For the last few weeks now, the government’s reaction to its loss of the National Assembly has followed a pattern that mixes contempt for the will of the electorate with a mad scramble to shift as much power as possible away from the National Assembly to the branches of government they still control. In Phil Gunson’s words, it’s been “shocking but not surprising.” That lasted until today. As we start to sort through the raft of new “decree-laws” Nicolás Maduro just unvelied after the end of his enabling law powers, we’re both shocked and surprised at how many zeroes Maduro wrote on that blank check of his.

We’re not even through reviewing all the new measures, but just the reform to the law governing the Central Bank of Venezuela is enough to give us the heebie-jeebies. @Econ_Vzla’s tweetstorm is a good place to start here. We’re looking more than simply bad policy. What they’re doing is insane.

As we all know, Venezuela has stopped publishing economic figures. These figures are important because companies and workers need them in order to plan ahead. For example, how can a union negotiate a pay raise when it has no idea what the inflation rate is?

The opposition-controlled legislature had vowed to bring the Central Bank directors to hearings, and eventually force them to publish statistics, as the Constitution enables them to do. It had also threatened to remove them (again, Constitution), vowing to investigate the extent to which the Central Bank is financing the government via inflationary monetary expansion – essentially, printing bolívares out of thin air, thereby fueling inflation.

In a huff of bravado shocking even by chavista standards, the reform of the law does away with the threats.

The directors of the Central Bank are now named by the President, with no legislative oversight. National Assembly members can no longer force them to give out economic information. The Central Bank is now allowed to freely finance the government, even though the constitution says explicitly it can’t.

Earlier today, Pedro Rosas mused about how the opposition’s control of the purse strings would force the government to negotiate in order to stay funded. But with the government in full command of the printing press – who needs purse strings?

This reform is a disaster. It decisively shuts the door on any possibility of meaningful economic reform. It dismantles the last shards of an institutional possibility of halting Venezuela’s slide into hyperinflation. The pain this will inflict on our country will take a generation to erase. It’s that serious.

The government’s “Thelma & Louise” tactics can only mean one of two things: they want to force the opposition into some sort of nuclear option quickly (i.e. a Constitutional Assembly or a Recall Referendum), or they simply want to destroy Venezuela. Because, make no mistake, Venezuela is very much the car in this analogy.

Whatever the reason, things are bad and getting worse. Gird your loins, folks.

57 COMMENTS

  1. You have to think they are setting things up for a major showdown hoping they’ll come out in a better position than the one they’re in today. Demasiadas tocadas de cara juntas…

  2. ” The pain this will inflict on our country will take a generation to erase. It’s that serious.”
    You mean an extra generation. The shit we are in already will take *at least* one generation to clean, dear Juan.

  3. Earlier today I was working on an idea for an article for CC, about how Maduro’s economic advisors -Boza, Salas and the Spanish guy- are worse than ignorant: they’re truly dangerous people. They don’t think there’s s any need to devalue, they think the exchange rate doesn’t matters, and they don’t think printing money fuels inflation. Salas thinks “inflation doesn’t actually exists in the real world”. If they keep going down this road they’ll burry Maduro and chavismo, but not before unleashing a hurricane of capital destruction and hunger. Today’s a bleak day.

  4. I am actually nearly speechless. Apparently, there is a whole raft of new laws that have been signed, but haven’t been published yet, so we don’t even know what is in them. This is nothing short of auto coup d’etat. They are taking away virtually all of the constitutional powers of the National Assembly. This cannot stand.

    And what the HELL is the “Ley Negro Primero”?

  5. They made very clear, that they are not interested in any cooperative solution. The point in time is surprising, the measure not really. It allways has been their nature.
    A printing press has much more power in a country of 40% inflation per year than in one with 300% and more.
    They can’t go on and on and on with their games. At some not so far future, they will simply run out of money.
    German saying: A terrible end is better than terror with no end.
    But its very sad, that there will be no happy cooperative end, after this victory of the opposition in the elections.

  6. Honest question:

    One thing is to interpret dubious passages in the Constitution and in other laws, but isn’t the CRBV pretty clear on what the AN and the Prez can and can’t do regarding the BCV? How can the TSJ say such law is constitutional when the law goes exactly against the Constitution?

    I’m baffled about this point really. Because it is plain ridiculous!

  7. Taking a deep breath… Ok, so suppose the new Assembly simply overturns all the new laws? The TSJ immediately declares the AN actions unconstitutional? We are in uncharted territory here. Raul Stolk’s arguments about keeping it clean are suddenly looking irrelevant.

