An IBD editorial muses about what I consider Obama's weakest point: his willingness to submit free trade treaties to the whims of Unions and a few pols in Congress. The example of course is Colombia who is blocked from an FTA because under Uribe assassination of trade union leaders has not gone down enough to the tastes of Pelosi and allies. True, Uribe still has work to do but on that field looking at his global actions of taking down the FARC and trying to control general violence, including a considerably improved safety for union leaders, one would thing his successes should be rewarded instead of putting him through more unnecessary hoops that might in the end tire him and become counter productive. Not to mention that the current Colombia US balance is right now in favor of Colombia, which makes the Pelosi gang on trade look even more silly than what they really are.
But as it is usually the case, trends are more worrying than actual cases and the IBD folks wonder about Canada playing footsie with Europe since Obama announced that the FTA treaty with them might be reviewed. In fact it was the lowest point of Obama in his latest debate, when pressed on FTA by McCain. Clearly he did not know what to answer and reached for a fast "on the trail" cliché to reply. That is very worrisome. And I am sure that his misstep on Colombia was noticed by Canada and Mexico.
There are two things that need to be noted here: the US has always had a tendency toward isolationism. It was brought out kicking and screaming by Pearl Harbor and has been playing around since there, to global benefit in spite of a few pointed errors. Or does anyone think that we would be better off today if the Soviet Union where still splitting Europe in two?
The second thing to be noted is that Senators usually do not make the best candidates, the more so when their Senate experience is pretty much all that they have. And this year we have TWO senators running!!!! Usually I prefer when there is at least a governor, they do have a better grasp of the real world (though Bush is a flaming exception!). Although I have decanted for Obama I am still worried that he is a single term senator. And it shows when he takes positions like he does on Colombia and NAFTA. The current US problems are not due to NAFTA or Colombia, they are due to Wall Street uncontrolled speculation and the unwillingness of the US to confront its social drug problem. Creeping isolationism will not protect the US against drugs or loss of jobs overseas while it will favor authoritarian regimes elsewhere. Chavez would love nothing better than an autocratic Uribe to justify his strong armed rule and justify a road to war.
-The end-
Showing posts with label trade deficit. Show all posts
Showing posts with label trade deficit. Show all posts
Wednesday, October 22, 2008
Thursday, October 09, 2008
From my crystal ball on Venezuela
I think that the world crisis is now here to stay and thus it might be time to speculate a little bit on how it will affect Venezuela. But before the leftist peanut gallery cheers even though the lion has not been skinned or even killed, it is important to remember that capitalism has always managed to reinvent itself because, simply put, it is the system that best fit basic human nature: the wish to improve your lot and the lot of your family based on your work and your values. Socio-communism has always failed because it has always tried to impose values on people without allowing people to exert at least some of their own values on the side. Thus as a first conclusion to this post, no matter what Chavez is saying these days, history is against him. If you disagree with this paragraph then you are off the hook, stop here and go read other blogs.
The Venezuelan reality today
We import most of our food. We are in no position to develop food production fast for several reasons:
Many of the candidates that have the skills or the desire to develop food production in large scale are either out of the country or have nothing to do anymore with food production.
The countryside is in chaos, from crime to landless peasants, to peasants with land but nothing else, skills or finances or even a property certificate, not forgetting the wreck of our road system and the unaccountable delays of rail road building.
Any new development in the next two years will be tied to credit that has become this past month scarce and expensive.
As a consequence, even though food imports will lower some in the next months it will be due to lower consumption of the people more than any significant production increase of food stuff.
We import most of our manufactured items. Comparable situation as in agriculture. We have the workers, we have the managers, but we do not have the finances nor the will to produce. Today the industrial park of Venezuela is roughly half of what it was in 1999. Even if many were willing to reopen they need to retool, they need credit, they need a decent work environment with less harassment from the state. And forget about foreign investors interested in Venezuela for the time being: they are either out of cash or scared of Chavez, or both.
As a consequence Venezuela imports will continue as long as consumption levels and income persist. But they will go down and will not recover as long as other economic equilibrium does not return, in particular as long as Venezuela does not produce at least 80% of the food it eats. We can expect even a decrease of local production before production starts again. The commerce and financial sectors which have driven the growth these past few years upon their ability to import whatever will be now unable to sustain themselves as they cannot rely on internal production to pick up where imports drop.
The government has spending out of control. Chavismo has spend liberally on social programs, some good but with too many dead ends financed for electoral purposes. In addition for political reasons sustained by Chavez ego Venezuela supports Cuba and props Bolivia, Nicaragua and helps a few other people. And I will not discuss the cost of corruption, mismanagement and inefficiency.
At 80 USD a barrel it is clear that this level of spending cannot be sustained over time. The current crisis has accelerated the decrease of oil prices and today the 80 USD level has been reached, which implies an even lower price for Venezuelan crude. If to this you add that all reports point out to a stalled oil production in Venezuela and a lack of financial muscle to expand production, it is clear that the government is facing a very serious crisis, no matter how many denials we are hearing these recent days. Obviously nobody has told Chavez the truth yet.
What Venezuela has
In face of the coming crisis we still do have some advantages, no matter what lack of reserves we might have.
The follies of Chavez have somewhat isolated us from world markets. In a way that is good as we are not as affected as the major financial places, but is is also bad because at a time when we will need financing to overcome the errors of these past 10 years there will be no fresh capital available to us, except perhaps for oil production, and with lots of strings attached.
We do have oil. Even at 80 USD a barrel and even with lower production we will have a steady source of income that can help us weather with reasonable sacrifices a world recession.
We have many budgetary options to improve our financial balances. For example an increase in the price of gas at the level of production cost in Venezuela, an increase in the price of electricity at the level of cost will free enough funds for the government to improve quickly public transportation and electrical services, and thus productivity of the population and business. There might be even enough funds released to offset some of the social cuts that are unavoidable. And of course we can call off all of these expensive weapons purchases since with a world recession and oil below 80 USD it is unlikely that anyone will be in any position to invade us for the next 3-4 years.
In other words with a medium quality management of the country we could avoid a deep recession and get a more solid economy in 2 to 5 years. But we will not avoid some rough waters ahead.
What will happen
First we must agree on a likely outcome to the present world crisis. Personally I think that a global depression will be avoided. However a recession is now unavoidable. How strong and how long it will be it is any one's guess. However we can assume that unless there is major Middle East blow up or a nuclear conflict in India/Pakistan, the price of oil will not go back to 100 for at least a couple of years. I do not think it will go much lower than 80. As low as 60 perhaps at the end of the Northern winter 2009 if this one is mild. But oil is disappearing and the general tendency is for up, up and up until alternative energies becomes wide spread.
