PSUV Can’t Fix the Economy’s Problems Because it Can’t See Them

At its Economic Conclave, we saw a PSUV as radically divorced from reality as it's ever been. ¿Rectificación? Yo te aviso.


If you invited 100 sane, competent economists of the left, right and center who do not work for the Venezuelan government, to grab a coffee and to talk about the Venezuelan economy, you’d find yourself having similar kinds of conversations with a good 99 of them.

You’d end up talking about a failed model based on multiple, unrealistic price controls that create huge distortions, crazy arbitrage and irresistible corruption opportunities. This model benefits the few at the expense of the many which, when you think about it, is what socialists have always criticized about capitalism.

In your 100 cafecitos, your 100 economists would certainly disagree on ultimate causes, and on the sequence and scope of needed reforms. They’d disagree on all kinds of details. Your cafecito with Ricardo Hausmann would certainly be a lot different from your cafecito with Mark Weisbrot. But, in the end, you’d find yourself having 100 conversations about the same thing.

That streak ends, though, when you enter Planet PSUV.

According to Últimas Noticias, the ruling PSUV party held an economic conclave “a calzón quitao” at la Universidad de las Artes (Uneartes) in Caracas. If UN’s account is to be believed, the conversation they had simply never touched any of the themes you’d have had in your 100 economist cafecitos. Instead, PSUV launched an economic summit that studiously avoided even mentioning, much less discussing, any of the key distortions currently mangling the Venezuelan economy. And you won’t fix a problem that you refuse to acknowledge. You can’t.

In revolutionary terms: the PSUV seems to constantly ignore the first two of the three revolutionary “R”s –revisión, rectificación y reimpulso  because the “revision” tends to be more like a scapegoat parade and the “rectification” process limits to a couple of mea culpa speeches and vows for still stricter controls. “Relaunching” is a fan-favorite, because the same popular programs are presented with a new name or logo, giving the government more time to fulfilled a never-ending list of promises.

Economist Tony Boza, who apparently organized the gathering, said that the meeting would produce a working paper to be brought up for a national discussion amongst Psuv members to later be presented to the country.

According to Boza, after the MUD won a majority in the National Assembly the PSUV delegates decided to undertake a first round of revisión profunda to launch more efficient actions. This sure sounds a lot like: ‘the economic crisis was not a problem until we lost the 6D parliamentary elections’, doesn’t it?

The oil panel at the soiree included Alí Rodríguez Araque and Carlos Mendoza Potellá and was moderated by David Paravisini. Former governor of Portuguesa Antonia Muñoz presented some ideas to develop the Venezuelan countryside.

Other members of PSUV in the – so called – debate were Luis Salas, José Gregorio Pino, Judith Odreman, Erika Farías, Carmen Menéndez and the national deputies Ramón Lobo, Ricardo Sanguino, José Avila and Jesús Farías.

According to Boza, there is no consensus about increasing gas prices and -inspite of the Communist Party proposal- they are not considering the nationalization of the banking sector. He also said that they are proposing the strengthening of the Sucre – a rather small compensation system for regional trade – and that they hope the government defines mechanisms to keep on meeting foreign debt payments. Don’t we all?

Now… for the fun -and sad- part: Let’s see what the ‘true revolutionaries’ had to say about the economy.

Alí Rodriguez Araque claimed that “the economic crisis will be continue for the next two years, causing the social impact of shortages and rising poverty levels”. No surprise there…

However, he seemed to miss -once again- the cause of the problem when he added: “we should remove the phrase ‘economic war’ from our speech and explain more clearly to our people that our economy depends on oil, that oil revenues are dwindling and that this situation will continue in 2016″. Let’s be clear: the crisis started on the first semester of 2014, before the oil prices started to dwindle… and just like Bárbara and me once wrote over a year ago: “don’t let anyone tell you our recession is because oil prices fell. It’s because our policy-makers failed”.

