The FT rings the alarm bells

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Panic-attack-symptomsThe folks at the FT are worried. Very worried.

Two money quotes, given their annoying firewalls:

“In a report last week which was otherwise bullish on supplies, analysts at Citigroup called Venezuela “probably the biggest bull risk to the oil market in 2014 outside of the MENA [Middle East and north Africa] region.”

“The current regime is looking increasingly unstable, with rampant inflation, shortages of food and other basics. In the event of a coup the country’s production could collapse as it did back in 2002 [when PDVSA workers went on strike],” the bank’s analysts added.

Venezuela’s growing instability was also widely discussed at an oil industry conference in Mexico last week, according to participants.
Concern centres around two scenarios.

One fear is that municipal elections in December could be a trigger for civil unrest, encouraging elements within the army that oppose the regime to step in to secure the streets. Any coup could lead Chavistas to orchestrate a shutdown of production at PDVSA.”

And another one:

““It is a matter of time before Venezuela defaults on its loans to China and without more cash the government will struggle to pay wages and there will be chaos,” says one senior trader, who says the market should be factoring in a significant reduction in Venezuelan output next year.”

Wait, coup? Chaos? Defaulting to China? Oil shutdowns? Nonsense. Don’t they read Weisbrot? Everything’s great! We’re not Greece. Why, we’re getting a loan from Goldman Sachs!

1 COMMENT

    • Alek, the graph that you link to shows the rate of poverty being 31.6% in 2011 and 25.4% in 2012, a drop of 6.4 points in the year, which is in fact a drop of 20% in the year as Mark claims. A drop of 20 points would have meant a 63% drop.

    • Alek, From your article at Infodia, there is a link at “on the website of the World Bank”, there is a graph with numbers below: Tasa de incidencia de la pobreza, sobre la base de la línea de pobreza nacional (% de la población)(- Indicator name, with Indicator code of ” SI.POV.NAHC”)

      2012 31.6%

      2011 25.4 %

      Which is a decrease of 19.6% from 2011 to 2012 : 1-(.254/.316)X100.Granted, these numbers, which I believe came from the Chavernment, are suspect, but they do support Weisbrot’s claim fairly closely, when you round off.

      However, when you look at other World Bank data supplied at the link,- you can download a spreadsheet for Venezuela- the number for poverty reduction becomes rather suspect. Some months ago I looked at World Bank data for GNI per capita, PPP (constant 2005 international $, (Indicator code of “NY.GNP.PCAP.PP.KD”) and found out that from 2008 to present, per capita income in constant dollars has stagnated or declined in Venezuela.

      This was not easy to track down on the current spreadsheet, as the current spreadsheet has Indicator Names in Spanish- or no Indicator Name showing. By linking to the Indicator Code, I was able to find the most current data for GNI per capita, PPP (constant 2005 international $. By dealing in PPP- purchasing power parity, exchange rate distortions should be smoothed out.

      GNI per capita, PPP (constant 2005 international $ middle column
      Poverty headcount ratio at national poverty line- right column
      2008 11,885 32.6
      2009 11,148 31.8
      2010 10,705 32.5
      2011 10,869 31.6
      2012 11,254 25.4

      It does not make sense to me that from 2008 to 2012, GNI per capita , PPP should decline 5% in constant 2005 dollars, while Poverty should fall from 32.6% to 25.4%, a decline of 22%.

      That the economy has stagnated from 2008 to 2012 makes sense to me. The alleged reduction in poverty with a stagnating to declining economy does not make sense to me.
      Weisbrot dealt “honestly” with the poverty figures that the Chavernment supplied the World Bank.”Honesty” to Dr. WhiteBread is parroting Chavista talking points/data. However, as you point out, the veracity of those poverty figures is very much in doubt.

      • Boludo, what I tried to say -evidently I didn’t express myself clearly enough- is that Weisbrot is attributing to World Bank figures that would show a 20% decrease in poverty. The data in the graph does show such reduction, but my point is the whole thing is based on numbers from INE, an institute that become famous for having miraculously reduced poverty in a matter of months, after Chavez berated its director in a cadena.

        That is why no reporter is taking the trouble to report the “20% poverty reduction” claimed by Weisbrot because the numbers are simply untrustworthy. Pretty much like the ones about every other economic index in the country, or the canard that “Venezuela has eliminated illiteracy.” If you click on other poverty stats on the left of that very page, you will see that most of them stop in 2006.

        And if you visit this link http://databank.worldbank.org/data/views/reports/tableview.aspx you will see that all figures come from INE, hence my question about who is fact-checking Weisbrot at The Guardian.

        Thanks for your clarification anyway.