On a practical level for Venezuela this means 2 years of oil at 70-80 average, and little access to credit. International credit will be more difficult to get now as investors will be much more conservative and less credit will be available. An economy like Venezuela with its corruption, unpredictability and mismanagement is an awful credit candidate in the new financial world. At least whatever oil we produce we will be able to sell, which is not the case of the trinkets produced by China or India.
What will be the possible scenarios?
Chavez gets told and decides to take care of Venezuela. The November result is 10 states for the opposition while his budget plans sink with the crisis. Chavez decides to 1) cut 70% of his foreign aid, 2) start an increase in gas prices, 3) cut spending to about half of his misiones, retaining only those on health, subsidized food for the poor and some educational program 4) devalue the currency from 2.15 to 3 VB to 1 USD, 5) start a protectionist program to reboot Venezuelan production. Inflation will by hard for a few months but social programs targeted to the very poor only will mitigate the shock some and by the end of 2009 we might be looking toward much lower inflation and more industrial production. That the opposition directs 10 states will force enough political compromise and social peace for such a transition plan. For 2010 a recovery of oil prices, an improved agricultural production and a controlled spending restart general economic growth in Venezuela.
Yet, this probably mean that Chavez will accept an expiration date of 2012 and will work on improving things enough to have his chosen successor elected.
ODDS: less than 5%
Chavez tries to escape reality but still does take some measures. No matter what the November results are, Chavez decides to continue supporting Cuba and Bolivia even if it is at lower levels. And he does not renounce his lifelong reelection scheme. He needs money for that. Understanding that in Venezuela increasing further taxes means the end of private sector he settles for postponing weapons purchases, a devaluation and an increase in gas prices, betting that oil prices will recover faster than they will. If inflation reaches 50% he might even think he can survive that with a few devaluated cash grants. And if oil prices return to 90 by spring 2009 he might apparently succeed. But none of the basic problems of the Venezuelan economy are solved and the crisis is just postponed making this one probably worse when it finally comes. In addition this allows for a mercurial Chavez that can go anytime against his already meager crisis control plan, undoing any good he might have done with a single speech or program.
Basically it will be a dangerous game between what the opposition gains, how the crisis develops, how Chavez popularity with the poor survives, what legal expedient he can manage to get his constitution changes. The consequence is a systematic instability as we have had these past ten years with unpredictable outcomes. Life at the edge but even more so.
ODDS: maybe 25%?
Chavez speaks loudly, blaming others, but changes nothing to his ways.
The reality is that Chavez will not stop from supporting Cuba which will ask even more money from Venezuela as it suffers from the world crisis: less tourists, you know....
The reality is that in ten years Chavez has made a new promise every Sunday and now he simply cannot stop making promises.
The reality is that he only cares about him retaining power forever; the rest is immaterial.
As such he will decide to believe that he can fudge his way out of the tight spot and that he can manage somehow to rush oil back to 100 a barrel. Sure, he might still devaluate some, he might suspend the purchase of some weapons, he might cut off Ecuador and the tiny Caribbean islands. But that will not solve the problem at all. Two possible outcomes:
Chavez rushes forward and radicalizes the country. Taxes go up, the private sector is further nationalized in an orgy of Venezuelan companies takeover without the compensations accorded to foreign companies. Workers are sent to occupy industries, not to take them over but to have them forget for a while about the other problems of the country. A referendum to "address the crisis" is quickly called pretending that by more centralization, the repartition of private sector and the participation of workers in state companies the crisis is solved. In that referendum of course he tries to get his reelection ad infinitum. It can all end in some "fujimorazo" on any lame excuse.
Chavez waits to react to the crisis and keeps his current radicalization pace. The crisis hits us anyway and is felt no matter what isolated measures are undertaken. Social unrest grows. Two things can then happen: 1) fearful chavistas decide to remove Chavez from office before things reach a no-return point or 2) Chavez decides to radicalize faster, as above, but the momentum is lost, people now associate the crisis to Chavez and major civil unrest results. In such conditions if he is tempted by a "fujimorazo" it will be a bloodshed.
ODDS for each one: 30-40% each, but probably more for the first option
So there you have, Venezuela News and Views Crystal Ball. The answers in less than a year.
-The end-
The Venezuelan reality today
We import most of our food. We are in no position to develop food production fast for several reasons:
Many of the candidates that have the skills or the desire to develop food production in large scale are either out of the country or have nothing to do anymore with food production.
The countryside is in chaos, from crime to landless peasants, to peasants with land but nothing else, skills or finances or even a property certificate, not forgetting the wreck of our road system and the unaccountable delays of rail road building.
Any new development in the next two years will be tied to credit that has become this past month scarce and expensive.
As a consequence, even though food imports will lower some in the next months it will be due to lower consumption of the people more than any significant production increase of food stuff.
We import most of our manufactured items. Comparable situation as in agriculture. We have the workers, we have the managers, but we do not have the finances nor the will to produce. Today the industrial park of Venezuela is roughly half of what it was in 1999. Even if many were willing to reopen they need to retool, they need credit, they need a decent work environment with less harassment from the state. And forget about foreign investors interested in Venezuela for the time being: they are either out of cash or scared of Chavez, or both.
As a consequence Venezuela imports will continue as long as consumption levels and income persist. But they will go down and will not recover as long as other economic equilibrium does not return, in particular as long as Venezuela does not produce at least 80% of the food it eats. We can expect even a decrease of local production before production starts again. The commerce and financial sectors which have driven the growth these past few years upon their ability to import whatever will be now unable to sustain themselves as they cannot rely on internal production to pick up where imports drop.
The government has spending out of control. Chavismo has spend liberally on social programs, some good but with too many dead ends financed for electoral purposes. In addition for political reasons sustained by Chavez ego Venezuela supports Cuba and props Bolivia, Nicaragua and helps a few other people. And I will not discuss the cost of corruption, mismanagement and inefficiency.
At 80 USD a barrel it is clear that this level of spending cannot be sustained over time. The current crisis has accelerated the decrease of oil prices and today the 80 USD level has been reached, which implies an even lower price for Venezuelan crude. If to this you add that all reports point out to a stalled oil production in Venezuela and a lack of financial muscle to expand production, it is clear that the government is facing a very serious crisis, no matter how many denials we are hearing these recent days. Obviously nobody has told Chavez the truth yet.