But at least Alí and I agree on something: the ‘economic war’ speech doesn’t help and it’s time to let it go. Cue the ‘Frozen’ soundtrack.

Rodríguez Araque also dared to say that the crisis should be explain to people in an honest way, just like “a true revolutionary” would. Maybe the government should start admitting their responsibilities and catching-up on the loooong list of delayed official publications before talking about honesty.

The revolutionary deputy José Ávila talked about corruption and its effects on inflation. Ávila, as a national deputy, has comptroller powers… so if he and his bancada knew about such corruption schemes, then why didn’t they do something about it? Uh? I guess that meant that they would have to dismantle the distorting controls they been defending all along.

Ironically enough, in October, Ávila said that the government hadn’t released official inflation figures because of they have been altered by economic actors -scapegoats galore.  

Ávila also criticized the remate of the debt of Petrocaribe, decision made by “los que acaban de salir de Pdvsa”. He didn’t mention any names. You can’t help but wonder.

I want a government that works for the people and not for a failed revolution. We, as Venezuelans, want answers.

The cause of the crisis is undeniable: a failed model, built on a huge proliferation of dysfunctional controls. But PSUV suffers from a strange kind of blindness about this. It isn’t even that it can’t fix the problems, it’s that it can’t talk about them because it can’t see them.

What passes for “economic debate” within chavismo today contains no economics at all. It is, instead, a parade of scapegoats, a bunch of mea culpa speeches and no real rectification whatsoever.  

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  1. All of this augurs poorly for Venezuela/its economy for the near-term. The PSUV model doesn’t work, either economically or even socially–you can’t re-distribute wealth/capital to the poor when you barely generate enough to feed your 50%+ poor citizenry. Rodriguez Araque probably hopes that in 2 years the Country may come back with a comeback in oil pricing–he should listen to often-prescient short-seller Jim Chanos, who says that oil producers should maximize production now (as Saudi Arabia is doing), since by 2030 oil in the ground may not be worth much, as vehicles will be continuing to be converted to electric power, fueled often in homes off the grid by solar/natural gas, and 80% of oil use currently is for transportation (and this not to mention the future necessity of governments discouraging the use of oil due to global warming).

  2. Terrífic work. Seems like another reason to hope for an unexpectedly rapid collapse of chavismo – foreign investment will never return while these ideologically rigid lunatics are still around.

    Even the Chinese have got to be wondering if they will ever recoup 100% of what they’ve already loaned to Venezuela…

  3. No surprise there. Expecting these buffoons to change their outlook is like asking a frog to act like a cow.

    I guess they still see the emperor is dressed in his finest outfits………………

  4. Oh they can see it. It’s like that example joke Slavoj Zizek uses where, at a Stalin cabinet meeting, a guy criticizes Stalin. Another one gets up and berates him “how dare you, our great leader this and that!” They were both disappeared. It’s about the discipline to not acknowledge the possibility of the existence of reality outside the party.

    • Also a danger in some “siemprd hemos sido mayoria” sectors of our very own “new majority” (I hate politically chosen terms… oposicion, coño, la guerra sigue).

  5. “Let’s be clear: the crisis started on the first semester of 2014, before the oil prices started to dwindle… and just like Bárbara and me once wrote over a year ago: “don’t let anyone tell you our recession is because oil prices fell. It’s because our policy-makers failed”.”

    It’s frustrating to hear in foreign press how oil prices are so closely linked to the economic crisis (to be fair, they do mention price controls usually but most people just think of oil). Clearly, their decline pulled back the cash that papered over a dysfunctional economy, but we had two years of recession BEFORE the oil prices started to fall in Dec 2014. No other economy in South America had recessions those years. This crisis started before the fall of oil prices, that fall in prices just pulled off the band aid that covered up some of the gaping wound.

  6. Let’s be clear: the crisis started on the first semester of 2014, before the oil prices started to dwindle…

    While the economy may not have entered into “crisis” mode until 2014, it had long been apparent that the Chavista economic model was not performing well relative to other economies.