        • Alek, perhaps you need to know that fact-checking in main-stream media is rarely if ever done anymore. And if the World Bank goes ahead and uses figures from an untrustworthy source, such as the INE, how is The Guardian to know any differently.

          Second, may I suggest you not cloak yourself with terms that are totally unnecessary? Gilding the lily by using flourishes such as “empirical expertise” (?) detracts from keeping your message simple and direct. The objective in writing is to dissolve, not enhance the ego of the writer.

          Just a few observations …

          • Not only media. A German “professor” of history, born and raised in Eastern Germany, also used those bloody numbers for his Von Bolívar zu Chávez, a thick book about Venezuela’s history…the only one available right now in German bookshops, as far as I know.
            He also quoted White Bread as “independent” economist. The guy got finances from the Venezuelan embassy for a cátedra de Bolívar.
            It is a pain in the ass that we have to explain everything and most people stop at references such as “it’s United Nations’ data”, “it’s what the WB said”.

        • We’re on the same page: the Poverty figure that Weisbrot quotes is not supported by other data from the World Bank. 1) You point out the poverty indicators that are not covered after circa 2006 [rather like murder rates sent to the UN-Kepler’s point] and 2) I point out the Poverty figure is not consistent with per capita income in PPP constant dollars.

  1. I don’t think we are entering Syria territory at all. Plus, I don’t think a military solution would be welcome.

    Altamira soldiers where the most antichavista element in the force, back in 2002. And on april 11th they were all active members. What did they do after 48 hours without official recognition NOR condemnation? They folded, even though those were the last active soldiers who had seen an actual combat (60’s guerrilla insurgence).

    You want to know what is Latin America’s strongest labor union since 2002? The presidential labor union. Ecuador had a Police Force crisis, Honduras had a military intervention in politics and Paraguay had a legislative defenestration on the executive. Right now, UNASUR, ALBA, PetroCaribe, CELAC, OAS et al. are more than ready to repudiate the overthrow of any “democratically elected president”. I don’t think all these fat generals are going to weather it like they did in Honduras.

      • I heard that CItgo spun off some asphalt plants that had Vz crude purchase obligations which just came off and the independent company is now purchasing open market..

        the bigger story is Cdn heavy crude being brought south to US refiners by rail..volume jumped from near nothing to over 300,000 bls/day within two years. …the savy markets end run around Keystone permitting problems….Cdn heavy oil production is competing head to head now with Vz heavy oil in the US south whereas before the Canucks had trouble getting it to market…that combined with the huge increases in US tight oil production which is lifting overall US production by about 3MM bls/day since 2010 is rapidly shrinking what is required from offshore which typically has higher transportation and political costs….within 3-5 years there won’t be any need for Vz or any other OPEC oil in North America..time to find another market boys…hope they pay net 30 and in cash.

        • Citgo sold its 2 small asphalt atlantic coast refineries at least 2 years ago with the promise (unkept) of continuing supplies from Venezuela to feed them . Dont think the sale had much impact on Citgos income stream. About Canadian heavy crudes coming south , that might be . If Pdvsa was run properly however they might give Canadian heavy (tar?) crudes a run for their money because costs of extracting heavy crude in Venezuela can be much lower than what it costs in Canada and the cost of ground transportation is always much costlier than marine transportation which brings the crude direct to the USGC refineries door. Of course refineries in the USGC have already been designed so as to optimize the refining yields of venezuelan heavy crudes which makes the Venezuelan crude always attractive , if offered . Nowadays sadly doubt very much that Venezuela will produce enough to even continue supplying feedstock to its own refineries.

  2. Never noted is that there was no effort whatsoever on the part of the oil strikers in 2002 to disable production capacity ( in fact great care was taken to hand over installations to govt reps in tip top shape ) . If there had been any effort at disabling production the disruption to the operations would have been inmmense and lasted at least a full year or more . Many of those strikers had lived their whole lives taking care of the installations and were actually attached to them the same way an artisan is attached to his tools . Also to be noted is that the ordinary worker is a creature of habit , it will continue doing things as always , stopping work is one thing but destroying facilities is quite another. Dont think the average engineer in todays Pdvsa is in any way a fanatic even if their top bosses make a career of sounding like they are .

  3. Venezuela’s economic policy is proving to be another example of Ludwig von Mises’s argument that economic intervention, if left unchecked, leads to complete socialism. The ever-expanding price controls testify to the fact that governments always search for new scapegoats in the market instead of admitting the failure of their own policies, and that it is always easier to increase government control than reduce it.

    • The Chaverment decided to prove that Atlas Shrugged wasn’t farfetched. It can happen to you!

      I also like the way The Road to Serfdom and The Servile State explain how good intentions pave the way to hell.

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