What Venezuela has
In face of the coming crisis we still do have some advantages, no matter what lack of reserves we might have.
The follies of Chavez have somewhat isolated us from world markets. In a way that is good as we are not as affected as the major financial places, but is is also bad because at a time when we will need financing to overcome the errors of these past 10 years there will be no fresh capital available to us, except perhaps for oil production, and with lots of strings attached.
We do have oil. Even at 80 USD a barrel and even with lower production we will have a steady source of income that can help us weather with reasonable sacrifices a world recession.
We have many budgetary options to improve our financial balances. For example an increase in the price of gas at the level of production cost in Venezuela, an increase in the price of electricity at the level of cost will free enough funds for the government to improve quickly public transportation and electrical services, and thus productivity of the population and business. There might be even enough funds released to offset some of the social cuts that are unavoidable. And of course we can call off all of these expensive weapons purchases since with a world recession and oil below 80 USD it is unlikely that anyone will be in any position to invade us for the next 3-4 years.
In other words with a medium quality management of the country we could avoid a deep recession and get a more solid economy in 2 to 5 years. But we will not avoid some rough waters ahead.
What will happen
First we must agree on a likely outcome to the present world crisis. Personally I think that a global depression will be avoided. However a recession is now unavoidable. How strong and how long it will be it is any one's guess. However we can assume that unless there is major Middle East blow up or a nuclear conflict in India/Pakistan, the price of oil will not go back to 100 for at least a couple of years. I do not think it will go much lower than 80. As low as 60 perhaps at the end of the Northern winter 2009 if this one is mild. But oil is disappearing and the general tendency is for up, up and up until alternative energies becomes wide spread.
On a practical level for Venezuela this means 2 years of oil at 70-80 average, and little access to credit. International credit will be more difficult to get now as investors will be much more conservative and less credit will be available. An economy like Venezuela with its corruption, unpredictability and mismanagement is an awful credit candidate in the new financial world. At least whatever oil we produce we will be able to sell, which is not the case of the trinkets produced by China or India.
What will be the possible scenarios?
Chavez gets told and decides to take care of Venezuela. The November result is 10 states for the opposition while his budget plans sink with the crisis. Chavez decides to 1) cut 70% of his foreign aid, 2) start an increase in gas prices, 3) cut spending to about half of his misiones, retaining only those on health, subsidized food for the poor and some educational program 4) devalue the currency from 2.15 to 3 VB to 1 USD, 5) start a protectionist program to reboot Venezuelan production. Inflation will by hard for a few months but social programs targeted to the very poor only will mitigate the shock some and by the end of 2009 we might be looking toward much lower inflation and more industrial production. That the opposition directs 10 states will force enough political compromise and social peace for such a transition plan. For 2010 a recovery of oil prices, an improved agricultural production and a controlled spending restart general economic growth in Venezuela.
Yet, this probably mean that Chavez will accept an expiration date of 2012 and will work on improving things enough to have his chosen successor elected.
ODDS: less than 5%
Chavez tries to escape reality but still does take some measures. No matter what the November results are, Chavez decides to continue supporting Cuba and Bolivia even if it is at lower levels. And he does not renounce his lifelong reelection scheme. He needs money for that. Understanding that in Venezuela increasing further taxes means the end of private sector he settles for postponing weapons purchases, a devaluation and an increase in gas prices, betting that oil prices will recover faster than they will. If inflation reaches 50% he might even think he can survive that with a few devaluated cash grants. And if oil prices return to 90 by spring 2009 he might apparently succeed. But none of the basic problems of the Venezuelan economy are solved and the crisis is just postponed making this one probably worse when it finally comes. In addition this allows for a mercurial Chavez that can go anytime against his already meager crisis control plan, undoing any good he might have done with a single speech or program.
Basically it will be a dangerous game between what the opposition gains, how the crisis develops, how Chavez popularity with the poor survives, what legal expedient he can manage to get his constitution changes. The consequence is a systematic instability as we have had these past ten years with unpredictable outcomes. Life at the edge but even more so.
ODDS: maybe 25%?
Chavez speaks loudly, blaming others, but changes nothing to his ways.
The reality is that Chavez will not stop from supporting Cuba which will ask even more money from Venezuela as it suffers from the world crisis: less tourists, you know....
The reality is that in ten years Chavez has made a new promise every Sunday and now he simply cannot stop making promises.
The reality is that he only cares about him retaining power forever; the rest is immaterial.
As such he will decide to believe that he can fudge his way out of the tight spot and that he can manage somehow to rush oil back to 100 a barrel. Sure, he might still devaluate some, he might suspend the purchase of some weapons, he might cut off Ecuador and the tiny Caribbean islands. But that will not solve the problem at all. Two possible outcomes:
Chavez rushes forward and radicalizes the country. Taxes go up, the private sector is further nationalized in an orgy of Venezuelan companies takeover without the compensations accorded to foreign companies. Workers are sent to occupy industries, not to take them over but to have them forget for a while about the other problems of the country. A referendum to "address the crisis" is quickly called pretending that by more centralization, the repartition of private sector and the participation of workers in state companies the crisis is solved. In that referendum of course he tries to get his reelection ad infinitum. It can all end in some "fujimorazo" on any lame excuse.
Chavez waits to react to the crisis and keeps his current radicalization pace. The crisis hits us anyway and is felt no matter what isolated measures are undertaken. Social unrest grows. Two things can then happen: 1) fearful chavistas decide to remove Chavez from office before things reach a no-return point or 2) Chavez decides to radicalize faster, as above, but the momentum is lost, people now associate the crisis to Chavez and major civil unrest results. In such conditions if he is tempted by a "fujimorazo" it will be a bloodshed.
ODDS for each one: 30-40% each, but probably more for the first option
So there you have, Venezuela News and Views Crystal Ball. The answers in less than a year.
-The end-
Tuesday, October 09, 2007
Two Latin Americas (and two US)
This week started with yet a new display on why Latin America might never be able to get from under its undeveloped status: our love for inane myth. Not that other cultures do not fall under the sway of their own myth which on occasion can spell disaster for them, but it seems that in Latin America we have developed a talent to seek such myths even when they come with a warning label.
On the other hand, we have a US that still does not get it and sometimes seems to be doing all what it cans to perpetuate such myths, making one wonder if the subconscious of the US actually wants us to remain "primitive" (or was that exotic?)
