Last week, the government trotted out an illegally wiretapped private phone call between Venezuela’s top businessman and its top academic economist. Ricardo Hausmann, the enormously influential head of the Harvard Kennedy School’s Center for International Development, can be heard discussing macroeconomic stabilization with Lorenzo Mendoza, who runs Empresas Polar. Mostly, it’s Hausmann doing the talking.
And the shocker? The shocker is that there is no shocker. A scandal is when someone says something in private that is at odds with what they say in public. The Hausmann-Mendoza call is The Opposite of Scandal.
In private, Hausmann lays out basically the same policy proposal he’s been pushing very much in public for some time now. Venezuela can’t pay its debts, and when a country can’t pay its debts its best course of action is to ask for an emergency bailout from the one international organization that was set up specifically to bail out countries that can’t pay their debts: the International Monetary Fund.
The IMF is, obviously, politically toxic on the international far left. The reasons why say a lot more about the far left than about the IMF, though.
Say you understood nothing about fire, but you noticed that whenever a fire truck turned up at a house in your neighborhood, the people would come out in a terrible state…choking, shocked, horribly burned, sometimes dead.
Now, if you were singularly stupid and viscerally averse to learning and thinking, you might well conclude that fire trucks were evil.
You might start holding candle-lit vigils and street demonstrations to protests fire-stations in general.
You might feel patronized and enraged when people around you who do understand what fire is and how it works roll their eyes dismissively at your antics and pay exactly zero attention.
You may even be tempted to broadcast, on State TV, an illegally recorded wiretap between two influential people in the neighborhood who noticed a house on fire and discussed calling the fire fighters, saying they should go to jail for this outrage.
Was anything even remotely controversial or surprising said in the call? The closest we come is when Hausmann says any deal with the IMF will have to include “Private Sector Involvement”, which is bankerspeak for “private bondholders aren’t going to get paid back in full, obvs.”
But what’s remarkable is how non-challant Mendoza is in receiving the news. These days, with Venezuela bonds maturing past next-year already trading at recovery values, having a right-wing academic openly call for Venezuela to fail to fully honor its debts doesn’t even warrant a gasp from a fat-cat capitalist.
Just the opposite: it almost goes without saying. Everyone’s come around to Wall Street’s consensus that the alternative to an orderly restructuring isn’t payment in full, it’s an out-and-out desmadre, a chaotic default that could spiral into, well, anything.
Now personally, I’ve been an IMF-bailout skeptic on Venezuela over the last three years. I don’t dispute the idea that if a country is genuinely broke, its best option is usually to go to the IMF. I’m not a lunatic: when my house is on fire, I call the firefighters.
What hasn’t been so clear to me is that the house really is on fire. It’s hard to tell, because the government has closed the blinds, barricaded the windows, and won’t give anyone the data needed to figure out whether the smoke alarms we’re hearing are from toast burning in the toaster oven or from a full on blaze.
To me, the first thing to do is have a look inside, and make sure the fire really is a fire. Because if you call the firefighters for what turns out to be a piece of burnt toast you look foolish, and all your neighbors conclude you have no idea how to run a household.
That debate is rapidly becoming moot, though, and for all the reasons Anabella outlined yesterday: the government’s total paralysis when it comes to even modest reforms have probably settled the issue. Maybe it really was a toaster oven fire, two years ago, but at this stage, with the amount of smoke seeping out through the windows, it’s becoming almost impossible to believe it hasn’t spread from there.
Even so, I might still want to make sure there really aren’t any better options for putting out the fire than calling the firefighters. Those guys will put out the fire, yes, but they also turn out with axes to gain access to the site, and those high pressure hoses they use definitely can inflict some added damage to a structure that, lest we forget, is on fire.
But can you genuinely blame Ricardo Hausmann for putting in a preliminary call to the firefighters to say “listen, um, there really is a whole lot of black smoke billowing out of this one building where I used to be the superintendent, you guys ought to maybe put a plan in place to put it out”?
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