Chavez bulldozing over Venezuelan economy

If you're into schadenfreude, this article reads like a comedy. President Chavez seems to be effectively demolishing the Venezuelan economy and replacing it with a system where the only thing being produced in Venezuela is going to be the oil, most of which will be exported abroad, and all the other goods are going to be imported and distributed to citizens based on a voucher principle. With oil prices now around their all-time highs, he needs them still to grow in order to fund his government's deficit. The deficit is incurred because he's massively importing basic consumer goods from abroad, and the reason he's doing that is because he's already crippled the local economy to the extent that it cannot any more provide all of its citizens with the most basic local goods.

By the time he's done, Venezuela will have been sent back to the stone age economically. It seems like the nation is going to rely entirely on its oil revenues as the only means of its survival. But when eventually oil prices fall, so will the entire "economy". This will be fun to observe.

It is a comedy, of course, as long as you don't consider or identify with the plight of Chavez's hapless economic subjects. Once you begin to identify with a person stranded in this arising caricature of a state, it becomes more of a tragicomedy. And the way it seems to be going, it's on a good path to turn into a tragedy pretty soon. The saddest part is, even when the nation is completely ruined, Chavez will likely manage to stay in power - just like his friends Robert Mugabe (who sent Zimbabwe into the stone age over the past few decades), Kim Yong-Il and Fidel Castro (who are keeping their respective countries in the economic stone age as well).

Fun, fun, fun.

To the extent that misery is funny.


Anonymous said…
Mr. Bider,

Sometimes for me is funny how people around the world talk, write, talk and write about what is happening in Venezuela without understand in reality the true reality.

When Chavez was leading polls back in 1998 I read in newspapers people saying things like you :-) today economic in Venezuela is far beyond better than before... having the oil revenue invested where it needs to be invested; THE PEOPLE

I invite you to check just these two examples:

Old project supported by tyrant Chavez:

Also, you should check economic indicators like; inflation, income per capita, country investment risk, etc...

Chavez is creating a new paradigm... many can't understand that, but in the years to come many countries will follow those steps and that Mr. Bider is the real threat for USA.
denis bider said…
Hah hah hah :) That's the part about Venezuela's upcoming economic demise that I find funny. You suckers don't know what you're in for. Some of you genuinely think that Chavez is doing you a favor. Meanwhile, he's setting you all up to be raped royally in the behind. :)

The effects of Chavez's policies will be no different, and no more original, than the effects of Castro's policies in Cuba, Mugabe's policies in Zimbabwe, and Kim Yong-Il's policies in North Korea. Your perceived honeymoon is going to last about as long as you have oil and prices remain high. Heh heh heh, enjoy it :)
denis bider said…
Yeah, how about those economic indicators:

[*] Inflation roars back in Venezuela in April: "The stronger-than-expected jump [of 1.4 percent in April] followed a 0.7 percent fall in March, a break in the inflationary trend because Chavez cut the value added tax that month without addressing pressures which have caused shortages of food staples like milk and meat."

From the same article, this is how Chavez is fighting unemployment: "Late on Monday, to mark May Day, Chavez lifted the minimum wage 20 percent. He also ordered the working day to be gradually slashed to 6 hours in a move he said would force employers to create new jobs."

[*] Your income per capita is slightly growing: from 2005 to 2006, it went from 110th place to 108th place according to purchasing power parity, and 84th place to 77th place according to the Atlas method.

But government spending is now driving the Venezuelan economy, and the only reason your government can spend this money is because it confiscated oil revenues from companies that made those oil revenues possible by investing in Venezuela in the first place.

As far as I know, PDVSA does not have the expertise that the international oil companies have. Furthermore, Chavez fired a major portion of PDVSA's engineers when they went on strike. And furthermore, Chavez is using PDVSA's revenues to, like you say, "invest in the people", instead of investing into the future of your oil.

This means that sooner than later you will start to have problems extracting the oil, which means that your oil revenues are going to collapse, which means that your government's "investment in the people" will have to be cut. What do you think will happen then? What impact is that going to have on your nation's gross national income?

What's almost certain is that you're going to have to turn back to the same international oil companies that you are bashing now to help salvage your oil industry when it enters crisis.

* Country investment risk? Don't get me started on that! Chavez had to institute restraints on foreign exchange to stop the capital from outflowing. "Foreign direct investment was a negative $881 million in the first half as foreign companies pulled out money."

Every socialist country can present isolated "success stories" of poor kids playing violins and chocolate growers making a good living. It is easy to create success stories when you just need to confiscate some money in one part of the economy, give it to another part, and then have the media report on how well the favored part of the economy is doing.

What isn't so easy is doing this in a way that is sustainable and stable.

A good economy is like a garden; the gardener just plants the seeds and lets them growing, treading softly on the ground and watering the plants sporadically. The result of such good gardening is a rich harvest.

What Chavez is doing, instead, is bulldozing the existing garden and replacing its produce with prepackaged fruits and vegetables that he bought somewhere else. That's going to work about as long as Chavez can keep spending money. And then, what you're going to be left with is a bulldozed, battered and neglected garden which fails to yield any harvest.

In other words, unless your course changes significantly, when you run out of oil, you will starve.
verbatim said…
Well...with Mugabe it was a different case. He forgot the white people are the one with the appropriate knowledge about agriculture, economy etc. He thought that black people can run modern Zimbabwe (as it was back of the most developed African countries) without proper schooling and experience and so he basically removed white people from the country. At least he managed to achieve 9000% inflation ;)

Chavez on the other hand is turning country into a communism which really isn't smart idea. Oil reserves can't last forever...
denis bider said…
I agree that Mugabe is different in that his goal is not socialism; he's just an autocrat that's flat out stupid. Maybe it's kinda like what the United States would be in 20 years if George W. Bush was a dictator. :) One of the things he does have in common with Chavez is that they're both suspiciously elected autocrats needlessly meddling in their countries' economies with disastrous effects. Mugabe seems to be worse and more violent - so far.
boris kolar said…
Chavez is great! I'm looking forward to meet all these young slim female Venezuelan refugees :)

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