Caracas Chronicles

A few weeks ago, I was delighted to learn that our good friend Omar Zambrano, a terrific economist and blogger, was returning to Venezuela to … I dunno, get crap done. If you don’t know who Omar is, you can check his blog, or his unmissable Twitter feed. He’s a personal friend, as well as a friend of the blog.

His brave decision to return made us all ponder our life choices a little bit.

Omar is already hard at work making a difference in economic opinion in our country. But after reading his first in-depth interview with Prodavinci, I was left with a slight taste of disappointment in my mouth.

Omar gets all the basics right: Venezuela is going to need financing. We will have to lift price controls and currency controls. Reform cannot happen until Maduro and his passel of clowns leave the stage. Even though the way he said it is kind of murky -which is probably due to poor editing on behalf of the journalist, Victor Salmeron- his thinking is clear enough.

But when he gets into other areas, he is too cautious, and in some cases he makes no sense.

Here is an example (in the original Spanish):

Un actor importante es la banca. ¿No se necesita un ajuste de las tasas de interés si se levanta el control de cambio? ¿Qué impacto tendría el encarecimiento del crédito en la recesión? ¿En la situación de las familias?
Allí como en el resto de la economía tiene que haber un ajuste progresivo. No tengo elementos, pero hay quienes sí tienen preocupación por este aspecto. Venimos de un largo período de represión financiera, con gavetas de crédito. Nadie sabe la calidad de los activos que tiene la banca, a quién le han prestado en cada sector. Ese es un tema muy delicado. Venezuela tiene que transitar el camino hacia la recuperación del sistema de precios y eso incluye los precios financieros que son las tasas de interés.

Otro aspecto es el legado de empresas públicas ineficientes que reportan pérdidas, con nóminas abultadas y que necesitan inversión. ¿La privatización es la única salida a este problema? ¿En qué áreas vería con agrado la privatización como parte de un plan de ajuste?
La privatización es parte de las opciones que tiene que manejar el sector público, pero hay muchas modalidades; por ejemplo, en Bolivia se habló de capitalización de empresas públicas, puede haber traspaso de control a dueños anteriores de las empresas estatizadas, esquemas de participación de los trabajadores a través de alianzas con el sector privado.

Omar was asked about two things: the financial sector, and privatizations. On the former, he punts, basically saying we have no idea if the country’s banks will survive the transition because we don’t know how good the banks’ balance sheets are. On the second, he says that privatization may not be necessary, that there are other alternatives, such as worker alliances, or giving back expropriated companies to their old owners.

These are important issues, and I’m sure Omar has thought about them more carefully that his answers reveal.

We know that banks balance sheets are garbage. For years, banks have been financing the government, and providing cheap loans to shell companies whose owners used loans to purchase dollars. If the transition does not take this into account -via, for example, demanding banks merge and combine their capital- we will be facing a massive banking crisis in the near future.

As for public companies, the only remedy is privatization. Public companies such as electricity or water utilities are in desperate need for cash. This is not going to come from the government, or from some mythical worker alliance (let’s remember workers are bankrupt). Companies will need cash, and only the private sector can provide it. Yes, giving them back to previous owners might work, but will they want them back? Even if they do, this … is called privatization.

Can’t we just call things by their name?

I don’t know if Omar is playing a political game. I don’t know if he is hiding behind euphemisms in order to keep his enemies guessing.

But my advice to him is: go deep bro.

You’ve already taken the corageous step of moving back to Venezuela and getting in the thick of things. For years, you’ve called it like it is. Don’t become part of the machine. Don’t hide behind euphemisms. Don’t be guarded.

Venezuela is sick, and she needs us economic doctors to tell it to her straight… even if that means saying bad, bad words such as “banking crisis” or “privatization.”