Caracas Chronicles

Our friend Miguel over at the Defecating Legion’s blog has sort of challenged me to an opinion duel. The argument goes like this:

A few weeks ago, opposition front-runner Henrique Capriles said that, if elected, he would not do away with Cadivi until the conditions were ripe for its removal. In other words, he refused to pledge to remove Cadivi upon taking office, but did not rule it out either.

Miguel is livid about this. He thinks Cadivi should be removed immediately because it represents a never-ending source of corruption, and because it creates distortions that will ultimately bring down the Venezuelan economy.

I agree. Misión Cadivi has long been one of my hobby horses, and I believe that it is the single most destructive of all of Hugo Chavez’s policies.

But Capriles is right to refuse to commit to an early end to the policy. The reason is after the jump.

Miguel gets the economics right, but not the politics. Consider, for a minute, the country that a President Capriles would receive. Not only will he have the Asamblea against him, but he will also have the Courts and the Armed Forces as his sworn enemies. More importantly, he will be duelling against the very agents that will supposedly “smooth out” the transition from a heavily controlled exchange regime to a more liberated one: the people at the Ministry of Finance, the Central Bank, and Cadivi itself.

Managing the transition is going to take real skill, and saddling yourself with artificial up-front commitments just won’t help.

Imagine, for example, you and a bunch of your red, very red friends are in charge of the BCV’s money market. Imagine President Capriles has instructed Nelson Merentes to flood the market with dollars if the exchange rate starts ballooning, but Merentes has given you green light to not do that, to – wink, wink – simply take a vacation. Where is the exchange rate going to end up after the first week of the new President’s signature policy?

Or imagine Capriles eliminates Cadivi, only to have the Supreme Tribunal reverse the measure because it violates the principles of solidarity, socialist ethics, and collective property enshrined in their imaginary Constitution? (The real one doesn’t have any of that stuff, but it ceased being relevant a while ago.)

Or imagine that the people in charge of making the electronic transfers for the new Misión that you’ve devised to counterbalance the shock effect of eliminating Cadivi – a Conditional Cash Transfer, say – inform you that, on the day where people were supposed to receive their money, they were unable to process the transfers because they require Hugo Chávez’s signature.

Or imagine the people in charge of watching over the nation’s foreign reserves inform you that the gold that backs your newly-liberated exchange rate … has vanished.

None of this is too outlandish to imagine, because we are dealing with insane people.

Capriles is right in saying that he first has to feel the machine and take it for a test run before he commits to a massive undertaking such as this one. It’s only common sense.

The other problem with Miguel’s argument is that it does not mesh well with Capriles’ main goal: unifying the country.

The entire message of the campaign has been: we need to stop the petty ideological wars. How does doing away with Cadivi and changing the entire way people do business overnight accomplish this goal? And how does announcing the establishment of a market exchange rate going to help solidify the impressive left-wing+right-wing coalition Capriles is putting together?

Because, to me, it goes in the opposite direction. People who are benefiting from Cadivi, most of them in the government, will feel like you’ve taken away their lifeline on the first day of office. Why should they take you seriously when you claim you are only interested in unifying the country? Deep down, you’re just looking for revenge.

Capriles’ proposal took me by surprise, but I came around. Capriles managed to convince a Cadivi-hater like myself that he was right. That, in my mind, is pretty brilliant.