Someone on the internet is wrong!

What is it they say about wrestling with a pig?

What is it they say about wrestling with a pig?

So I just couldn’t help myself from jumping into that Felipe Pérez/Mark Weisbrot debate on the FT’s BeyondBRICS blog. Mostly, I took the chance to do some awareness raising about the crazy level of opacity we have to deal with when talking about Venezuela’s fiscal situation:

Nearly every data-stream an analyst would need to make a serious forecast is either artlessly manipulated or just not published. The challenges this creates are not always fully appreciated. So let’s start with a brief survey of what we don’t know.

We don’t know what the public sector’s real deficit is…

We don’t have clear accounting of how much of the public sector’s deficit the central bank simply bankrolls…

We do have balance of payment figures, but the healthy current account surplus they report is plainly at odds with the evidence of external adjustment we’ve seen all around for the past year…

We don’t really know how much oil Venezuela exports…

Worse, we don’t know which portion of the oil that is exported generates current revenue…

We don’t really have a complete view of the public sector’s net foreign asset position…

The figure the central bank does report as reserves…is widely assumed to be backstopped by sums held in other government accounts (Fonden, the Chinese-Venezuelan fund, and others) that, you guessed it, do not publish their balance sheets…

We also don’t really know the crucial black market dollar exchange rate (publishing it is a crime punishable with jail time in Venezuela, making the market notoriously opaque).

But it goes beyond that: we don’t even know the official dollar-bolivar exchange rate. Rafael Ramírez, oil minster, recently announced that the bulk of forex trading would be shifted to a mechanism – Sicad – that does not actually disclose at what rate it trades bolívars for dollars!

Really, it’s a plea for caution. I go on to note that what we do know about public finances is fairly hair-raising, but trying to make sense of what those hair-raising data points ultimately mean is more or less impossible: like trying to put together a 5,000 piece jigsaw puzzle with 2,974 pieces missing.

11 thoughts on “Someone on the internet is wrong!

  1. Central Bank said it will begin publishing the Sicad rate on its website so that tourists can exchange their dollars, a positive. On the negative side, this is the same Central Bank that cancelled the press conference this morning to release inflation for November which is 9 days late by law.

  2. And yet……this opacity speaks volumes …..of huge problems in the country’s finances, for if the regime had any believable good news to tell , theyd be shouting it to the winds and wouldn’t stop repeating them again and again.

    • Well, that’s likely, but it drags the whole debate into the field of supposition, interpretation, tea-leaf reading, etc. It’s not impossible that the data aren’t that bad, but they’re hiding it to keep us guessing, or because a National Security State mentality generally predisposes them against transparency, or to cover up specific instances of graft, or because the BCV’s technical capacities have been so downgraded the stats aren’t even being collected properly to begin with, or any of a dozen other explanations. We. Don’t. KNOW!

      Besides, even accepting they’re hiding them to hide problems in the country’s finances, this still leaves all the key questions unanswered. Are they going to hit some kind of hard constraint next year or next month or next week or in the next 20 minutes? Again, we really don’t know.

  3. We don’t know what the public sector’s real deficit is…We don’t have clear accounting of how much of the public sector’s deficit the central bank simply bankrolls Etc. Etc.

    But Herr Doktor Whitebread has been shown the true figures, and he has concluded that Venezuela’s fiscal outlook is rosy. And we know that Herr Doktor Whitebread is someone we can trust.

  4. The parallel rate is a real data point, at least as a minimum marker, available you-know-where, and is sky-high, in spite of ample $ funds supposedly available from narco/other dubious activities. As MO stated, the SICAD rate will supposedly be published, but isn’t a real marker, since the Govt. will say whatever it is, true or not, and has said they estimate only $100 mill. per weekly subasta, $5 bbl. per year , insufficient for real Country needs, and that the large bulk of $ will be continued to be provided to Cadivi, supposedly at 6.30, for such priority items as food/medicines/etc. The high parallel rate speaks volumes about insufficient real: foreign reserves; net foreign assets; paid-for oil exports; BOP balance; etc.

  5. Well never have a complete reliable picture of this regimes financial situation if we depend on what they choose to tell the world because they see themselves as engaged in a war where the only news allowed are those that favour it or if unfavourable that can be blamed on someone else !! thats been their constant practice for many years now but that hasnt stopped people from gathering different pieces of information from govt and other sources and put them together to reach some plausible view of whats happening !! Certainty and precision are of course desirable but we know thats quite impossible with this regime , so all you can attempt are credible conjectures which may be somewhat off mark but still sufficiently reliable to allow you to gauge the situation . As to what the govt will do and when it will do it to face their financial difficulties Im not sure even most govt people know that , its probably a decision in the making which will vary depending on their perception of the political consequences of what they do and which faction has the greatest influence any given moment. One thing I know it isnt going to be Sweet and easy !!

  6. In any case what we DO know is enough to give anyone living here the chills. Is hyperinflation just around the corner or a bit further down the street? how about scarcity? and where will the forex stabilise, if it ever does? Once everything comes crumbling down, what will there be left?

    We do not know a great many details, but like in any good horror movie what we do KNOW is enough to give us nightmares, and enough to let us speculate as to what types of monsters lurk in the darkness just out of reach… We do not see them, but we can hear them just outside rustling amidst the carnage they´ve already left behind.

  7. Quico, while Weisbrot is just a defender of the government (so he is not wrong, because he has to write whatever pleases his bosses), Felipe Pérez is wrong because what he proposes might only work in a normal market economy. A normal economy where, yes, the State (and not the government) uses regulation as a tool (sometimes the appropriate tool, sometimes the wrong one), but without (the State) OWNING the economy.

    Any measure that is to be taken to make things better, has to be in the direction of a normal, open, market economy. To me (maybe I’am getting old), there are no subtleties or half baked situations. I do not believe that socialism is different from communism. I do not believe that Canada or the Scandinavian countries are socialist ones. Economies are either open market or no market at all. That thinking applies to the political realm, too. Political systems are either democracies or Non-democracies. The rest is for the birds.

    Thus, what Felipe Perez does, is trying to be with God and with the Devil at the same time. He knows very well that to try to implement his four measures without dismantling the base model, does not make sense and will not work.

    Yes, in part because they are “hiding their heads in the sand” (The name that I used for the first of my 4 scenarios, written on april 15, was “I, the ostrich”), but mainly because they move on a very, very different system of thought and action. One in which the State owns the economy, the people and the country. One where the State comes before the people.

  8. Labels are tricky and often dont do justice to the specificity of each system being labeled and the many important differences between the systems that loosely share a label , is the Chinese a market economy or a centralized communist economy ? , what about Brazil ?? Do we like market economies because they work better or because they reflect certain individual values and liberties we cherish ?? Deng Tsiao Ping the father of modern china tried to make the chinese system a version of singapore , but all he cared about a sytem is that it worked the best results whatever the ideological label.

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