    • Unless you consider, in defense of Raul’s argument, that the newly appointed TSJ justices have as their first directive the catching of this car going off the cliff. They have two choices. To follow the rule of law, or to stand below this car falling off a cliff and catch it.

      • And if they go for option 2, it is probably not safe to try to intervene with a falling car and a judge trying to catch it.

  8. when Hitler realized that he had no chance, he ordered the total destruction of Germany, so it´s basically: he lost the war but the people who suffered it, were supposed to pay for it!

  9. Toro just mocked me a few hours ago when i suggested chavernment would do this, either with PDVSA or the BCV.

    “With PSUV’s 2/3 majority? LOLWUT”… Something along these lunes.

    They did. Without useless AN.

    Next bet: AN doesn’t take seats tomorrow.

  10. still not tottally surprised. It just puts in paper what already is defacto. Approved by the same people that handpicked the TSJ’s members who will most certainly say that it is constitutional.

    They’re pushing the crisis to a point in wich only the army can solve it. They must think they have the army in their pockets, otherwise the fear of a coup would have force them to the negotiating table.

    • That’s the thing… they CRBV is so clear you can’t have ‘interpretaciones’ of the Law.

      Artículo 319.
      El Banco Central de Venezuela se regirá por el principio de responsabilidad pública, a cuyo efecto rendirá cuenta de las actuaciones, metas y resultados de sus políticas ante la Asamblea Nacional… . También rendirá informes periódicos sobre el comportamiento de las variables macroeconómicas del país y sobre los demás asuntos que se le soliciten, e incluirán los análisis que permitan su evaluación. El incumplimiento sin causa justificada del objetivo y de las metas, dará lugar a la remoción del directorio y a sanciones administrativas, de acuerdo con la ley. […] El presupuesto de gastos de funcionamiento e inversiones del Banco Central de Venezuela requerirá la discusión y aprobación de la Asamblea Nacional, y sus cuentas y balances serán objeto de auditorias externas en los términos que fije la ley.

      Articulo 320.
      En el ejercicio de sus funciones el Banco Central de Venezuela no estará subordinado a directivas del Poder Ejecutivo y no podrá convalidar o financiar políticas fiscales deficitarias.

      • It is clear to you, to me, and to everyone else on this blog. You are assuming that they care about what we or anyone else thinks, or what the Constitution actually says. They don’t.

  11. They positioned the hyper inflation death star.
    And at this point it is also the responsibility of Brazil, Latin America in general, the EU, the US, China and Japan, that they won’t use it.

    The German Hyperinflation of 1923 really went berzerk after we declared reparation payments for WW I as too high for our economic capabilities, the french occupied the Heavy Industry region of the Ruhr and the German Government financed a strike of the workers of the Ruhr. It was not because of some party loosing an election.

  12. they are inducing rage against themselves, former supporters are not only neutral but they are crossing to the other side and the govt is speeding this process!

    i would like to see the next polls!

  13. *sigh* And to think that some of us, in academia, still deal with some american and european “trasnochados” who feel sorry because “the right” is taking over… Btw, has Chomsky said anything lately?

  14. I think what just happened is SUPER obvious. The government just picked the best of all the bad options they had…I.e. pack the courts to declare everything the AN does as unconstitutional, move all the “legal” funding decisions back the executive branch, and create a new chamber to represent people’s interests (at least visually). Anything the AN does will be obstructed by one branch of government or the other, and the military will “enforce the law” if required. I think they are betting they will find someone in the opposition pushing back violently at some point and will use that to say the opposition are the violent ones, not the government. They know they will get some flack for it (both domestically and internationally), but like I said, it is the best of all their bad options…

    Only question now is what the opposition can and should do? Protests? Yes. International pleading? Yes. But beyond that, it gets much less obvious…wait until the economic collapse (which will take place prior to the next election) and then act, wait until the next presidential election and try to win at the polls, or try to force something now? Or try to do something counterintuitive and try legislate a SUPER liberal policy of giveaways which the government could never fund and will endear them to the public…all the options have their own drawbacks…question is which is the best of all the bad options???

    • Best part of doing the last option is you could do something you know could never work as the first AN action…I.e. Something like declare the minimum wage for all workers at the equivalent of $10USD/hour and make it fixed based on the black market rate, or some equivalent measure (to adjust for inflation). Then dare the government to rule against it. If the government went against, they would hurt their own standing with Chavistas. If they ruled in favor, they would bring down the economy even faster…

    • How about trying to rebuild some semblance of good governance and let the Chavistas sabotage it? The people aren’t that stupid, they’ll revolt sooner or later. They might as well consider MUD a good choice, not just the lesser evil.

  15. A law can’t override a constitutional provision, that’s Law 101… Opposition can wipe their asses with that law that Maduro approved for himself.

