Paquetazo en Gotas


And so it begins. The Chávez government started to cut back on unsustainable social spending in the construction sector not years after the election, or months, or weeks even, but three days after:

En un recorrido realizado en edificios en construcción por El Universal, trabajadores señalaron que el nivel previo a las elecciones ha bajado desde el miércoles 10, cuando se retomaron las obras…

El ritmo de construcción bajó notablemente en el complejo de más de mil viviendas que se erige en el puente Los Leones, en la urbanización La Paz.

Vecinos de la zona señalaron que durante las semanas previas a las elecciones gran cantidad de obreros trabajaban hasta altas horas de la noche, panorama que cambió en los últimos días. “Ahora trabajan sólo en el día, ya no prenden los faros que alumbraban para mover las maquinarias en las noches”, apuntó Esperanza Rodríguez, habitante de la zona.

En algunas obras han optado por disminuir su plantilla. En el edificio de la Misión Vivienda ubicado en la calle Ávila de San Bernardino, el 50% de los trabajadores fueron despedidos en la última semana y sólo quedan trabajando cien en la jornada diurna, según informaron varios obreros.

El caso se repite en el edificio que se construye en lo que era Parque Vargas, en la avenida Bolívar, donde laboran actualmente unas 320 personas, treinta menos que en las últimas dos semanas.

Yup, it took the Chávez regime three days to start to apply the type of money-saving cuts to social programs it spent the entire campaign accusing Capriles of secretly planning. Three days.

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  1. If the government is that short on money that it has to cut spending so soon even before the end of the year and the gubernatorial elections I wonder how many of those companies working on Mision Vivienda are going to be stiffed with uncollectable bills for months and months on end.
    From Mision Vivienda to Mision Reelección to Mision Salvese quien pueda.

    • Indeed. Several oil industry and public sector contractors have been waiting for years to collect their debts. Small companies simply shutted down operations. The transnationals were in stand by, waiting for a change after the elections, but I guess they’ll probably leave the country too. However, those debts will no disappear. They are still there, waiting to be collected. I guess those companies working for Mision Vivienda will have to wait in line.
      I wonder how long can this gov sustain this charade…

  2. This is just business as usual. This government is not running out of cash, not with oil at $100 + and not with the gold reserves in their hands.

    The slowdown represents a return to pre campaign work levels, necessary to maintain the illusion that yes, you too just might get a home here or there. You too might get a hand out, just step right up!

    There is no financial sturm und drang on the horizon, just a dull grey existence punctuated by occasional bursts of savagery.

    Until Chavez reveals in January what his wonderful plan for the next 6 years is.

    If collectivization gets the full speed ahead signal, then yes, that is when Transnationals will start to think about pulling up stakes. Although many already have long ago planned contingencies and taken out their headquarters to other, more business friendly shores in LatAm, such as Panama (P&G) and Colombia or Brazil.

    Small businesses, say 5-50 employees will likely continue as they are, but anything above that and it will be the kiss of death or the employees take over, and in many cases, it will be the kiss of death anyways, as we have seen time and again with expropriated companies that get “new employee management” from Caracas and not even from within the company.

    • You’re missing the second part of Francisco Rodríguez’s analysis. The same guy who started forecasting a 10-point Chávez win in September 2011 is adamant that the government will be forced to implement a major fiscal retrenchment within the next 8-14 months. A 19%-of-GDP budget deficit isn’t financable in Venezuela or anywhere else.

    • Still, haven’t we seen this before? Haven’t we seen many predictions of financial chaos and look, the monster is still alive.

      This governement will continue to borrow money for oil, irresponsibly, as long as they can. China will continue to loan us money for cheap, below market pricing, even as their spending goes down. Their economy alone, even in a down spiral will be enough.

      But who’s to say we don’t do the same with India and others who will seek cheaper oil?

      Do you have a link or something to read regarding Mr. Rodriguez’ predictions?

      • “This government will continue to borrow money for oil, irresponsibly, as long as they can.”

        Yeah, but how long is that? That’s the real question, and I don’t know the answer. As Yogi Berra said once, “it’s difficult to make predictions, especially about the future”.

      • I was thinking about the same. Doomsayers have been telling us for a long time that the government cannot sustain it much longer, falling short of foretelling the end of Venezuela as we know it the short-middle term. We’ve listening to that music for quite some time, and it never came.
        First the oil prices went up again. Later the chinese came to the rescue. The gov also stopped paying its debts to small and medium creditors, such as owners of statized companies and contractors.
        I think that Mr. Rodriguez, Toro and most of the analysts understimate the creativity – and luck – of the government when it comes down to getting cash.

          • Could I just suggest that perhaps, in part, the lesson from the election prognosticating debacle is not to rely on any one single forecaster, especially if they are predicting things that seem too neatly to comport with our own stated or unstated desires. Also, not to correlate past success with current or future success predicting outcomes. That’s not to take away from Rodriguez’s analysis; it’s just to invite folks to think more widely about other explanations. For instance, and as others have suggested, I’m not sure that cash on hand is the key metric; it’s the ability to borrow. That’s partly, I think, what explains last week’s dividend allocation on oil bonds. As long as the government keeps paying those, then the credit line will continue. More likely any cutbacks are the result of what Robert notes above: a return to pre-campaign spending. And that’s hardly a Chavez novelty. It’s a basic feature of the petro-state.

