Caracas Chronicles

For all we talk about policy in this blog, I’m glad I’m not a politician. I’m relieved I don’t have to repeat talking points or, gulp, lie.

Very few people are saying what needs to be said: that last Friday’s devaluation was, when you boil it down to the basics, a move in the right direction.

Yes, it’s going to be painful. Yes, it’s the consequence of a myriad of boneheaded economic policies, piled one on top of the other. Yes, it is the height of hypocrisy, when the government had repeatedly denied it was coming, and even criticized Capriles during the campaign for (supposedly) considering it.

But is it a bad thing? Absolutely not.

Cadivi dollars at 4.3 BsFs were a scandal, one we discussed at length on the blog. Giving people cheap dollars amounted to a subsidy for the rich, the tourists, and the well-connected. Every dollar sold at 4.3 was a dollar that couldn’t be sold at the real price, and as such, meant there were fewer bolívars available to the government to build schools or roads. Every day with a budget deficit is a day we saddle up future generations with debt.

Changing the exchange rate to BsF 6.3 doesn’t fix the situation entirely. In fact, it falls way short. But is it a bad thing? Absolutely not. Is it a step in the right direction? The answer is an unequivocal yes.

You just won’t hear that from our commentariat. In their view, if the government is doing it, it has to be bad.

Even with the devaluation, our currency remains overvalued, and the enormous distortions upon which our economy rest are still there, unabated. The only problem I see in the devaluation … is that it doesn’t go far enough.

Just don’t quote me on that.