The "Che" 40 year death commemoration
I do not want to talk much about that. Words fail me to explain why a mass murderer can be shown today as a beacon of love and peace. I am not talking about our delirious tropi-banana local Venezuelan potentate, so blinded by "che" cult, that he said a few days ago that any graduating MD that joined private practice was just a mercenary, was not in his eyes an MD (ensuring this way that Venezuela will not be forming good doctors anymore). No, I am talking about the opinions on the Che that many youth expressed when any mic would be placed in front of them. Apparently years of ignoring the reality of the Che in schools have created a generation that believes that the Che was the iconic 13th disciple. Maybe Dr. Mengele supporters might want to review their promotional strategy. They could look in the US where merchandising has yielded handsome dividends by selling tons of memorabilia to people who the Che would have so much loved to destroy.
An Ecuadoran constituent assembly
Although this piece f news is technically a week old I am including it here as it truly belongs to the topic of inane myths ruling our conduct. It is not idle to remember that Correa, Ecuador president for one year now was elected on a second round ballot AFTER having arrived second in a first round, with not even 30% of the popular vote. Yet, for some unexplainable reason he has managed to get high ratings and pulled out an electoral victory one week ago which will give him a solid majority to push any constitution he feels like. The Venezuelan script is so far followed to the letter, even though Correa should have the credentials to be a more democratic leader than our local tropi-potentate. When you see someone like Oppenheimer who has talked to all LatAm presidents describe Correa as one of the most arrogant leaders he ever met, then you might get a clue...
I am not going to worry much about Correa. The only chance he has to make his project to become life president of Ecuador (his protest to the contrary are lame and after tropi-bananator example we all know much better) is to succeed in bringing Ecuador out of the US dollar belt. I doubt that Ecuadorans will vote for a new currency now that they are starting to enjoy the benefits of a solid currency. But one never knows, countries have done the suicide thing. Besides it would not be the first time that Ecuadorans elected a wildly popular leader to toss him out even faster.
No, what is interesting here is that a mass hysteria is leading the country to believe that yet a new constitution will solve the problems of the country. They could have asked Colombians how that did work for them. They could ask Venezuelans how this is working out for them. They could have asked how Bolivians are coping with it. Not to mention other such attempts such as Peru and Brazil who on the long run have not floundered as badly. Apparently the new constitution mantra has become a new myth, the latest offering for messianic leaders to reach power.
And the US, from the height of the longest serving constitution of the continent seems unable (or unwilling?) to even offer constructive advice. Not that it should, but it would be nice to hear a US president say that constitutions are only as good as the people who apply them. Then again, that would question certain US presidents, would it not?
A free trade referendum in Costa Rica
Fortunately to compensate for a bad electoral result in Ecuador and the anti modernity folly of the Che we had a good vote in Costa Rica. No matter whether one agrees with Free Trade Agreements, anyone should at least understand that a small country like Costa Rica can only survive and thrive in an open economy. The garden variety of FTA to apply can be discussed, but they are a must for a country who has only nature and its people skills to sell. Well, for a few weeks we were concerned that Costa Rica would turn its back to any FTA. For the tropi-bananism that would have been a good result since their objective is to create a free trade zone where mediocrity is the commodity and oil the rewards for servility. Colder heads prevailed. Even if the margin is narrow, soon Costa Ricans will start enjoying for example the benefits of modern communication technology at lower prices, and will be able to retain investors and increase their market share in the only market that counts for the Caribbean, for better or worse the US. It is that or exporting migrants to the US: there was no other choice unfortunately. For those who doubt this I would urge them to observe the results of the nationalizations of CANTV and EAS in tropi-bananaland: service is noticeably down and the joints have been taken over barely 6 months ago!
But that Tico success as usual did not come with the help of the US. I am not impressed by the new democratic congress leadership. And I would be a registered Democrat if I lived in the US (if anything because Dem primaries are usually much more interesting). I do understand that they do have a need to deal with Iraq but their anti Bush rhetoric is coloring some aspects that should not be touched, that should be bi-partisan no matter what. The Washington Post editorial today has a very nice summary of that referendum battle in Costa Rica, and inasmuch as the Post is considered a Liberal paper, it clearly and willfully endorsed the Costa Rican result as a victory.
Thus it is with dismay that I read in that editorial:
That is wrong on many levels. First, no one asked them to do so (even if trade unions asked them, Costa Rica is too small a country to be a threat). Second, foreign policy is conducted by the executive power. This one requiring a two third approval of treaties in the Senate CANNOT negotiate anything it wants. Foreign policy in the US is usually a bi-partisan affair by necessity, at the very least when a treaty will result form a given initiative. Third, it was a lie as the State Department promptly pointed out. And last but certainly not least, it did go squarely against US interests in the region. Amen of US intervention in a Costa Rican affair by the Democrats in Congress!!!!
I observe with the greatest dismay that the Congressional leadership is slowly but surely, (for personal vendetta?) taking a policy that is detrimental for the US interests in the region and which in the medium term can only profit the anti US agenda in the area. There is something worrisome when Democrats start looking at their navel as it is certainly not the Republicans who will take them out this self gazing.... If in a way that Costa Rica demarche might have been a token thrown to trade unions by Pelosi so she can be freer for bigger things, it is not reassuring that the Colombian FTA approval is all but doomed, which will result in dire consequences for the US, starting with increased drug supplies. What incentives will be left for ANY Colombian government once they are told that the US does not want an FTA with them? In case Pelosi et al. have forgotten, the only incentive that Colombians have to stop growing coca leaves is to grow or manufacture stuff to sell the US. That is it for Congress, or doing an Iraq on Colombia; and we all know how that worked.
-The end-
On the other hand, we have a US that still does not get it and sometimes seems to be doing all what it cans to perpetuate such myths, making one wonder if the subconscious of the US actually wants us to remain "primitive" (or was that exotic?)
The "Che" 40 year death commemoration
I do not want to talk much about that. Words fail me to explain why a mass murderer can be shown today as a beacon of love and peace. I am not talking about our delirious tropi-banana local Venezuelan potentate, so blinded by "che" cult, that he said a few days ago that any graduating MD that joined private practice was just a mercenary, was not in his eyes an MD (ensuring this way that Venezuela will not be forming good doctors anymore). No, I am talking about the opinions on the Che that many youth expressed when any mic would be placed in front of them. Apparently years of ignoring the reality of the Che in schools have created a generation that believes that the Che was the iconic 13th disciple. Maybe Dr. Mengele supporters might want to review their promotional strategy. They could look in the US where merchandising has yielded handsome dividends by selling tons of memorabilia to people who the Che would have so much loved to destroy.
