force me to buy with my savings because the regime refuses to honor my previous legally contracted debt, a debt contracted with the regime approval.  In short, considering that local currency is worthless, that there are no working conditions, bankruptcy in Venezuela is much more cost effective than bringing back your savings to save your company.

The dakazo 2 will fail miserably and the amazing thing is that the regime will be unable to understand why....

Technocracy on the rise

I have heard all sorts of nicompoopetties as to the regime holding to office stubbornly but as a concession allowing technocrats to run the show. You know, like China.... Things will get better...

This also will not work.

First, the good potential technocrats in Venezuela have long left the country or are salvaging their business or someone's business. It is unlikely that they will leave their current jobs to dirty themselves in the cesspool that Venezuela's administration has become. In any case they would impose conditions that I doubt the regime would meet.

Thus the only sources for the regime are foreign technocrats or local second tier ones, the only ones that may be willing to put up with the crassness of working for a vulgar and corrupt regime. For money of course.

In the foreign import section we have already people like the notorious Banque Lazare and the ambiguous Pigasse at its head. Nothing good can come of it. Not because Pigasse works for money, it is his right. But because his personal delusions push him to prop up a brutal regime devoid of ethics and corrupt to the bone.

Local technocrats available are of poor quality and, well, come mainly from the military ranks. Thus their "technocracy" was acquired late in their career and as a side occupation. And even those that the regime promote are, well, of dubious quality. Let's take for example Alejandro Fleming who directs CENCOEX, the ATM of the regime for imports. Well, he does speak French and has studies at French average to low universities. His major was International Relations and now he is one of the economy stars never having worked in a private business or even in a bank or economic think tank. You think I am rash? Well read his tweet line and tell me I am wrong about the guy, that he is more than merely a flippant bureaucrat.

Even if I was convinced that Fleming and the like have good intentions, they have neither the skills or the contacts needed to solve Venezuelan current problems.

Thus we shall keep sinking.