Caracas Chronicles

For Thursday, February 18th, 2016. Translated by Javier Liendo. 

“We need to do everything again and make it new.” Nicolás Maduro

The guy with no ego spoke via every national radio and television outlet for five hours. Using tired arguments, Nicolás repeated himself again and again. We were ready to applaud the increase in gas prices just so he would shut up. But the President lacks auctoritas, so he got sidetracked many times, substituting the fixation for el finado with Henry Ramos Allup, whom he mentioned 22 times during his speech. Ramos significantly surpassed Luis Vicente León and DolarToday. But Maduro is so humble that he even had to clarify that he was there to give orders.

His poor prognosis about the economic problems foretold his impossibility to take reasonable steps to face the crisis; according to him, the “guerra económica” is the enemy that must be defeated. The fact that he doesn’t understand war as a form of conflict and the enemy as a subject speaks volumes; as well as being amazed by the country’s incapacity to attract investment; speaking about the international economic blockade; calling for unity just as he spoke to chavismo, represented, he believed, by those gathered in some Plazas Bolívar all across the country, gathered to listen to the President devaluing the bolívar and applaud him.

The general strategy to defeat the chaotic and “parasitically-induced” inflation includes three points:

1. Dismantling all the systems of the economic war (easy, given the imaginary nature of that war);
2. Overcoming all the traps of oil rents that create dependence (while he celebrated minister Eulogio Del Pino’s successes at Doha); and,
3. Establishing a new system of the “productive engines” to fix prices.

In other words, more restrictions and statism.

Sowing cassava

Nicolás warned us not to fall for deceit, while he argued that DolarToday could destroy the country. It was an ode to contradiction. He acknowledged the crisis of the shortage of medicines and medical supplies. He even admitted that corruption was a crucial issue. However, he demanded more controls. 

His best example to explain inflation rates was cassava, with all the double entendres the (phallic) root has for Venezuelans: “How much does it cost to sow cassava?”, he asked as Diosdado Cabello and Jorge Rodríguez smiled.

Issues and measures

About the issue of food, Nicolás argued that there were problems in all levels: production, distribution and marketing, saying that “Abastos Bicentenario rotted away”; an evidence of the economic model’s failure, and yet his obstination is such that he believes shortages and destruction to be the consequence of lacking rather than excessive restrictions. He only thought about restructuring them, just when he should lift them.

About the price system, he said that the government would adjust all prices to real costs – through the Law on Fair Prices – because they’re outdated. To complement the Law, they will create a chief of staff presided by Miguel Pérez Abad and the Army’s high command. More power for the Army.

The increase in gas prices took him almost half an hour of preludes. Nicolás asked: “How much does an empanada cost?” and he answered himself “300 bolívares”. It’s been years since he lived in Venezuela, this Venezuela that the rest of us are living in. He spoke a lot of nonsense to justify the necessary increase, which hasn’t happened since 1996. The price of 91 octane gas will be Bs. 1, and that of 95 octane gas, which used to be Bs. 0.097, will now be Bs. 6. Let it be clear: the deficit remains unchanged, the money collected through this increase will be in bolívares, and will be used for other things.

This increase still doesn’t cover refinement, transportation and marketing costs. This increase won’t stop smugglers (we still have the cheapest fuel in the world). The only way for this increase not to be ineffectual, is for prices to be adjusted over time. Otherwise, inflation rates will swallow them. And it’s impossible to understand why gas money will go the Fund for Missions, because it will never cover production costs that way.

Nicolás announced the simplification of foreign currency exchange in two rates, in force starting tomorrow: Bs. 6.30 dollar increases to Bs. 10, Sicad disappears, and Simadi will be a “floating complementary system” which will start at the present rate of Bs. 203. He ignored what’s truly relevant: how many of the available dollars will be paid at Bs. 10 and how many at Bs. 200. It’s insane to keep selling dollars at Bs. 10 given this crisis, but it’s also evident that the Government has no dollars to offer at Bs. 200. Sicad and Simadi were, at some point, also “floating” systems and they didn’t work because they weren’t allowed to float. Foreign exchange control continues.

Nicolás spoke about the first minimum wage raise of 2016 (+20%) as if it was a personal achievement, with the Bs. 11,578 wage being the best compensation for his speech. Food bonuses were also increased (+2.5 Tax Units), which puts them at Bs. 13,275. 

The 6th measure is summed up in the socialist version of Manuel Rosales’ Mi Negra card. A direct subsidy for families handpicked by the Government through a debit card. It took them 17 years to get to direct subsidies. So many failures and corruption, to go back to something that was already in place before their coming into power.

What Nicolás didn’t say

He didn’t say anything relevant about food shortages, foreign currency grants to the private sector, payments to international suppliers or overflowing inflation rates. He didn’t mention the possibility of international financing, the decrease in public imports or the efficiency of expropriated companies. Only by lifting restrictions can corruption be corrected and he didn’t. With productive capacity destroyed and with the inability to inspire trust, announcements were left attached to a five-hour long speech. It was irresponsible to talk about the country’s diminishing income without making decisions to solve the crisis that this creates.

Nicolás devalued; he adjusted fuel prices; he increased the minimum wage and the rest of his announcements are riddled with inaccuracies.

Years ago, my dear friend Gerver Torres told me that countries never reach rock bottom, that things can always get worse. Venezuela’s economic crisis is worse than just a few hours ago. By this time, we’re all poorer and Nicolás, by ordering business people “a parir,” also told us to keep pushing.