An Ecuadoran constituent assembly
Although this piece f news is technically a week old I am including it here as it truly belongs to the topic of inane myths ruling our conduct. It is not idle to remember that Correa, Ecuador president for one year now was elected on a second round ballot AFTER having arrived second in a first round, with not even 30% of the popular vote. Yet, for some unexplainable reason he has managed to get high ratings and pulled out an electoral victory one week ago which will give him a solid majority to push any constitution he feels like. The Venezuelan script is so far followed to the letter, even though Correa should have the credentials to be a more democratic leader than our local tropi-potentate. When you see someone like Oppenheimer who has talked to all LatAm presidents describe Correa as one of the most arrogant leaders he ever met, then you might get a clue...
I am not going to worry much about Correa. The only chance he has to make his project to become life president of Ecuador (his protest to the contrary are lame and after tropi-bananator example we all know much better) is to succeed in bringing Ecuador out of the US dollar belt. I doubt that Ecuadorans will vote for a new currency now that they are starting to enjoy the benefits of a solid currency. But one never knows, countries have done the suicide thing. Besides it would not be the first time that Ecuadorans elected a wildly popular leader to toss him out even faster.
No, what is interesting here is that a mass hysteria is leading the country to believe that yet a new constitution will solve the problems of the country. They could have asked Colombians how that did work for them. They could ask Venezuelans how this is working out for them. They could have asked how Bolivians are coping with it. Not to mention other such attempts such as Peru and Brazil who on the long run have not floundered as badly. Apparently the new constitution mantra has become a new myth, the latest offering for messianic leaders to reach power.
And the US, from the height of the longest serving constitution of the continent seems unable (or unwilling?) to even offer constructive advice. Not that it should, but it would be nice to hear a US president say that constitutions are only as good as the people who apply them. Then again, that would question certain US presidents, would it not?
A free trade referendum in Costa Rica
Fortunately to compensate for a bad electoral result in Ecuador and the anti modernity folly of the Che we had a good vote in Costa Rica. No matter whether one agrees with Free Trade Agreements, anyone should at least understand that a small country like Costa Rica can only survive and thrive in an open economy. The garden variety of FTA to apply can be discussed, but they are a must for a country who has only nature and its people skills to sell. Well, for a few weeks we were concerned that Costa Rica would turn its back to any FTA. For the tropi-bananism that would have been a good result since their objective is to create a free trade zone where mediocrity is the commodity and oil the rewards for servility. Colder heads prevailed. Even if the margin is narrow, soon Costa Ricans will start enjoying for example the benefits of modern communication technology at lower prices, and will be able to retain investors and increase their market share in the only market that counts for the Caribbean, for better or worse the US. It is that or exporting migrants to the US: there was no other choice unfortunately. For those who doubt this I would urge them to observe the results of the nationalizations of CANTV and EAS in tropi-bananaland: service is noticeably down and the joints have been taken over barely 6 months ago!
But that Tico success as usual did not come with the help of the US. I am not impressed by the new democratic congress leadership. And I would be a registered Democrat if I lived in the US (if anything because Dem primaries are usually much more interesting). I do understand that they do have a need to deal with Iraq but their anti Bush rhetoric is coloring some aspects that should not be touched, that should be bi-partisan no matter what. The Washington Post editorial today has a very nice summary of that referendum battle in Costa Rica, and inasmuch as the Post is considered a Liberal paper, it clearly and willfully endorsed the Costa Rican result as a victory.
Thus it is with dismay that I read in that editorial:
Senate Majority Leader Harry Reid (D-Nev.)and House Speaker Nancy Pelosi (D-Calif.) wrote Costa Rica's ambassador in Washington to say that Costa Rica would not necessarily lose current U.S. trade benefits under the Caribbean Basin Initiative, which expires in September, if the pact were rejected.
That is wrong on many levels. First, no one asked them to do so (even if trade unions asked them, Costa Rica is too small a country to be a threat). Second, foreign policy is conducted by the executive power. This one requiring a two third approval of treaties in the Senate CANNOT negotiate anything it wants. Foreign policy in the US is usually a bi-partisan affair by necessity, at the very least when a treaty will result form a given initiative. Third, it was a lie as the State Department promptly pointed out. And last but certainly not least, it did go squarely against US interests in the region. Amen of US intervention in a Costa Rican affair by the Democrats in Congress!!!!
I observe with the greatest dismay that the Congressional leadership is slowly but surely, (for personal vendetta?) taking a policy that is detrimental for the US interests in the region and which in the medium term can only profit the anti US agenda in the area. There is something worrisome when Democrats start looking at their navel as it is certainly not the Republicans who will take them out this self gazing.... If in a way that Costa Rica demarche might have been a token thrown to trade unions by Pelosi so she can be freer for bigger things, it is not reassuring that the Colombian FTA approval is all but doomed, which will result in dire consequences for the US, starting with increased drug supplies. What incentives will be left for ANY Colombian government once they are told that the US does not want an FTA with them? In case Pelosi et al. have forgotten, the only incentive that Colombians have to stop growing coca leaves is to grow or manufacture stuff to sell the US. That is it for Congress, or doing an Iraq on Colombia; and we all know how that worked.
-The end-
Friday, August 10, 2007
Trade evolution
El Universal published yesterday a graph where the imports and exports of Venezuela are compared for the first trimester, according to the Central Bank figures. As is often the case I saw something interesting that the presentation of the data did not allow to underline. So I did calculate the percentile difference between imports and exports, that is, (Exports-Imports)/Imports. OK, well, the title is not quite what I want it to mean, but bear with me for a second because the graph below will enlighten you.
Observe the arrows.
The number 1 points out to the very low oil prices of 1998, the year Chavez was elected in the middle of a small recession. And that year, non oil exports were still proportionally significant. We actually had a trade deficit for 1998 and 1999.
The number two arrows point out to the so called recession induced by the oil strike of 2002-2003. What do we see? In spite of a generalized recession of internal production, lesser non traditional exports and a big drop in oil production, Venezuela in fact had comparable exports to 2001!!! Courtesy of course of the spectacular increase in oil prices. In other words, Chavez income was not that perturbed in 2003 in spite of all his anti opposition speeches accusing it of sabotage. Chavez had enough money, FROM THE START, to get going on his Misiones programs (that he could have started much earlier, by the way). Observe also that 2002 was a drop, but that these numbers refer to the first semester, BEFORE the April "coup".
