Will the fiscally responsible candidate please stand up?

"We're in a hole, compatriotas, so keep digging!"
“We’re in a hole, compatriotas, so keep digging!”

A moment of honesty: one of the reasons I’ve found it hard to blog about this election is the disappointment I feel with the Capriles candidacy. Yesterday I was reminded of why that is.

Yesterday Nicolás Maduro, being the shallow, irresponsible person that he is, promised people he would raise public salaries this year by close to 40%. Never mind the fact that the nation is bankrupt – the show must go on, and since inflation is on the rise, we must counter that with higher salaries for public employees.

Now, if Capriles really believed the campaign was a chance to highlight Maduro’s many flaws, he would have taken this announcement to do just that.

He could have pointed out that Maduro has bankrupted the nation. He could have stressed that Venezuela cannot keep spending and borrowing as if the day of reckoning wasn’t near. That raising salaries would only mean higher inflation down the road. Heck, he could have gone populist and simply said it wasn’t enough.

In other words, he could have kept the focus on Maduro, and on his reckless handling on the economy.

Instead, Capriles immediately countered Maduro with a promise to decree a hike in salaries … the day after the election. This comes on the heel of promising PDVSA employees that they won’t be touched.

Capriles is behaving like a candidate who thinks he can win, and is willing to offer anything and everything in order to do just that. The irony is that, taken at face value, one could argue the Maduro proposal is the least insane of the two! After all, he’s raising salaries gradually and leaving himself some wiggle room if conditions change.

Never mind that the President Elect – in case that were to happen – has no power to decree anything. Capriles recklessly puts aside any pretense of understanding the nation’s fiscal predicament, and simply promises to ramp up the printing press at the Casa de la Moneda, damn the torpedoes.

I’m sorry, but Venezuelans deserve to be treated as grownups. We’ve been through this before. Devaluations to cover a fiscal hole create inflation, which creates pressure to raise salaries. The government gives in, and this increases the deficit even more, prompting further devaluations down the road.

Wash, rinse, and repeat. Much as we may have nostalgia for the ’80s, bringing back the economic policies of the Lusinchi era is not going to get us anywhere. We know how all that turned out. And, judging by this exclusive report from Spanish journal ABC, the people in the Maduro campaign are well aware that the economy is a ticking time bomb.

I wish our candidate understood this.

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    • I agree. If we are actually that close to winning I am willing to turn a blind eye on this. If there were an unsormountable difference between both candidates then sure, what the hell, speak the plain harsh truth. But since it seems we are almost there why spoil the party? there´ll be plenty of time for the hangover once we get there…

      • I do not have a Republican heart, but I agree with Juan 100%…Venezuelans need to know the truth, the ugly truth. Venezuelans need to know that the way up the hole where the 21 century-socialism place the country it is going to be hard for everybody.
        I really like Capriles, but the populism and religious part of his campaign drives me crazy!…

  1. Juan, what’s your take on capriles argument that he’ll be able to do so because he’ll stop giving away oil for free (or money, for that matter). On your opinion, would that be enough to support his claims?

  2. I disagree. Given high levels of inflation and the government’s recent devaluations (both announced and via secret auction), a minimum wage hike is justified and even necessary. If you value workers’ salaries in a stable currency (dollar, real, yuan, whatever you want that’s not Bolivars or Bitcoins), they’ve been crushed by the government’s recent economic policies.

    Capriles would be absolutely correct in announcing the hike immediately upon election. Eventually, the country needs to find its way out of the inflationary trap, but an immediate minimum wage hike to ease the pain caused by the Maduro economic policies of recent months is both economically responsible and politically smart.

    • Capriles knows that raising wages will only lead to bigger deficits, and more devaluations in the future. But he needs to win an election (or he thinks he can win it), so he’s willing to say whatever his advisers tell him to say.

      The consequence of Maduro’s policies is that poor Venezuelans will become poorer, at least for a while. Nothing Capriles says or does will change that fact.

  3. I can think of a way he could pay for that.

    If Capriles beats Maduro, I think it might smash apart this polarized political scene and set the country back on a democratic path. That would allow room for what we all want…a policy debate.

  4. I thought Capriles has offered first the salary raise, I heard him say it a couple of days ago and Maduro’s announce was yesterday I think.

    I’m not sure about anything, the +5 hour difference with Venezuela confuses me sometimes.

  5. What matters at this point is to win votes. Financial niceties come later. There is already too much financial mess for either candidate to use corrective tools on their campaign platform.

  6. It’s a tough call. Capriles is a politician, not an economist. If he loses I very much doubt that he will have to eat his words or that pre-election promises will weaken the opposition’s position significantly. In fact I’d be surprised if most people even remember any of his promises. The opposition will be able to hammer away all the same, facts will be facts. If the economy implodes under Maduro what Capriles says now won’t matter one iota. Plus Capriles will have a lot of other problems to contend with if he doesn’t win, as will the opposition.

    An additional cynical point is that this election is so far removed from reality at this point that, well it’s more about feeling that this or the other candidate has a clue period.

    I agree with JC that Capriles’ remarks regarding what he can accomplish are untruthy and thus fundamentally irresponsible. There is sadly a profound lack of understanding about economics among the public and no apparent interest in telling them the truth, but this short election period is I guess not the time to resolve that. If Capriles actually WINS and is truly reasonable he will have to take unpopular measures. Most serious in my opinion is management of PdVSA.

  7. I’m sorry, but I’ll have to disagree with you on a crucial point.

    A nation that might elect a candidate who recieves orders from a bird, sound effects included, does not, in fact, deserve to be treated as adults.

    Painful, but true =/

  8. If it’s true what everyone is saying, that the economy is a ticking time bomb of mass destruction, then I wouldn’t think you’d want Capriles in to take the fall for that. Just my two cents.

  9. Mr Nagel, in order to understand the salary hike, i refer to you to this paper on the politics of stabilization by Treisman (2004):


    It’s obvious that Capriles is going to need a LOT of political support in order to execute economic policies, especially considering that, if winning, he’s going to inherit a State full of Chavista Die-hards on all public powers; so he’s probably going to look for political support amongst private agents. In order to do that, you most certainly have to give incentives, and nothing is so general, so populist, so Pueblo, like an immediate wage raise.

    Henrique Cardoso’s succesfull stabilization policy in the 90s that brought down the Brazilian hyperinflation agrees with this reasoning: political credibility matters A LOT in the short term, while fiscal sustainability is relevant, but only on the medium-long term. So i’m with Caprichito on this one.

    • OK, that’s a good point. I’m not entirely convinced, however. Capriles may find less resistance than he would expect were he to win. But I understand your logic.

  10. IMO the issue of a political inmature society must be dealt through education. The opportunity lost by Capriles is that of not using the impending time bomb to educate. We are going to implode, fellow venezuelians BECAUSE of the failed policies of Chavez: 1), 2)…. y se lanza una lista de razones de todo lo mal hecho y de sus consecuencias.

    LAter, when Chavismo implodes and the infighting makes it divide and brings the country into civil unrest, he may come back and say I TOLD YOU SO….

    We are corriendo la arruga. Seguimos en la pea y algun dia pronto, vendra la rasca y la resaca.


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