lunedì, dicembre 28, 2009

2010 for Venezuela - by Daniel Duquenal

2010 for Venezuela
And we are at this time of the year where you either write the year in review or make up some horoscope. Or both. Safely I prefer to limit myself to a horoscope, as seriously as one can make such predictions considering the nature of the beast.

2010 is going to be a very difficult year for Venezuela. To understand this better we need a quick overview of the actual political and economical situations.

An economy with no signs of recovery

The first thing that one must understand is that unless the government decides to make a dramatic change in the way it is running the economic ship, next year is going to be worse, maybe much worse, than 2009. Unfortunately it is very unlikely that anything will change as the only governmental plan is to wait for a significant increase in oil prices, something that will happen at best late in 2010, too late to have any positive electoral effect before the crucial parliamentary vote of September.

The basic problem of the economy is that the private sector has been reduced, even dramatically in the area of goods production. Currently there is no trust in governmental policies, there is little spare cash for investment and even less taste to invest. In addition the fixed currency exchange rate favors an economy of importations over local production, a convenient tool for chavismo to direct goods to their followers. In other words the private sector is simply unable and unwilling to pick up the slack and try to help a revival of the economy. That would be difficult even if there was a will because with a fixed currency, an inflation rate of 30% and punitive labor laws the private sector simply can do little better than fight for its survival. Forget about job creation: even the financial sector and the import and distribution sector are very unlikely to grow significantly in 2010 because there is less money to go around unless the government continues increasing the country's debt at a scary rate.

Forget about the public sector. With the recent electricity and water crisis it has shown its total incompetence. Add to it the recent corrupt banking crisis and you can figure by yourself that those in charge of the public sector economic activities are in for a quick buck at state expense, way more worried about proving their loyalty to the regime, while lining their pockets, than to produce anything of value. Incompetence and political greed explains also the dramatic collapse of steel production in Guyana since the government took over SIDOR. Reports of equal drop in production and quality are heard from the nationalized cement industry.

The forecast is dim: I predict an increase in joblessness and at least 20% inflation for the first semester. I also predict that the recession will go through at least the first two quarters independently of oil prices variation. I also predict that the government will either have to increase gas prices or devaluate the currency to at least 3 Bs. to the USD from 2.15. These will have little effect on the current crisis except for exacerbating inflation in the second semester. The economic problems of the country are due much more to the legal and coercive repressive system coupled to corruption than to gas or dollar price. What is needed is to restore confidence and this is not going to happen.

A political quagmire