I Got the Eudomar Blues

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Last week, when Eudomar Tovar was named Central Bank head, lots was said about the new breed of Merentes-backed “pragmatists” in the nation’s top economic policy-making posts, with Tovar seen as a welcome break from the looney-tunes chavista orthodoxy of his predecessor.

This misstates the problem: it’s not about ideology, it’s about basic competence. At the risk of going on-and-on-about-this, I think we should be clear: there is no evidence in the public sphere that Eudomar Tovar is anything other than a blathering idiot.

His maiden press conference yesterday, which dramatically displayed his inability to read a simple bar chart, makes for amazing viewing.

This is a guy who struggles with the basics of formal Spanish syntax and diction. We see him stumbling through a mangled explanation of a simple table, happily contradicting the information being displayed directly behind him, pausing only to drop in such enlightening tidbits as the fact that when unemployment goes down, it means more people are working.

It makes for a sad, painful spectacle, one that raises all sorts of questions…not least of which is, do they pay him by the number of times he says “por supuesto”?!

For all the Eudomar-the-pragmatist hype, the element of continuity with the know-nothing Stalinish who preceded him is strong. Like Edmée, Eudomar at no point gives any hint that he understands what a Central Bank is, what it is for, or what its chairman’s role is.

It’s really quite remarkable: for the second time in a row we have a Central Bank head who doesn’t speak monetary policy. I don’t mean the fancy stuff, I mean the bare bones basics: Eudomar Tovar can’t seem to articulate a basic understanding of the link between money, the price level and shortages. Watch!

Really?! “Férrea cordinación” between you and the Finance Ministry?! That’s the best you can do as an answer to a question about shortages?!

Either he genuinely doesn’t get it – which I can’t really bring myself to believe, because the guy did study macroeconomics and bits of it must have stuck – or the intellectual climate chavismo fosters renders it politically toxic to be seen to understand the link between monetary aggregates, inflation, price controls and shortages.

After all, the revolutionarily correct line is clear: inflation and shortages are all down to heartless speculators. The end.

Still, it staggers me. I mean, you’d think a basic self-preservation instinct would push a government facing inflation and shortages as top national concerns to appoint someone minimally competent to understand the issues at stake. You’d think if there’s one area where they’d realize they need to project an aura of managerial competence to the people who they depend on more and more – the bondholders – it’d be here.

Pero no, chamo, ni eso.

I have seen the Iceberg that the Titanic that is Venezuela is headed into, and its name is Eudomar Tovar.

1 COMMENT

  1. So the poor Spanish, the inability to read a chart… That was all simulation? And where did he study? I wouldn’t be surprised at all if he really were that stupid.

  2. Francisco,

    Si! As Moctavio (an economist) also said yesterday. However, you add a very good point here (one that I think may have relevance ot the hydrocarbon/PDVSA sector as well):

    “Either he genuinely doesn’t get it – which I can’t really bring myself to believe, the guy did study macroeconomics: bits of it must have stuck – or, even more worryingly, the intellectual climate chavismo fosters makes it so politically toxic to posit a link between monetary aggregates, inflation, price controls and shortages that he’s not politically able to enunciate it. ”

    So, two questions:
    – (1) WHERE did he get his economics degree, when and at what level (masters, no?) I have met pretty sincere-minded chavista professionals/functionaries who clearly had a one-sided/isolated education (and they may realize it .. making them fairly open to being re-educated in “successful” China .. but, I digress)
    – (2) The political correctness – yes. This, I think, is a big factor. Aside from (A) the fact that certain sections of Chavista officialistas are dogmatists who refuse to see the problems left behind by Chavez, and this limits open discussion of the problems … besides this, If one looks at (B) how weak and precarious the Maduro-Cabello electoral base has become, it explains a lot about why the administration clearly feels they are not in a strong enough position to OPENLY and FRANKLY make any significant economic reforms domestically (any form of “austerity” by whatever other name governments use) to staunch the flow of funds populist-style to the electoral base. … Although they de facto have cut back things, simply because they have insufficient dollars.) They dare not PUBLICLY discuss the wreck of the economy Chavez left them and the need for change. Meanwhile, they may very well realize what is needed.

    I am convinced – from anecdotal discussions in recent months with some professional chavista functionaries here and there – that at least a section of officialismo has no illusions whatsoever of the state of things. .

    • Some may like to think Miguel is an economist and he might be a good one at that but at the core he is trained physicist with a Ph.D. from Harvard.

      • I know many physicists who switched to economics and they tend to have an amazing grasp of macroeconomic concepts. The theory and forces behind the flow of current are not that different than those behind the flow of currencies. Physicists master economic math quickly.
        I am a Ph.D. economist/statistician and appreciate Miguel’s analyses.

        • Physicists in general don’t understand economics. It’s not a matter of difficult math or IQ, economic theory is different. You can read a book and be able to sort of explain basic things, but a top economist beats any physicist (or engineer) talking about macroeconomics. As one would expect. . . ET is NOT a top economist. I don’t know if he is even an economist at all. . .

          • Of course physicist IN GENERAL won’t necessarily know anything about economics, but what Ronaldo said was that physicist who SWITCHED to economics tend to be pretty good at it. In fact, if I’m not mistaken, there are quite a few winners of the Nobel prize in economics who where originally physicists.