    He should be impeached and prosecuted for that blatant executive overreach…

  16. Now the only question that remains is if they are doing this because they are incompetent or because they want to see the country destroyed.

  17. Oh, come now. Are you sating there are no lawyers able to draft a paper Ramos Allup can wave in their faces?

    Screw referendo and constitutente, impeach his ass. I’ll bet my right arm and half of my left the military will NOT want to take Maduro’s side.

  18. It’s like watching a terminally ill cancer patient refusing to die. It’s just depressing.

    The chavistas are counting that the opposition won’t flip any of their deputies.

    They just took control of the BCV and will milk it for all it’s worth.

    For those in Venezuela. I would recommend you finance everything humanly possible. Hyperinflation is coming and it’s not going to be pretty.

    Oil prices are projected to drop more this year.

    The damage done to Venezuela will take at least 3 generations to fix assuming their is competent management.

  19. I just wonder, are they really this wilfully evil? Or do they just happen to stumble into these decisions out of their desperation or absolute incompetence?

  20. Por este motivo escribir artículos elucubrando sobre tal o cual posibilidad en la economía o la política venezolana no tiene mucho sentido. El chavismo siempre tiene ventaja.

  21. Dictators are all the same, as videogame characters, take a look at this guy called Arctrurus Mengsk, because he resumes in one phrase ALL the chavizta ideology:

    “I will rule over this sector, or I will se it BURN TO ASHES!”

  22. I think many of us here were under the illusion that the opposition, by winning this election, was now in a position to exert legal institutional power over the “regime”. But that would only be possible if chavismo were willing to voluntarily abide by the laws, which is not their style.

    Don’t get me wrong. I think the opposition has real power but it is not institutional power. Not yet. The power it has is political power, but there is still ways to go before that will translate into actually having the upper hand on the regime.

    To unseat chavismo will take much more than an election. Elections are important because they showcase and accelerate the erosion of chavismo’s political base. But their power structure based on control of the institutions, media, the courts, resources and weapons, is still pretty much there.

    The election sent a clear message to the government, people want change.
    But the regime is too scared of losing power so they decided they will not play ball with the opposition.
    They will not share power. They will not go down without a fight, much less a fair one. For them it is a life or death struggle, figuratively but also literally.

    Chavismo will not leave until their power structure completely collapses which unfortunately will be brought about by a much deeper socio/economic crisis for all venezuelans.

    But it also means chavismo will assume sole responsibility for the consequences.
    They won’t be able to blame (or share blame with) anyone for their disaster.

    The opposition will need to continue building their political base and wrestling institutional control with the government. They will also need to build bridges with the more moderate factions in power.

    • “But it also means chavismo will assume sole responsibility for the consequences.
      They won’t be able to blame (or share blame with) anyone for their disaster.”

      Sorry to block that thought, but chavizmo has blamed the non-chavizta part of Venezuela for EVERY SINGLE problem during all the time they’ve had power, as they preach 24/7 that they are not responsible for ANYTHING at all that went wrong, ever.

      That’s what hegemoncorp does, that’s why MUD couldn’t win in some states and that’s why chavizmo still got 42% of the votes in 6D, I beat morocotas vs medios that at least half of those votes were from people that are brainwashed as northkorean puppets by now.

      • The trend is clear, people believe them less and less.

        With the new opposition controlled AN they have a chance to revert that trend, by letting the AN enact some measures and share on the success or failure of those measures.

        But they are delusional, they do not see the magnitude of the crisis they are going to provoke.
        They won’t allow the AN to do anything and people will know that it is all their fault.

        Maybe it is better this way, than having the AN help the government.

  23. Ameris said: “But it also means chavismo will assume sole responsibility for the consequences. They won’t be able to blame (or share blame with) anyone for their disaster.”

    This is the corner that Maduro is painting himself into. If he manages to wrangle ALL the power, castrating the new assembly, then he is left to try and right the ship entirely through his own means. Since we all know that is impossible, the country will go down with him at the helm.

    It would make sense to keep power if the government had some viable game plan, but all they are offering is by any economic standard a recipe for a failed nation. Tis a puzzlement…

    One has to wonder what Maduro hopes to get out of these last-minute shenanigans. Looks like a man and a movement who’s only intention is to hold onto power no matter the consequences. Since the situation can only deteriorate, probably rapidly, it indeed looks like a mad man driving a car off a cliff.

    How to stop him? How far will Venezuela have to slide before the military has to step in? Surely Maduro does not expect MUD, the military AND the gente and international community to do nothing. But what CAN be done, other then yammer on and on about how grim and insane it all is…

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