The very least we can conclude from this way to present Venezuelan economic results is that the dark legend that Chavez weaves around 2002-2003, is not as dark as this one would like us to believe, considering that the bulk of his income comes from oil trade surplus, a trade surplus that was, by the way, comparable in percentile amount to the one from 1997.
Finally the third arrow. The comfortable surplus of 2004-2005-2006 that allowed Chavez to have the grandest time around the world, bearing presents to whomever wanted to bow to his glory has dramatically fallen. What the graph does not show because of its format is that importations went from 3227 million of USD in the first quarter of 2004 to 9108 million USD in the same period of 2007. Almost three times as high!!! The average annual increase of imports during that period is, according to that data of the BCV, 46%!!!! Now, tell me how the Venezuelan production resisted such an inflow of importations. No wonder that private investment for new industries remained stagnant, local business preferring to operate at full capacity without expansion, least additional subsidized imports wrecked their ability to recover their investment.
Finally, what does that drop in 2007 mean? The reality of PDVSA falling production? The arrival of all the imports blocked during the second half of 2006 as CADIVI was slow in granting currency, the government preferring to send the state income to supply the social programs to buy votes? Whatever that drop is it is quite ominous. And we do not see with the announced constitutional measures how the trend to more and more importations will be reversed or at least stabilized: the private sector is simply not going to invest and foreign investors will not come in a country where private property is seized at will (RCTV, CANTV, EDC, Avila Magica, Orinoco Oil belt).
Meanwhile the front page of El Universal yesterday showed the harbor of Puerto Cabello clogged with ships full of imports that customs cannot process fast enough. A sign of increased Venezuelan production? Not!
-The end-
Observe the arrows.
The number 1 points out to the very low oil prices of 1998, the year Chavez was elected in the middle of a small recession. And that year, non oil exports were still proportionally significant. We actually had a trade deficit for 1998 and 1999.
The number two arrows point out to the so called recession induced by the oil strike of 2002-2003. What do we see? In spite of a generalized recession of internal production, lesser non traditional exports and a big drop in oil production, Venezuela in fact had comparable exports to 2001!!! Courtesy of course of the spectacular increase in oil prices. In other words, Chavez income was not that perturbed in 2003 in spite of all his anti opposition speeches accusing it of sabotage. Chavez had enough money, FROM THE START, to get going on his Misiones programs (that he could have started much earlier, by the way). Observe also that 2002 was a drop, but that these numbers refer to the first semester, BEFORE the April "coup".
The very least we can conclude from this way to present Venezuelan economic results is that the dark legend that Chavez weaves around 2002-2003, is not as dark as this one would like us to believe, considering that the bulk of his income comes from oil trade surplus, a trade surplus that was, by the way, comparable in percentile amount to the one from 1997.
Finally the third arrow. The comfortable surplus of 2004-2005-2006 that allowed Chavez to have the grandest time around the world, bearing presents to whomever wanted to bow to his glory has dramatically fallen. What the graph does not show because of its format is that importations went from 3227 million of USD in the first quarter of 2004 to 9108 million USD in the same period of 2007. Almost three times as high!!! The average annual increase of imports during that period is, according to that data of the BCV, 46%!!!! Now, tell me how the Venezuelan production resisted such an inflow of importations. No wonder that private investment for new industries remained stagnant, local business preferring to operate at full capacity without expansion, least additional subsidized imports wrecked their ability to recover their investment.
Finally, what does that drop in 2007 mean? The reality of PDVSA falling production? The arrival of all the imports blocked during the second half of 2006 as CADIVI was slow in granting currency, the government preferring to send the state income to supply the social programs to buy votes? Whatever that drop is it is quite ominous. And we do not see with the announced constitutional measures how the trend to more and more importations will be reversed or at least stabilized: the private sector is simply not going to invest and foreign investors will not come in a country where private property is seized at will (RCTV, CANTV, EDC, Avila Magica, Orinoco Oil belt).
Meanwhile the front page of El Universal yesterday showed the harbor of Puerto Cabello clogged with ships full of imports that customs cannot process fast enough. A sign of increased Venezuelan production? Not!
-The end-
Thursday, August 02, 2007
Inflation and minimum wage, Venezuela's Cabezas in Oz
Event though I know that the job of Chavez finance minister, Rodrigo Cabezas, is to make his boss look good while he scrounges any cent he can to give to his boss without any control, I still get amazed on occasion by his utterances. For example Cabezas today was congratulating himself for the Venezuelan inflation rate of July (a mere 0.5%!) and reminding folks that Venezuela has one of the highest minimum wages in Latin America (285 USD), coupled with the best growth rate.
All true but all false.
Inflation. Rodrigo Cabezas did not elaborate much on the fact that on July first the sales tax went down 2%. Even if we keep in mind that not everything is subject to sales tax, we could have hoped for a 1% drop in inflation. Thus, if we got 0.5% we can be assured that the real inflation of the country is ABOVE 0.5%. 1%? 1.5%? More? It is any one's guess but it is any one's verifiable fact: prices go up and up and up.
Minimum wage. Well, that might be right if the currency exchange rate was a free number, going up and down with the aleatory factors of the market. Instead we have been stuck at an official 2,150 VEB to the USD for over a year and the street value of the VEB today is 4,400. Yes, that is right, the street value is less than half of the official value. Thus THE REAL VALUE of our minimum wage is half of what the minister pretends us to believe. The question that begs to be asked is whether this real value put us still on top of LatAm or at the bottom......
Growth rate. What growth rate are we talking about? The one based on ever increasing importations? Or the one of new plants hiring new workers to produce more and more "made in Venezuela" stuff?
The government piously tells us that all the food scarcity are due to increased purchasing power form lower classes who apparently for the first time in their lives must be eating (one wonders how did they manage to grow up and breed before Chavez came to office, but I digress). But Cabezas is a liar, if by omission. In fact the truth almost escaped him. He admitted that the government is trying (desperately?) to make all sorts of investments from irrigation projects to 200 "socialist manufacturers" to be able to supply, NEXT YEAR, what is lacking in Venezuela stores. What Cabezas implicitly admits here is that the private sector will not increase its production, or at least not enough to supply what is lacking on the shelves. What Cabezas fails to say is that the remaining private business are working at full capacity but are not investing significantly. What Cabezas fails to say is that the private sector is not investing because it is afraid that any day the state will come and expropriate it just because Chavez said so; because the cost of business is ballooning in Venezuela; because everyday management spends more and more time dealing with more and more new regulations that make little sense in most cases instead of managing and developing the business and production lines.