          • Really? Brain surgery beats economy and rocket science (and physics) beats brain surgery (and thus)

            Physicists have a very good mathematical basis but that goes beyond the calculation stuff. It has to do with the use of logic, their training to be aware of real causality.

            By the way: physicists can make pretty good software developers, even if they did not study “the real thing”. Given enough training, they can make it for it faster than many other groups.

            Of course, we are talking here about dealing with data and drawing conclusions, not about the way one or the other group might convey stuff to the public or so (human skills), but that is another matter.

            University degrees – of ANY KIND – do not confer some magic or non-magic attributes to someone, they are at most a guess about having attained minimum requirements.
            I am an absolute layman on macroeconomics but I am sure anyone with the required mathematical background and enough time to peruse the economy theory on his/her own, stuff students go through through a normal career, will become proficient.

            And please, tell me: how good can these top macro economists be when their interpretation of world crisis can be so brutally varied? Can you give me names?

            Economists’ discussions show more diverging views than the ones physics had over one century ago about whether the luminiferous aether was the way to go.
            The financial crisis and the interpretations we saw from the different “top economists” was an example of that. Some of these top economists were not better than a good gerente de panadería.

  3. Eudomar Tovar studied at the Universidad de Carabobo (1981), which is a shock to me and any other Valencian. He was born in Bolívar, though, which is a huge relief to the citizens of Valencia.

    The way he speaks is really poor and I find it is hard to pretend to speak like that.

    Now, about reading charts: you don’t need to go to university for that. As far as I remember, we were plotting charts during 1 year of secondary (7th year of school now).

    • What really depresses me is not so much his inability to comment on a simple table, but the little relevance of the table itself. What important information is conveyed in showing that 17 is 29.3% of 58? Why are the weights of each sector included in the table? Wouldn’t it be more informative to decompose overall growth by sector contribution and show it graphically? What sector is “no metalicos”? Isn’t this name a “little” vague?

  4. Couldn’t be that Merentes just wants to do both fiscal and monetary policy at the same time and he just placed the first idiot he could find that can take any orders from him?

    I mean it’s it’s seems crazy that the so called pragmatist finance head of the revolution, the counter force to Giordiani will be willing to back such a mediocre candidate.

      • BTW, why do we assume the “Merentes” brand is some kind of quality seal in macroeconomic management?? The guy is an absolute inept, and does not understand a thing either. Just because he seems more willing to talk to the rest of the world than El Monje?? Is that it? Chavez-Giordani really did a great damage, even to the discussion of basic economics in Venezuela

        • I agree. One need only look back to that trip to the Vatican a couple of months back. There’s an incredible photo of the entire Venezuelan government standing around a cemetery in Rome, contemplating the grave of Giordani’s economic idol, an early Italian Marxist by the name of Gramsci. The entire Venezuelan cabinet took the time out of a busy schedule to visit a grave stone, somewhere in Rome, on Giordani’s recommendation. What a photograph! What complete insanity.

          • I know Gramsci’s work pretty well. He is no dummy, but his heroic status comes from the fact that he died in prison before Communism became left fascism. So he’s exempted from blame.

        • Merentes gets a free pass because he doesn’t seem to be evil or a Stalinist. That’s how low the bar is for these guys.

  5. Please don’t ask about the Producto Intelno Bruto. It’s a cuban thing, you wouldn’t understand.
    As compoltamiento is.

  6. As an economist from Universidad de Carabobo I feel utterly insulted. I started in 85, so I did not have the pleasure of meeting this erudite scholar. The incompetence of everyone in Venezuela’s current government seems to be infinite… starting with the president. It is really depressing the low level of everyone with some level of authority. It’s beyond hope.

    • First off: welcome Gaby! (Gaby is an old friend). I second your pain, particularly for you and all the good economists I’ve met from the UC (Sonia, Pablo, etc.).

      As for Quico’s post – loved it. It really left nothing unsaid. Le diste hasta con el tobo al tipo, and he deserved it. Defensa del gremio chamo.

      • Y que conste que ese tipo NO nació en Valencia, es de Bolívar. En Valencia la gente no habla así (Aponte Aponte is the exception but then, as I explained to Setty and based on CNE records, the likelihood that Aponte Aponte is the product of strong inbreeding is extremely high)

        • Ok, I let it pass the first time, but now…
          My dad was an awsome economist AND he was from Bolivar and happy about it. Valencia does not have the monopoly on smart people.
          Too bad for the country he passed away so early, a relative relief that was 22 years ago, and he didn´t get to see what´s beome of it -of us-, not even 4F.

  7. Kudos to Francisco for a great analysis and follow up on how such seemingly mediochre economist as Eudomar can become head of the country’s most fundamental financial institution.
    The explanations (i) he is incompetent as academic studies and degrees dont guarantee that the student will become really competent professional , (years of long professional experience have taught me this) (ii) he knows his stuff but is lousy at delivery and nervousness makes him into a wreck ( also happens) . (iii) he knows his stuff but the message that politically he has to give is so toxic and incoherent that he makes a mess of his statestments . (iv) he is really mediochre but part of Merentes coterie of cronies so that he is put there simply to serve as a tool of Merentes policy decisions. (v) althought well trained his mind is so contaminated by stupid ideological beliefs that he can no longer think straight and has been made functionally stupid by his sectarian passions . ( a take on Borges famous dictum that ‘tyrannies foster.servilism and.stupidity’) (vi) a combination of any of the above. My fear is that even if you put one fo the best and brightest as head of the BCV ( which of course the regime doesnt have) the countries financial situation is so f…d up that there is little he can do unless the Regime is willing to inmolate itself for the sake of the country ( which it will never do) or there is a total regime change.!! Until then lets get out our armoured umbrellas!! . ,

  8. lots was said about the new breed of Merentes-backed “pragmatists” at the head of the nation’s top economic policy-making institutions

    How did “Banca & Negocios” get it so wrong?

