Fun Game: Guess the Date

20

This appeared in the Wall Street Journal…but when?

CARACAS,Venezuela–By ceremoniously signing a new $1.4 billion loan on Monday, the International Monetary Fund made it official: It’s back in Venezuela. … Venezuelan politicians are breathing a sigh of relief at once again being bailed out and international investors are eyeing their next opportunity. Ironically it’s only the Venezuelan people who are no better off.

On one level Venezuela has made what would seem to be some small progress in the last few months. In January, the Venezuelan government reopened the oil sector to private foreign investments. Analysts welcomed the naming of … to the important cabinet level post of planning minister. Finally, Venezuela has accepted the IMF measures of conditionality, including the removal of price controls and foreign exchange controls and an end to the dramatic state subsidy of gasoline.

But these new measures mean very little. Much of the IMF plan is classic austerity, including higher taxes. More importantly, the IMF loan merely serves as financing for a balance of payments crisis that should be solved by market solutions. Furthermore, the reopening of the oil sector to foreign private investment is not the same as privatization of the Venezuelan oil company. The mandated profit sharing and tax revenues from this oil scheme will flow to the inefficient Venezuelan state. These new revenues, together with the IMF loan, will serve not as a development tool but as a power pack for maintaining corrupt political institutions as they are today.

Venezuela still lacks what it most needs: private ownership (not in the mercantilistic sense) of the nation’s assets. Without it, the country is doomed to economic disintegration. The new oil revenues and the IMF plan simply finance this trajectory.

For decades the Venezuelan political establishment has accumulated control over the country’s assets at a great rate. The list of assets now belonging to the state includes all mines, oil production, petrochemical, aluminum and iron factories, beaches, ports, a large proportion of agricultural lands, prime real-estate locations, 60% of the value of the banking system, manufacturing companies, television and the main radio stations. Most of these state controlled enterprises (save oil) are money losing. Without new funding Venezuela would be forced to sell them to the private sector immediately.

The oil scheme and the IMF loan will isolate the country’s political leaders from reality, thus allowing them to postpone the deep privatization program needed to sell off the disproportionate stake of state-owned companies. Together with tax and gasoline price increases, the strategy to capture foreign private investment in the oil sector is a way of maintaining state control over the economy. The IMF loan only complements this strategy.

Despite Venezuela’s relatively small population of … million and its huge oil revenues … its political leaders are running out of funding. This in turn is draining their power. According to the latest polls, no traditional politician and no political party in Venezuela holds … the electorate’s preferences. And it’s no wonder why.

… GNP has dropped 39% and the inflation index has increased 110-fold … fiscal deficit … external debt servicing costs … foreign debt … unemployment … the informal sector of the economy. The middle class has shrunk….

Instead of borrowing from the IMF, raising taxes and public service utility rates and inviting foreign private investment into the oil sector to obtain higher government spending privileges, … administration should have faced the economic crisis–fiscal and balance of payments deficits–with some important reforms.

First, 20% of the state-owned oil company PDVSA should be privatized in order to reduce public foreign debt.

Second, a popular capitalization fund program should be initiated in order to put all state owned assets–including public schools, hospitals and the remaining 80% of PDVSA–in the hands of the common people. Private ownership of assets in Venezuela is the only way to change the economic course of the country. Such a move will give Venezuela the productivity boost it needs and reduce fiscal spending. Taxes, public service utility rates and subsidized gasoline prices should not have been raised until citizens became direct owners of the economic resources of their own country.

Third, the $2 billion of prime real estate and other assets now owned by the Venezuelan government … should be swapped for outstanding domestic government bonds, thus lowering interest payments on the fiscal budget.

Fourth, Venezuelans should be given the assurance that all additional oil revenues will be used strictly for servicing external debt or be distributed as dividends directly to all Venezuelans without passing through the hands of the government.

The IMF has a shameful role in all of this. Trying to finance fiscal deficits by increasing taxes and public service utility rates and by borrowing heavily is a never ending sacrifice for the Venezuelan people. Despite all the world fuss over recent “economic reforms,” Venezuela today is the same as yesterday. The economy is owned and operated by the state. One wishes that the IMF could somehow get some perspective on its lending program. Do IMF decision makers really believe that Venezuela has deteriorated due to lack of resources? It’s almost as if the IMF believes that capitalism–driven by private property ownership–only works in G-7 countries. Developing economies shouldn’t toy with it.

No IMF plan nor any statist pact with big oil corporations will stave off future devaluation, inflation or the overall depletion of the country, unless the common citizen is empowered. Venezuelans yearn for a true economic revolution. For now they are forced to accept the President plan for them: raising taxes and public service utility rates, maintaining the bloated public sector with revenues from foreign private investment in the oil sector and increasing debt by borrowing more from the IMF.