Of course Cabezas knows all of that. Even if he is an ideological jerk he is not THAT stupid. But the bolivarian revolution has stuck its finger in the fateful gear box that will pull its economy inside and turn it into shreds just like in Cuba. If we do not see it yet it is because PDVSA still brings enough money to hide all of this crap. But as PDVSA is slowly imploding we just need to sit down and watch for how long will the government be able to hide the real numbers of Venezuelan economy.
Of course, by then all of these chavista "businessmen" who made a fortune in the import business will have managed to have enough sales commissions stashed away in foreign accounts that they will not care anymore as to whether Venezuela can still afford imports. But we have seen this happen at least twice in Venezuela in the past. This is just a bad remake with more money and more corruption, but it will end up the same.
-The end-
All true but all false.
Inflation. Rodrigo Cabezas did not elaborate much on the fact that on July first the sales tax went down 2%. Even if we keep in mind that not everything is subject to sales tax, we could have hoped for a 1% drop in inflation. Thus, if we got 0.5% we can be assured that the real inflation of the country is ABOVE 0.5%. 1%? 1.5%? More? It is any one's guess but it is any one's verifiable fact: prices go up and up and up.
Minimum wage. Well, that might be right if the currency exchange rate was a free number, going up and down with the aleatory factors of the market. Instead we have been stuck at an official 2,150 VEB to the USD for over a year and the street value of the VEB today is 4,400. Yes, that is right, the street value is less than half of the official value. Thus THE REAL VALUE of our minimum wage is half of what the minister pretends us to believe. The question that begs to be asked is whether this real value put us still on top of LatAm or at the bottom......
Growth rate. What growth rate are we talking about? The one based on ever increasing importations? Or the one of new plants hiring new workers to produce more and more "made in Venezuela" stuff?
The government piously tells us that all the food scarcity are due to increased purchasing power form lower classes who apparently for the first time in their lives must be eating (one wonders how did they manage to grow up and breed before Chavez came to office, but I digress). But Cabezas is a liar, if by omission. In fact the truth almost escaped him. He admitted that the government is trying (desperately?) to make all sorts of investments from irrigation projects to 200 "socialist manufacturers" to be able to supply, NEXT YEAR, what is lacking in Venezuela stores. What Cabezas implicitly admits here is that the private sector will not increase its production, or at least not enough to supply what is lacking on the shelves. What Cabezas fails to say is that the remaining private business are working at full capacity but are not investing significantly. What Cabezas fails to say is that the private sector is not investing because it is afraid that any day the state will come and expropriate it just because Chavez said so; because the cost of business is ballooning in Venezuela; because everyday management spends more and more time dealing with more and more new regulations that make little sense in most cases instead of managing and developing the business and production lines.
Of course Cabezas knows all of that. Even if he is an ideological jerk he is not THAT stupid. But the bolivarian revolution has stuck its finger in the fateful gear box that will pull its economy inside and turn it into shreds just like in Cuba. If we do not see it yet it is because PDVSA still brings enough money to hide all of this crap. But as PDVSA is slowly imploding we just need to sit down and watch for how long will the government be able to hide the real numbers of Venezuelan economy.
Of course, by then all of these chavista "businessmen" who made a fortune in the import business will have managed to have enough sales commissions stashed away in foreign accounts that they will not care anymore as to whether Venezuela can still afford imports. But we have seen this happen at least twice in Venezuela in the past. This is just a bad remake with more money and more corruption, but it will end up the same.
-The end-
Friday, July 13, 2007
Trade Deficit between Venezuela and Andean countries
Tal Cual carried a very interesting article that speaks volume about the increasing decrepitude of the Venezuelan economy, a decrepitude hidden very well by a sea of oil dollars that pay from frozen chickens to shinny Hummers.
The graph below plots the evolution of trade between the Andean Countries and Venezuela. It is to be noted before examining the graph that Chavez has decided to favor Brazil trade above Andean Community trade (the AC is formed by Colombia, Peru, Ecuador, and Bolivia since Venezuela left). Yet, the graph tells us quite a story about an economic reality that chavismo refuses to face.
The first thing we can observe is that when Venezuela had a "normal" economy the trade amounts moved about with the same tendency. Then, when chavismo started its march to "socialism" and when the price of oil allowed Chavez to wave his check book as he pleased, the trends broke as the Venezuela green line was left far behind. Why?
First, until the year 2000 Venezuela was able to sell a little bit more than oil to its Andean partners. And even though importations were significant Venezuela tended to have a trade surplus. But since 2000 Venezuelan exports started falling and the reprise we see in 2004 is due to the increase of oil prices, and hence the increase in oil derivatives.
The article states clearly that Venezuela only exports oil derivatives and some steel to its ex Andean partners. The other exportations have all dried up due to the currency exchange control in place since January 2003. Venezuelan products have stopped being competitive: the government forces folks to export at the official rate and thus a currency overvalued by about 80% kills exports value. By the same token it is a boon for importers who can buy in Colombia stuff cheaper than what is produced in Venezuela.
This is particularly favorable to Colombia which shares an extensive border with us. As Venezuela agricultural production fails consistently to meet internal demand, when not decreasing its actual production, Colombians just need to send a few trucks across the International Bridge at Cucuta.
The trade deficit became a gap as early as 2005 and in 2006 it was downright worrying, if anything by the dramatic trend. With Brazil we cannot talk of trade gap, but rather of one way trade. Even Brazilians worry about their trade surplus with Venezuela as a few moths ago Lula worried aloud. Today El Universal reminds us that while it also comments that non oil exports in Venezuela have dropped from in 7,127 billion USD in 2005 to 5, 245 in 2006.
There is no relief in sight. In fact this totally uncontrollable gap has forced Chavez to admit that he might reconsider the decision to leave the AC.
The structural cause of the gap are not addressed by the government. The increasing imports of food stuff (creating even some problems in Colombia) are due to an increased purchasing power of the population which is good, I suppose, if we make abstraction that this increased purchasing power does not come form the work and production of the people but from the oil buried under our feet. That increased purchasing power is unfortunately combined with negative pressures on the agricultural sector. The politics of land grabbing have stopped private investment in the country side while the new cooperatives seem to be overall an unmitigated disaster as they produce at best enough for their survival. These new "social production" joints fail to offer any significant surplus that can be commercialized in the rest of the country. And the government has only itself to blame for that since many of this land grabs are coming at the expense of fully producing private concerns while the peasants brought in are pretty much left on their own not receiving all the help promised by the administration.