      • For some analysts a pragmatist is someone who sets up mechanisms like SITME and SICAD to allow well connected people to benefit from arbitrage while keeping all the controls and distortions of the economy firmly in place.

          • Definitivamente hay que “ocservar” …

            “las cifras que Uds. pudieron ocservar en la convocatoria es significativa pues son unos 330 millones de dólares, y eso es impactante para la economía.” (minuto 3:04)

          • There is another thing I find extremely annoying: how can professionals whose mother tongue is Spanish and who live in a Spanish speaking country keep saying “ocho punto uno” instead of “ocho coma uno”?
            I mean: I would understand this is a problem for a native Spanish speaker living for ages in the USA or in Ghana but in Venezuela?
            El Imperio lo tienen en la cabeza de trogloditas.

          • sin comentarios.
            Yo creci diciendo punto. Tambien he tenido que configurar el excel para comas com divisor de miles y punto decimal. Cuestion de escuela.

  9. As far as a “basic self-preservation instinct” goes… They’ve been privileging ideology over the ability and willingness to deal with reality for a long time, yet they’re still in power. Even if some of them realize that without the Chavez charisma this will eventually be their undoing, it will be very difficult for them to change course in so fundamental a way.

  10. I just wanted to comment on one thing you mentioned, even though is not the main issue here:

    “After all, the revolutionarily correct line is clear: inflation and shortages are all down to heartless speculators. The end.”

    Dude! Chavistas are now passed waaaay beyond that. They no longer claim it is down to heartless speculators wanting to make as much profit as possible at the expense of the people. No! They now claim it is a WAR declared by capitalists against the revolution! You see, capitalists are causing inflation and shortages on purpose to try to bring down the government.

    You need to watch VTV or read Aporrea more often, if you want to really have some idea of the level of insanity we are talking about here (but be careful while going there, or you might end up insane yourself).

    • “…You need to watch VTV or read Aporrea more often,…”

      Who, with a sane mind, could watch VTV or read the drivel in Aporrea.

      I’ve tried & can’t stand more than 2 minutes.

        • “If you gaze long into an abyss, the abyss will gaze back into you”

          I am not a huge fan of Nietzsche, but he did have a way with words. This phrase captures how I feel when trying to watch VTV to understand the collective madness that is Chavismo.

  11. Actually, Eudomar (& Merentes) does really understand what’s going on and which are the necessary actions to resolve the shortage & inflation problems. The thing is that he’s a member of the corrupt (not pragmatic!) side of the government. He’s involved in BANDES case. He & Merentes “están metidos hasta el cuello” in deviations of the assignments of dollars (briefcase companies). On the other hand, Giordani…well I think it’s not worth to talk about this character. He’s only a communist caveman. And yet I don’t know which of the “sides” is worst.

  12. A case of the Blind (not even one-eyed) talking to the Blind. No way, ideological, nervous, or whatnot, can a supposedly “educated” economist say that there were 58 CONSECUTIVE trimesters of growth, including 17 down trimesters (due to lower oil prices). (Incidentally, contrary to conventional pictographs, but in line with conventional twisted ideology, the up trimesters are in red, which conventionally means loss, and the down trimesters are in blue, which conventionally might mean gain). Anyone knowing the real Venezuelan economic sitiuation knows that there has been no growth (and rather probably real decline) in 2013, so what Eudomar must be talking about is not real (currency or units) growth, but devalued Bolivares growth from 4.3 to 6.3 when comparing 2913 to 2012. Finally, to FT’s …the people they depend on more and more…”–these are not the bondholders, who the Government will be more than willing to default on when the time comes (stupid greedy capitalist junk bond fundholders), but the 30% or so basic Chavista base believers still waiting in a Mercal line to buy a giveaway-priced pollo (lately getting scarcer and scarcer, if delivered to the Mercal at all), or working in one 0f the 3 million or so various Government jobs, 80 % being paid a minimum wage, and fearful of losing even this pittance.

    • You know nothing of econonomics, this is embarrassing.

      Real growth has nothing to do with dollars, none, zero zip.

      And to think you were releaved that Capriles would not be saddled with economic collapse, lol he would be doing backflips if the economy started growing at this rate and obviously also being president and all.

      The prediction of economic collapse after an election has been the most embarrassing and consistent kneejerk reaction of this site, since 2004. I feel bad for pointing it out after having your hearts broken but to still believe this 4 months in is just embarrassing.

      • Shamess: embarrassment not only becomes you, it is so reflective of the economic report card of the regime you drool over. Sinceramente.. como si fuera una potencia mundial.