        • Well this is something I’ve been thinking a bit about. How far is the government willing to go in order to avoid or delay that a big macro-economic adjustment we keep predicting. We always assume that these guys play within the confines of some well know / responsible economic framework. But they don’t. They’ve had luck but also they’ve been willing to do things that wouldn’t have been contemplated by sensible people (mortgage our future or expropriate to not pay the bills). What is the next step?

  3. Also it seems that bottlenecks in materials can be a cause.
    “ ¿Qué esta pasando en Ciudad Tiuna?
    Nosotros trabajadores de la construcción activados en Ciudad Tiuna, hemos notado como se ha desmejorado el ritmo del trabajo hasta llegar a paralizar la obra en su totalidad, a continuación le enumeramos algunos detalles, faltas, fallas, desdén, y pare de contar, esto con la finalidad que se tomen las medidas necesarias y con la urgencia que el caso amerita.

    1.- Falta de materiales para cumplir a cabalidad los trabajos.
    2.- Se para la obra y no hay información por parte de la empresa matriz (MAQUIVIAL).
    3.- La incontinuidad en los pagos al personal.
    4.- La falta de seguridad social, higiene y salud.”

  4. Ridiculous conclusion to arrive at. I’m sure it fits right in with a lot of apocalyptic worldviews featured in the comments here (when it comes to Vzla, but not the EU/US where shit is really going down).

    Even if it were true that campaign spending cannot be maintained indefinitely, what’s your point? Each year has seen rising social spending. The housing mission has clear targets leading to 2018. Nobody is predicting another oil price crash. There are big countries lining up to give Vzla cheap credit.

    If you don’t understand socialism, you can’t criticize it effectively. The social missions are intended to raise conditions of society to a universal level. Capriles thinks social programs are charity, and that everybody in society deserves a different set of conditions.

    • The same thing goes to you: If you don’t understand capitalism, you can’t criticize it effectively. If in “the EU/US where shit is really going down”, what do you think is gonna happen to oil prices? Fo you think that your false statement “Nobody is predicting another oil price crash” will still hold up? The correct answer is: NO. If the world economy goes down the toilet, the same will happen to oil prices.

      • Again, there’s this underlying assumption that oil prices are high enough to sustain pre-election spending levels. They’re not. Oil prices in the triple figures could help delay the onset of fiscal crisis perhaps to the fourth quarter of 2013. But the fiscal imbalance is structural, and the deficit is MASSIVE. A major shift of purchasing power from private households to the government is not really avoidable. Just kick back and watch.

        • Yeah, but the government won’t need to spend again as much as it did before 7-O until one year and a half before the 2018 elections. They’ll cut spending dramatically now, and then increase it by then. Regardless of how bad the years between now and then might be, with the new wave of spending people will be happy again, and vote for Chavez. Isn’t that how it works?

    • And as for the cheap credit, please. A lot of people gave cheap credit to Greece a few years ago. How is it working for them now? And if you compare the interest rates that Greece got back then and the one Venezuela has to pay to get a loan under Chavez, you’ll realize that the Venezuelan gov is not exacty a poster child for creditworthiness….

    • Who needs cheap credit? Those laid off workers -and all the others that will follow, including their families- love their #ComandanteNeoLiberal to death and will vote en masse for his digital candidates come December, April y hasta el 2023 and beyond. Es más, their love is so intense it wouldn’t be outrageous to envision 0 abstention and an ever growing number of tables where the oppo gets 0 votes and castrochavismo 100%. Hey, those thousands of new desempleados probably can’t wait to stand in line to be registered, ID and all, for the next Socialist Mission Whatever. And, next time, they won’t wait for somebody to transport them like cattle to the voting center. No, they will run to be the first in line antes de que suene la Diana, where they will have to fight por a good spot with assorted damnificados, the survivors of the crime victims, the people who lost their business and a legion of other direct beneficiaries of the socialist revolution.

    • (when it comes to Vzla, but not the EU/US where shit is really going down).

      Well, I’m sure these guys are no fans of EU/US fiscal policy either. If anything, those cases could serve to reinforce the dour conclusions about the damaging effects of profligacy. But this isn’t a fair comparison in the end, especially the EU, since the circumstances that led to Greek/Spanish/etc. overspending were different, and I wish we had some Krauts to bail us out and pay for our swimming pools…

      If you don’t understand socialism, you can’t criticize it effectively….

      How does the intent of the politician change the economic consequences? Whether you think social spending is about equalizing conditions or about charity does not change the numbers; you still have to, you know, get off the mule.

  5. I think the explanation is it was an all-out effort before the elections, remember all the inaugurations, the satellite, the planes for Conviasa, etc.. Simply a burst, not sustainable in the time. Now the election is won, things go to “normality”…

  6. You guys worry too much, a devaluation to Bs. 8.6 in January should keep things going for another couple of years. Let the people pay for what they voted for. They will cut spending in real terms, the economy will shrink for a while and hopefully oil will go up at some point. That’s how this “socialism” has worked so far.

    • “devaluation to Bs. 8.6”

      Where is that number coming from? Your SWAG, or do you know something I don’t?

      Not that I don’t think that is about the right number for what they need to do. It is a fairly good compromise between the need to stop the hemmorage of dollars vs. the impact on the economy and public backlash at the higher prices.

      • Giordani is not a great economist, nor does he do models. He needs a biggy to avoid another devaluation in the future, multiplying by two seems to be reasonable for his abilities. Maybe Chavez will round it off to 8. Macroeconomic policy in Socialism of the XXIst. Century

  7. Note that the report by El Universal refers only to Caracas, which doesn’t vote until April. They’ll probably shift most resources to contested states in the December election.


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