    GDP per capita, PPP (constant 2011 international $) Percentage Growth from 1998 to 2010
    Venezuela 7.8%
    Latin America & Caribbean (developing only) 23.4%

    GDP per capita, PPP (constant 2011 international $) Percentage Growth from 1998 to 2013
    Venezuela 15.2%
    Latin America & Caribbean (developing only) 32.0%

    When you consider these are figures from oil price bonanza years, the comparison is even more to the disadvantage of Chavismo.

    World Development Indicators Databank (World Bank)

    • This article in The Economist points directly to 2013.
      But there is more background, as you point out. I gave up trying to go back to the 1970-1980 time frame to get an exchange rate chart. There was no internet back then, and apparently no one was paying much attention, perhaps because not much was noteworthy, as in “too boring”, which indicates either calm, or overlooking important developments. I did find an anecdotal reference in Reuters.
      “During the 1970s, Venezuela’s currency was one of the strongest in the region, enabling its people to enjoy plenty of foreign travel and shopping. Venezuelans were known, one joke went, for always saying “Dame dos!” (Give me two!) when stocking up on expensive goods in Miami during those days.” (Reuters.)

      And I found another anecdotal reference in Investopedia
      “Initially based on the silver standard (1 bolivar = 4.5 grams (0.1575 ounces) of fine silver) until 1910 when the gold standard came into operation. In 1934, the bolivar became fixed to the U.S. dollar at a rate of 3.914 bolivar to 1 U.S. dollar. The currency remained very stable (when compared to others in the region) until the 1970s, when rampant inflation began to erode its value.”(Investopedia.)
      And I found this one chart in tradingeconomics that goes back to 1990 if you hit the “max” time frame button top left on the chart.
      The problems had advanced to the stage of recognition by 1983.

      To get to the root causes, I think one must look back further than merely Chavez. I don’t mean to offend, or to disregard political focus.

      To end wuth a good one, even if most here have already memorized this one, it really opens eyes onto historical perspective.
      Imo, the late 1970’s was the turning point, maybe not so much because of il, but because somehow it turned the tide of immigration (in) into one of accelerating emigration (out) which spread across nationalities to include native Venezolanos. Da para llorar.

    • The lifting price controls is not discussed because from Chavismo’s point of view, what is wrong with the economy is due to insufficient control of the economy. Such as when the GOV says JUMP, you should jump- even if you are wearing a 70 pound backpack. The cause of your failure to jump is your escualido pigheadedness, not the 70 pound backpack that burdens you.

      Yes, lifting of price controls would increase local production of foodstuffs, but that doesn’t fit into the Chavista world view that the more regulations imposed on the economy, the better it will perform. JUMP.

  7. Just to provide some context on Boza, here are the 4 proposals he was pushing in July:

    1) Create the “Observatorio de precios”, a database of official prices. Link it to a smartphone app, so people can compare/monitor prices in stores against the official prices
    2) Nationalize all foreign trade
    3) Nationalize the banking sector
    4) Expand domestic credit (After taking over the banks, I guess)

    Just give him the Nobel already, please.

  8. They will never solve any of the economic problems, because they CREATED EVERY SINGLE economic problem in the first place, with POLITICAL ends in 50% of the cases, and corruption ends in the other 50%.

    Their ridiculous meeting could’ve been shortened into this:

    Chaburro 1: “Our monopolies are fucking the economy up, that’s why we lost the elections.”
    Chaburro 2: “Yeah, yeah, ok, what about that?”
    Ch1: “You’ve to steal less so people won’t keep voting en masse against us.”
    Ch2: “Fuck that, man, my daughter just asked me plastic tits along with a travel to Switzerland.”
    Chaburro 3: “Yeah, fuck them, I want another house in Miami.”
    chaburros 4 to 55 give the same lame excuses.


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