        As for your hysterical Real growth has nothing to do with dollars, none, zero zip, suggest you read more carefully, since dollars had nothing to do with Net’s comment. More importantly, wrap your head around the notion of growth in money supply (in this case, devalued bolívares). Because the regime has enough morons without you adding to the pile.

        • “since dollars had nothing to do with Net’s comment”

          Did you even read his post?

          “Anyone knowing the real Venezuelan economic sitiuation knows that there has been no growth (and rather probably real decline) in 2013, so what Eudomar must be talking about is not real (currency or units) growth, but devalued Bolivares growth from 4.3 to 6.3 when comparing 2913 to 2012.”

          I cringed when I read this, instead of one of you guys correcting your own you live in an ECHO chamber, you make absolutely no effort whatsoever whenever the topic is economics, I blame myself for letting it get this bad, but there is only so much one person can do for internet strangers.

          Yeah on politics you at least try to not be as bad and have a toe in reality, but in economics you are as bad as the rest of the english blogosphere.

          • Real growth is measured in what is generally used as a constant, be it dollars, physical production units, etc.–i.e., a measure that is generally accepted because it is universally recognized as a measure of account, and/or usually does not vary too much in value over time. The Bolivar currency unit obviously does not meet these criteria, nor do you as an “economist”.

          • No, no and NO, not only is your grasp of basic macroeconomic completely zero, you don’t even realize that the dollar loses value over time as well, it has lost 43% of its value since Chavez won in 1998. Even your friend syd above thought you did not make this mistake. you seemed determined to repeat.

            The currency you are looking for has a name “1997 Bolivars”, this currency will never change in value, it will never gain nor lose it, you cannot trade in it but you can convert to it using simple math.

            http://www.investopedia.com/terms/r/realgdp.asp

          • Can you please for the sake of sanity attempt to make at least some of your replies relevant?

            The original whimsical suggestion that NET made was that Eudomar must have been measuring economic growth in non-adjusted bolivars. Otherwise Eudomar’s statement MAKES NO SENSE. Would measuring in non-adjusted bolivars be a crazy thing to do? YES. IT WOULD BE. THAT WAS EXACTLY WHAT NET WAS POINTING OUT. You then rush in to announce that GDP growth is usually measured in a constant currency. WELL NO SH*T SHERLOCK, THAT’S WHAT WE WERE JUST SAYING.

          • I have to admit, you are an epic troll. You ran the entire discussion off the tracks and turned it into YOU lecturing US about measuring GDP accurately when the intent was to examine the Venezuelan central bank’s complete confusion over the measurement of GDP. Amazing.

          • Even your friend syd above thought you did not make this mistake. you seemed determined to repeat.

            Once again, Shamess, you demonstrate arguments that are un revoltillo, wondering if it’s deliberate, in order to derail discussions. I suspect your education does not measure up. Hence, you’re unable to put forth logical, cohesive argumentation, linked to comments or post on the subject. Instead, you spin a pretend just for the sake of arguing.

            Maybe you have a learning disability? Or perhaps you’re a druggie. Any way you cut it, you don’t do any favours to the party or leader you’re trying to promote. Quite the contrary.

          • Sigh

            “The original whimsical suggestion that NET made was that Eudomar must have been measuring economic growth in non-adjusted bolivars. Otherwise Eudomar’s statement MAKES NO SENSE. Would measuring in non-adjusted bolivars be a crazy thing to do? ”

            “but devalued Bolivares growth from 4.3 to 6.3 when comparing 2913 to 2012.””

            He is talking specifically about the dollar devaluation don’t be pedantic.

            And yes measuring real GDP in anything but 1997 Bolivars makes it not be REAL GDP!

            “Hence, you’re unable to put forth logical, cohesive argumentation, linked to comments or post on the subject. ”

            Don’t worry I was embarrassed for him too.

          • precisely my point. Eres un revoltillo mental, Shamess. Pobrecito. No wonder you’re attracted to half-assed beliefs and incompetent practices.

          • “And yes measuring real GDP in anything but 1997 Bolivars makes it not be REAL GDP!”

            EXACTLY. THAT WAS THE POINT. Eudomar claims there have been 58 consecutive quarters of growth, but that can only possibly be true if you measure economic growth in non-constant bolivars. You still ignore this simple point, which is coincidentally the entire point of the original blog post. Congratulations again on completely throwing the discussion off track.

          • “EXACTLY. THAT WAS THE POINT. Eudomar claims there have been 58 consecutive quarters of growth, but that can only possibly be true if you measure economic growth in non-constant bolivars. You still ignore this simple point, which is coincidentally the entire point of the original blog post. Congratulations again on completely throwing the discussion off track.”

            There has NOT been 58 consecutive quarters of growth in ANYTHING! even Nominal Bs, I mean remember 2003? should have been painfully obvious with freefalling GDP in the first quarter.

            Eudomar mispoke, and Miguel Octavio was fanatic enough to believe it was a conspiracy and a lie, while Francisco called him an idiot because he knew he mispoke. What Eudomar meant to say is that there has been 58 consecutive quarters of Chavismo, a redundant redundancy I know, but not that there has been 58 consecutive quarters of growth LOL.

            I personally hate this statistic, I know the growth is positive for the government I have seen the math, some areas mediocre like manufacturing, others much better like agriculture, construction and comunications. What I don’t like about this statistic is that a country can collapse to 0 on quarter 1 and grow till the end of time and still not make it back to where it started.