The first results are now in: Venezuela will have for a long time a chronic shortage of beef and dairy as the specialized cattle is simply not replaced. Beef we can import for the time being but milk is already in rather short supply in foreign markets. We can see that on our grocery store shelves everyday now. The worst part is that the government keeps its policy of seizing cattle grazing ranches while any effort at resettling seized areas seem to be failing. From chronic shortage we risk to move on to permanent scarcity. Soon, considering that the government is keeping up and even strengthening its policy to fix prices so as to control inflation we are faced with the risk that Colombia will refuse to keep exporting cattle unless paid cash by Mercal at prices well above the Venezuelan regulations. How long the government will be able to keep up a straight face on this is anyone's guess, but the long term damage is already done: Venezuela is probably now a decade away from self sufficiency in meat and milk, even if the correct polices were to be implemented today.
Sugar is also another chronic laggard on the shelf. White sugar has disappeared since last year and brown sugar seems not to be as frequent as it used to be even one month ago. Again, price control and land grab are to be blamed for it. And again, as ethanol production keeps going up in the world supplies of comestible sugar might decrease some and their price increase. Another item with which the government is going to find difficulties in pretending that things are fine.
Other items are also in trouble but not as bad as the ones above, thus no need to discuss yet the problems in chicken production, for example. Beans, on the other hand........ But the point is made: the policies of the Chavez administration have created a dependency on imports that favors even countries with which Chavez does not want to have any deal with like Colombia. Imports from Colombia are at the sufferance of Chavez as he cannot simply replace them with imports from somewhere else. And there is no sign that in the near future Venezuela will be able to reduce its dependency with Colombia, by very far the largest share of the AC trade. Right now, astoundingly, Venezuela imported from Colombia in 2006 3,125 while its exports to Colombia dropped to 631. For every dollar Venezuela sends to Colombia it buys back 5 dollars. How long can this last?
-The end-
The graph below plots the evolution of trade between the Andean Countries and Venezuela. It is to be noted before examining the graph that Chavez has decided to favor Brazil trade above Andean Community trade (the AC is formed by Colombia, Peru, Ecuador, and Bolivia since Venezuela left). Yet, the graph tells us quite a story about an economic reality that chavismo refuses to face.
The first thing we can observe is that when Venezuela had a "normal" economy the trade amounts moved about with the same tendency. Then, when chavismo started its march to "socialism" and when the price of oil allowed Chavez to wave his check book as he pleased, the trends broke as the Venezuela green line was left far behind. Why?
First, until the year 2000 Venezuela was able to sell a little bit more than oil to its Andean partners. And even though importations were significant Venezuela tended to have a trade surplus. But since 2000 Venezuelan exports started falling and the reprise we see in 2004 is due to the increase of oil prices, and hence the increase in oil derivatives.
The article states clearly that Venezuela only exports oil derivatives and some steel to its ex Andean partners. The other exportations have all dried up due to the currency exchange control in place since January 2003. Venezuelan products have stopped being competitive: the government forces folks to export at the official rate and thus a currency overvalued by about 80% kills exports value. By the same token it is a boon for importers who can buy in Colombia stuff cheaper than what is produced in Venezuela.
This is particularly favorable to Colombia which shares an extensive border with us. As Venezuela agricultural production fails consistently to meet internal demand, when not decreasing its actual production, Colombians just need to send a few trucks across the International Bridge at Cucuta.
The trade deficit became a gap as early as 2005 and in 2006 it was downright worrying, if anything by the dramatic trend. With Brazil we cannot talk of trade gap, but rather of one way trade. Even Brazilians worry about their trade surplus with Venezuela as a few moths ago Lula worried aloud. Today El Universal reminds us that while it also comments that non oil exports in Venezuela have dropped from in 7,127 billion USD in 2005 to 5, 245 in 2006.
There is no relief in sight. In fact this totally uncontrollable gap has forced Chavez to admit that he might reconsider the decision to leave the AC.
The structural cause of the gap are not addressed by the government. The increasing imports of food stuff (creating even some problems in Colombia) are due to an increased purchasing power of the population which is good, I suppose, if we make abstraction that this increased purchasing power does not come form the work and production of the people but from the oil buried under our feet. That increased purchasing power is unfortunately combined with negative pressures on the agricultural sector. The politics of land grabbing have stopped private investment in the country side while the new cooperatives seem to be overall an unmitigated disaster as they produce at best enough for their survival. These new "social production" joints fail to offer any significant surplus that can be commercialized in the rest of the country. And the government has only itself to blame for that since many of this land grabs are coming at the expense of fully producing private concerns while the peasants brought in are pretty much left on their own not receiving all the help promised by the administration.
The first results are now in: Venezuela will have for a long time a chronic shortage of beef and dairy as the specialized cattle is simply not replaced. Beef we can import for the time being but milk is already in rather short supply in foreign markets. We can see that on our grocery store shelves everyday now. The worst part is that the government keeps its policy of seizing cattle grazing ranches while any effort at resettling seized areas seem to be failing. From chronic shortage we risk to move on to permanent scarcity. Soon, considering that the government is keeping up and even strengthening its policy to fix prices so as to control inflation we are faced with the risk that Colombia will refuse to keep exporting cattle unless paid cash by Mercal at prices well above the Venezuelan regulations. How long the government will be able to keep up a straight face on this is anyone's guess, but the long term damage is already done: Venezuela is probably now a decade away from self sufficiency in meat and milk, even if the correct polices were to be implemented today.
Sugar is also another chronic laggard on the shelf. White sugar has disappeared since last year and brown sugar seems not to be as frequent as it used to be even one month ago. Again, price control and land grab are to be blamed for it. And again, as ethanol production keeps going up in the world supplies of comestible sugar might decrease some and their price increase. Another item with which the government is going to find difficulties in pretending that things are fine.
Other items are also in trouble but not as bad as the ones above, thus no need to discuss yet the problems in chicken production, for example. Beans, on the other hand........ But the point is made: the policies of the Chavez administration have created a dependency on imports that favors even countries with which Chavez does not want to have any deal with like Colombia. Imports from Colombia are at the sufferance of Chavez as he cannot simply replace them with imports from somewhere else. And there is no sign that in the near future Venezuela will be able to reduce its dependency with Colombia, by very far the largest share of the AC trade. Right now, astoundingly, Venezuela imported from Colombia in 2006 3,125 while its exports to Colombia dropped to 631. For every dollar Venezuela sends to Colombia it buys back 5 dollars. How long can this last?
-The end-
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