20 COMMENTS

  1. Before I reached half the article, I’m gonna shoot an arrow here:

    1989.

    And then, communists came and made their attempt at a coup, instigating the lootings followed by the murders of soldiers that resulted in several more folks offed.

  2. I was moved to tears by the tender notion that you should entrust to the mass of the common people ownership of all public assets and miraculously they will be efficiently and honestly managed because of course the wisdom of the noble common man can always be trusted to do whats best no matter how complex their use and operation may be ……..!! Smacks of those beautiful images of the good hearted simple people meeting to decide on the issues affecting community life in some peaceful swiss canton or some new england town meeting ……… !! or thousands of mom and pop savers stashing their shares in some big company in a shoe box below their beds and not having to meet a sudden billion dollar cash call needed to cover some urgent investment need…..!! . These are platitudes from a more innocent age …….just do away with the state and all the wicked things that happen in the public realm will dissapear to be replaced by an idylic natural amateur state of affairs…….!!

    Of course there is an urgent need to redefine the way that public assets are handled so that we dont allow the partisan delusions and ambitions of pie in the sky ideologues and professional pols wreck the life of a country and that means making the operation of most govt activities more like that of a private corporation handling a job with professional expertise and rationality…. but thats the role of institutions and of both private and public organizations operating autonomously from any partisan political pressures .!!

  3. Definitely 1996, give or take a year.

    Back when Caldera’s DISASTROUS economic policies including the mismanagement of the banking crisis, managed to all but strangle the Venezuelan economy. Caldera’s doing away with the reforms initiated by CAP to open up the economy proved a giant step backwards. Faced with the results, the administration was forced to scramble and get back on the economic-liberalization train, to Caldera’s great disdain of course. Thus we were left with the devaluating Agenda Venezuela, which sorta patched up some economic problems but was overall a terrible and not very serious path to liberalization (not even a path, really). If it weren’t for Caldera’s lack of will to adopt the reforms that Venezuela so desperately needed, I’d be willing to bet that we wouldn’t be in the mess that we are in today. The lousy economic environment that dominated Venezuela all throughout Caldera’s administration was the perfect catapult for Chavez to get to Miraflores.

  4. Fucking cuarta.

    I agree with the author, though. He says common people, but he means foreign investment.

    Bill Bass, arent’t there folks out there right now with the money and the expertise to immediately start privatization?

    All a government would need to do, really, is ensure health and food services while the adjustment to that new state of affairs takes place. Street Venezuelans, even hardcore Chavista ones (which is only to say caudillista or authoritarian ones), would welcome jobs from the gringos or Chinese or whoever with great happiness and pride. Madeinusa FTW.

    Crazy commies are lower in number among us than most would think.

    • First thing you need to attract private investment is a set of conditions that allow you to trust that looking into the future your investment is not going to get taken over or made to operate under supply , financial , economic , legal conditions which can threaten its viability and profitability , second that there is a workforce which is disciplined, reliable and has the expertise and dedication to be part of a productive operation,that there is a system of law and order , that there is a market for what your business produces with atractive prices and growing demand .Because so much of the country is in ruins huge investments are needed just to make things work again on a normal regular basis …..electrical supply for example , but also roads .The currency has to be stable and free from any restraint on foreign remittances ……..Venezuela in fact has to offer conditions which are more favourable than those of many other countries which it it must compete to attract investments …!! there are currently many hurdles for such situation to be created ……!! But of course it can be done with good planning and management of state resources and initiatives and if a defeated Chavismo can be held in check.!! Cleaning the mess will be taking on one of hercules tasks ….multiplied a hundred fold..!

  5. 1995-6. But I find the whole argument of the article silly. Let’s not eliminate regressive subsidies, let’s not balance the budget, and let’s not do it in the way that eases strains the most. Let’s just sell assets to pay for debt and recurring expenses. Really?

  6. And this shows how chavismo is just the same 4th, transmuted into a refined form of human-right-violator-crime syndicate.

    Also, dude, stop retweeting the horseturds of that moron jimluers44, the guy is just another rabid chavista tarifado that dedicates tweets to this page like dioscapo flings false accusations to everybody that looks funny at him or delcy screeches twisted lies every second in the day.

  7. Una buena idea la de este post… Felicitaciones también por su artículo en The Atlantic con Moises Naim. Acabo de verlo traducido al español en El País. Otros podrán escribir artículos tan buenos como ese si tienen un buen día pero difícilmente uno mejor.

  8. what kind of idiot proposes more taxes in a country with essentially no productive apparatus? the only way to allow the country back into some resemblance of economic recovery is create a 6 month tax-free period on most (if not all) private economic activity

    • “what kind of idiot proposes more taxes in a country with essentially no productive apparatus?”

      The rabid, extreme left.

  9. well they say that those who forget history are condemned to repeat it. but I guess we face some kind of twisted way.

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