      • A couple of scenarios to think about, one on a small scale, the other on a large scale:

        A.) Starting in January, an employee in a local mercal is paid a salario of 3000 bolivars per month. The employee is okay with this because most people in his profession are paid the minimum. In June, his manager tells him that he does such a good job, he will give him a raise of 300 more bolivars per month bringing him to 3300. Said employee has thus seen a 10% increase in earnings, or, growth. However, at the same time, inflation is compounding at 3% per month. At the end of the year, has the employee won or lost?

        B.) A country exports a large quantity of a widget that is priced and settled internationally in dollars. Likewise, said country imports a large amount of consumer and capital goods that are purchased in dollars. Early in the year, the country devalues its currency by 30% relative to its major trade currency. What effect will this likely have on the price of those consumer and capital goods within the country? What will the short and long run expectations be for price levels post-devaluation? Which party will bear the burden of the devaluation? A). The trade partners B). The government C.) The importers D.) The consumers.

        Bonus question: Why would a country elect to devalue its currency? Would this likely lead to economic growth within that economy relative to its neighbors?

        • A.) This has nothing to do with real growth because prices remain static 1997 is the base year.

          B) The importers

          Bonus: to protect the native industry, and to promote exports. Yes I know harrdeeharr harr, the howls are predictable the minute I wrote “native ind” but Venezuela does make stuff and they do plan to export stuff other than oil, so this is the real reason Venezuela devalues the currency in the first place, the current account balance could even support a 3 Bs to the dollar under punto fijo economics, while totally and utterly destroying local industry. Just look at Chile and car production, that is the future you people propose.

          • A). That’s not actually an answer to the question but I see where you are going with it. Even so, if you are determining the real growth rate, you have to factor in price changes. If you leave price changes out, you are calculating the growth rate. Using nominal growth rates, its easy to say that there has been growth since XXXX base year assuming it is far enough back, but that never works in the real world and if you try to convince someone in finance that nominal growth rates are real, they’ll just giggle and try to sell you a bridge in Brooklyn or on the Autopista.

            B). This one is something of a trap. An importer is hurt only insomuch that they can no longer operate above their average total cost line with regards to marginal revenue. As soon as they are pushed above average total cost, they shut down; this holds particularly true when doubled with price controls which in turn leads to shortages. When faced with a cost increase, importers will typically pass said increase along to the consumers. The importers are dealing in two currencies, the consumers in one. In the end, price shocks are almost always passed to the end consumer, usually to their detriment.

            In Venezuela’s case, with the government acting as the largest single-entity importer and facing self-imposed price controls, then the government is the loser many times over. Think of it as chinese fiscal fingercuffs. And that is probably far more apropos than you might guess.

            Lastly, a government doesn’t devalue just to protect native industries. It can be just as effective doing this through import tariffs on those industries even though it risks a trade war in doing so. A government devalues its currency because it is fiscally advantageous for the government to do so; any other benefits, be they socially or economicalIy are simply icing on the cake.

            Venezuela’s case, with its largest import being oil, and denominated in dollars, a devaluation’s net effect is to reduce the purchasing power of its currency domestically through elevated price levels on its imports. When your exports brings you dollars and your imports cost you dollars but bring you bolivars in exchange, you being to see why this would make sense, viewing the government as the importer mentioned above. If you really wanted to argue that the purpose was to protect native industries, then there would have to be a much greater devaluation because the valuation of the bolivar is nowhere near 6.3, as evidenced by the many recent auctions putting it between 10-20. The implication is that there’s still a ~50ish% disadvantage to exporters on the world market. Moreover, even you admit that the industries are insufficient to export at this time as you state, “they do plan to export stuff other than oil” . Why would they select a policy to benefit industries that aren’t in a position to take advantage of said policy? That’s economically and politically wasteful.

          • Its a long post and I will answer tomorrow but this snippet

            “this through import tariffs on those industries even though it risks a trade war in doing so.”

            Uhh how can you just type this and not see the repercussions of raising tariffs?

          • Oh, I’m very aware. I kind of mention it, no?

            But, a de facto devaluation, in the great game of managing the national fiscus, is typically one of the last things a government wants to do; perhaps the only thing worse would be a default on sovereign debt, and from some points of view, they are a wash. Remember Argentina?

            Incidentally, if you believe that de facto devaluation is a good thing to do to protect industries, would that not imply that the industries in question are not competitive? Rather than devalue, wouldn’t it be far better to work on making said industries more competitive first? If that is the real rationale, that’s like hearing about dengue in Bachaquero and responding with a nuclear bomb when perhaps more orthodox methods of mosquito abatement would work.

            There’s this silly thing called comparative advantage in international trade and I can think of a number of industries that Venezuela should, nominally, at least, be advantaged over any number of trade partners. They’ve been mentioned in passing and directly many times over the years on this (and others) blog. Curious how those industries have not expanded. Could it be that there is some other inhibiting factor that causes these industries to atrophy? Somehow, I doubt that it is speculation, hoarding, or capitalism. Could it be something else that blocks growth through regulation and interference? Could that Smith guy have been right?

          • A quick question to pitianqui: What are the principal sectors that you feel have some comparative advantage, or could have with some work, and, with regard to what trading partners (or are you thinking in terms of the global market?) I ask because I did a study/wrote an article on Germany’s and the EU’s declining competitive advantage v. China in Latin America trade in medium- and high-tech goods (its at the German CFR site – & my blog), So I’ve been thinking of this re. Venezuela lately.

          • A few things, Venezuela has few if any advantages other than those afforded by geography, and in terms of high technology rocket launches are one of them incidentally, being so close to the equator and all with saving in fuel of up to 25%.

            For Venezuela to grow their advantages we need to start with our new inmediate market Mercosur, there has to be suffcient education and high technology advantages available so that a Siragon can export, a VIT can export, Orinoquia, etc.

            Just because we don’t have GLOBAL manufacturing advantages NOW does not mean we can’t have them in the future or that we cannot compete in the Mercosur, that is where Smith falls flat on his face.

          • “being so close to the equator and all with saving in fuel of up to 25%”

            Nice to see that you finally backed off your claim that equatorial launches offer a guaranteed 25% fuel savings vs. Cape Canaveral. In reality it takes 25% more fuel to get to the international space station from the equator. That fuel savings only applies to equatorial orbits (i.e. not even half the objects in space). French Guienna is doing a good job for the equatorial launch market, but if Venezuela wants to enter into capitalist competition and help drive the launch price down, all the better.

          • “Nice to see that you finally backed off your claim that equatorial launches offer a guaranteed 25% fuel savings vs. Cape Canaveral.”

            WTF I never said this, on the very first post I made perfectly clear that some angles such as polar orbits were more expensive, reread the entire debate

            ISS launches are roughly 15% of the launch schedule

            http://www.spacelaunchreport.com/log2012.html

            Let Kennedy and Baikonour keep it.

            Wheras the real money is in GTO, GEO and LEO of very low inclination

            http://indrus.in/opinion/2013/02/08/why_sea_launch_was_such_a_flop_22179.html

          • You were confused from the start (see below), and then dug yourself in deeper. You thought the 1% faster speed at the equator would amount to a 25% fuel savings, there’s no other reason you would have even bothered to mention differential equations and fuel mass, mentioning such an argument makes no sense otherwise. Stop trying to pretend that you were not at least deeply confused. You then laughed at the idea of launches from the US “being only 1% inefficient,” if at that point you had any understanding you would have specified what launches you were even thinking of.

            I suppose it makes you a good Chavista however, you are unable to admit you ever make mistakes.

            And yes, the reason Sea launch failed is because France has the equatorial launch market pretty well dominated. If Venezuela wants to sink some money and duplicate the Guiana space center while driving down prices for commercial satellite launches, great. Don’t expect it to ever make a profit, France hasn’t with Guiana .

            WHAT YOU SAID:
            YOU SAID: “It is inevitable, if you knew about orbital mechanics you should know that just launching from the equator you need 25% less fuel than from Cape Canaveral. Less fuel means smaller rockets means even less fuel. Polar and high angle orbits excluded(1)”
            (1) Wrong. The only thing that gets a 25% fuel savings vs. Cape Canaveral are equatorial orbits. Anything outside of that gets lass savings, meaning most possible orbits around the earth, not just high angle and polar orbits….

            YOU SAID: ” For example, because it is so close to the equator it provides a 25 percent fuel savings compared with Cape Kennedy. ”

            YOU SAID: “Your physics is deplorable, lower speeds means fewer time accelerating means less fuel need to accelerate means less mass, stop using arithmetic and start using differential equations for christ’s sake.”

            YOU SAID: “Boy you can’t take a hint can’t you? You don’t use differential equations because it is “too hard” for me? yet you keep using freaking algebra? until you show competency in even remotely understanding that with a rocket it is not about energy to get to orbit but about the amount of fuel you need to carry. Until that clicks you will not stop digging that hole you are at.”

            YOU SAID “God you are dense aren’t you? that formula is for ENERGY, which can be derived from simple algebra, but FUEL needed is entirely different formula, the more Energy you need the more fuel you need, the more fuel you need the more energy you need to get that extra fuel off the ground, not to mention the more metal storage you need for said fuel, meaning more weight meaning more energy on top of that.
            YOU SAID: “The only way to solve this is with differential equations and NASA would laugh you out the door if tell them they are only 1% inefficient at Cape Canaveral.”

          • “YOU SAID: “It is inevitable, if you knew about orbital mechanics you should know that just launching from the equator you need 25% less fuel than from Cape Canaveral. Less fuel means smaller rockets means even less fuel. Polar and high angle orbits excluded(1)”
            (1) Wrong. The only thing that gets a 25% fuel savings vs. Cape Canaveral are equatorial orbits. Anything outside of that gets lass savings, meaning most possible orbits around the earth, not just high angle and polar orbits….”

            Wow you really are grasping at straws, this is all you have been reduced to? arguing semantics? I explicitly made clear that Polar and high angle orbits are excluded but that is not good enough, you see there are orbits in between an UNDEFINED “high angle” and equatorial where Norksediv can go all aspergers and declare victory! After getting drubbed repeatedly on that thread…

            What if I define high angle to be anything to be more than 0 degrees Norksy? Ooooops, LOL
            Anyhow the savings also move there too depending on the angle but I don’t have the numbers, belive it or not (which you refuse to do) it is a complex calculation.

            BTW The market is growing and we need to put our foot in the door so that we have a horse in the next big thing.

          • Oh yeah. Just like statistics are “effing meaningless” (Shame dixit when pressed), so, too, are semantics.

          • Wonderful, wonderful. Shame says on Aug. 24, 5:44 p.m., ” BTW, the market is growing and we need to put our foot in the door so that we have a horse in the next big thing.”–Sounds like typical Chavista thinking to me, but– the horse is probably achievable, since it will be born with no State intervention, but the buggy (horse and buggy, where Shame/Chavismo are sending the Venezuelan economy) is probably beyond their capabilities….Meanwhile, the foot continues not in the door, but in the mouth….

          • A) Real growth rates have nothing to do with prices, if anything prices only exist in 1997 and they only exist to give weight to different products, if you make a million pencils and one car a year the GDP should be completely different if you make a million cars and one pencil a year.

            Once you have prices set in stone you can just meassure production directly, for example the incredulous person on the other thread never thought Venezuelan oil was only at around 10% of GDP, it was in 97 with 97 prices. If anything since production declined from 3,5 to 3 mmmbd the share has actually dropped in real terms. In nominal terms its closer to 33% of GDP. But this does include prices, inflation, forex etc. Much more complex due to the highly polarized debate.

            B) Importers always benefit more with overvalued currencies, the problem is you don’t do well in defining economic pain, if the market for imported goods shrinks and Importers go bankrupt is difficult to claim consumers were worse off even if they can no longer afford a new phone. That said it is only a matter of time for the currency to return to previous levels. 1% monthly inflation is still high.

            ” A government devalues its currency because it is fiscally advantageous for the government to do so”

            The government can print currency, they can create a law where government institutions sell dollars at 10 Bs, they have so many tools to not enter a fiscal crisis that the devaluations only make sense for the private sector, both protecting local industry and exporters (however small they may be right now).

            ” If you really wanted to argue that the purpose was to protect native industries, then there would have to be a much greater devaluation because the valuation of the bolivar is nowhere near 6.3, as evidenced by the many recent auctions putting it between 10-20. The implication is that there’s still a ~50ish% disadvantage to exporters on the world market. ”

            This is completely inaccurate, the true value of a currency is determined by the PPP index, not by the foreign exchange rate, either official or black market. The Bolivar is overvalued but nowhere near 10 or 30, closer to 7 actually. The world bank is due to update the global PPP index soon in a few months, we will never get a better true value of the Bs. Or of any currency really.

          • *sigh*

            Prices have everything to do with determining real growth. It is all about relativity between the price levels of the comparative years to provide an adequate measure. I am not discussing the weighting of componentry within the GDP due to its prices. And it isn’t that complex to calculate. A second year finance student is taught the necessary maths. Either the GDP has grown, which reflects growth within the economy, or it hasn’t; regardless, inflation undercuts real growth. Always has, always will.

            Likewise, while importers are always subject to exchange rate changes, a de facto devaluation is most punitive to the consumers simply because the importers protect their margins and pass the increased cost of the imports on to their customers. Pretty much how it works the world over. If they can’t, they don’t import, and most economists would consider a reduction in choice making the consumer worse off as they become effectively unable to obtain that silly “scarce resources” thing. (Its an Econ101 thing).

            The currency won’t return to its levels. Ever. Why? Because its pegged. And pegs only work through wishful thinking. It hasn’t worked in the past 100 years; even when pegged to gold for the developed countries. It goes a bit deeper than that, as you assert that the value of the Bolivar is not in the 10-20 range from the auctions, but rather closer to 7.

            It cannot be in light of the inflation. Why, you ask? Well, there’s this nifty little equation that leads to implied future exchange rates, it works with inflation and has a twin that is very similar using interest rates. The equation goes something like this:
            S1/S0 = (1+If)/(1+Id)
            S1 is the predicted spot price at the end point in time and S0 is the current spot price. Likewise, If is the foreign (Venezuela’s) inflation rate for that time period and Id is the “domestic” inflation rate of whatever country you choose. (This is the calcuation that finance folk, like those at BoA, UBS, and elsewhere use. It has also been on 3 of the last 4 CFA exams, and was on mine as well, years ago.) Assuming we are generous here, and we take the bolivar peg and the dollar, calculate in rates (again, being generous) and call it 30% and 2%, you still end up with the bolivar being valued at 8 per dollar.

            But taking the year, you are assuming that it was correctly valued in January, which it wasn’t. See, with a pegged currency, you have issues, so you have to go back, back, back to when it was somewhat free floating and calculate forward from there, using inflation rates rolling forward. So 7 Bolivars is nowhere near accurate.

            Also, another dirty secret about a pegged currency? Monetary policy is useless. That was kind of a trap. You see, the terms of trade do not change with a pegged currency; rather, you can print money until the cows come home, but all you do is stoke domestic inflation. Which is why, I’ve mentioned elsewhere, that the government becomes captured by the currency to which it pegs.

            But, you can believe as you wish. That formula? Its how they calculate relative purchasing power parity. Its handy for people with a focus on international finance/economics. You can wait for the World Bank’s numbers. Or you can try and calculate it yourself. If you really want to try and convince me that the bolivar is and maintains a 7/1 value against the dollar, I have some shares in Enron I’d like to talk about selling you.

          • FT, have your economic predictions ever come true? aside from those relating to the price of oil collapsing in 08-09? Which BTW I saw coming as well.

            I mean at some point you have to face facts, you do much better when talking politics even though you were wrong on the fundamentals, Chavismo survived without Chavez when this was your only hope for the past 2 years.

            The Venezuelan economy under Chavezconomics is and will be for the short term a two variable economy. The price of oil x production = health. You guys were predicting an oil collapse in 04-05 that never came to be, I am more inclined to believe that Ramirez is right and that it will double production, though a few years later than promised by Chavez.

          • You never change Francisco might as well tattoo the fact that you don’t care about us little flies on your forehead. Power got to you from day one, only it was just power over one blog.

  13. In the last 14 years they have developed their own style. It doesn’t mater, if the president of the central bank holds a talk, which doesn’t gets the basics of math right (< 0 is the opposite of growth).
    Quite an extreme example of arrogance of power.

  14. The economy is starting to rev up to its usual 5% growth and monthly 1% inflation, and you guys are talking about the comunication skills of a technocrat, SIBCI will have a silver lining for everything but you guys that brown underwear lining for everything too.

    Was it Kepler that honestly thought there was going to be a recession? another failed prediction.

    • Hoo boy! Venezuela’s economic engine is going to blast into the stratosphere. But how to get product to market, on time, when “vialidad” is so abysmal? How to get those industries producing when the regime isn’t paying workers? How to ensure productive human engines, when the regime can’t manage the distribution chains of foodstuffs, which it has overtaken? How to ensure productivity period, when the regime cannot and won’t tend to crime rates?

      Should I go on, Shamess? You need a little grit in that washed-out brain of yours.

      • 14 years, 14 years predicting economic collapse when the economy grows on average, the only real criticism you have is that it could be higher or that SOME sectors like automobiles and mining is weak, but the belief that it will all collapse after the Maduro election was D-E-R-A-N-G-E-D. Literally specimens for an MRI to see what is wrong with you people. A damaged brain.

        The post miguel octavio was also ridiculous because it is just whining about verbal skills NOT the economy itself.

        • What do you say about your side,, who predicted the collapse of the US and capitalism ever since 2002 or so? Would you describe your fellow ideologues deranged as well?

          What about Chavez, who a few years ago said the dollar was “in free-fall” yet his currency dropped in value 50% against the dollar? A bit deranged perhaps?

          • Este payaso troll, y sus socios titeres en la administracion publica (De Maduro para abajo) tambien se iran poniendo altaneros y groseros, violentos y peligrosos (Mas) hasta que les colapse el circo y se conviertan de nuevo en las zabandijas y mediocres que son.

    • Actually I predicted that, along with others, as well as further devaluations. I suspected they would be de facto, rather than de minimis approach to dealing with their macro problems. Nero fiddling, I’d call it.

    • There is going to be a recession this year, ceteris paribus (unless oil prices go up to 120 or higher for several months).

      Usual monthly 1% inflation? Is that usual in the Feudal Banana Republic of Venezuela?
      In 2012 inflation was a bit over 27%. Let’s see, Chavista math genius…how much is that on a monthly basis?

      Venezuela’s economy under this regime does not depend only on high oil prices but ever higher oil prices. When that doesn’t happen you need to borrow yet more money from the Chinese, money you won’t pay with the money you have in US/Swiss accounts but with the money of the poor that any sensible government should be spending in education, health, security, (social) justice.

  15. Well, acording to El Nacional, Eudomar Tovar is:

    El nuevo presidente del Banco Central de Venezuela es economista de la Universidad de Carabobo (1981) con una maestría en Moneda e Instituciones Financieras, estudios de maestría en Política Económica (ambas en la UCV) y una especialización en Aduana y Comercio Exterior.

    Yeap, a Masters degree on money and Financial Institutions,,,,

    No comment

  16. OT, but apropos: A great line from Alberto Barrera Tyszka, “The absurd has become an ideology.”

    Following: Alberto Barrera Tyszka, a columnist for El Nacional newspaper, one of the remaining outlets critical of the government, discussed the controversy in an Aug. 18 column: “A government cannot declare itself in a state of emergency against the government. It’s too ridiculous, scandalously incoherent.…It makes no sense. The absurd has become an ideology.”

    • Alberto Barrera’s sunday articles have become priceless as reference points to following/understanding the bizarre permutations of Chavista discourse (sometimes the word ‘ideology’ seems too flattering a term for what they express) . Theirs is a sort of contrived theatrical spectacle or,rethorical gesticulation seldom making any sense but intent on creating an emotionally charged impression, logic and reality be dammed !!

  17. He could also just be incredibly nervous at public speaking, which doesn’t help anything. That would seem to disqualify him from ever reaching the pool of candidates in a high profile job like this, at least in a normal country.

    Being nervous plus knowing he is trying to BS something that other educated people will see through in about one second probably doesn’t help.

    It really doesn’t matter, the Chavista fanatics know nothing of economics or finance or probably don’t even care. The ones that do can either find narratives to believe the official versions or are so invested in Chavismo (emotionally and intellectually) that they are literally incapable of admitting (maybe even to themselves?) basic facts. Devoted partisans can make incredible leaps of logic, and in a extremely polarized society like Venezuela’s those leaps of logic can be herculean.

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