Latin America

[behappyalways]

It’s a mad, mad, mad, Maduro world

Venezuela’s leaders ignore reality

The economy is collapsing like a nation at war. The government is to blame


“HE WHO leads must listen even to the hardest truths,” said Simón Bolívar, who liberated much of South America from Spanish rule. The leaders of Venezuela today, who claim Bolívar as their inspiration, ignore his dictum.

Venezuela’s economy shrank by nearly 19% last year, according to a leaked early estimate by the central bank (see article). That would be bad even for a nation at war, which Venezuela is not.

Inflation was 800%. Shortages of food and medicine are causing hunger and looting. Infant mortality is soaring. Caracas is the capital city with the world’s highest murder rate.

The leaders of Venezuela’s “Bolivarian revolution” shut their ears to such truths. The central bank has not formally published data on growth or inflation since the beginning of 2016. After the leak, Nicolás Maduro, who took over as president from the revolution’s leader, Hugo Chávez, in 2013, sacked the head of the central bank.

His successor must “fight against the domestic and foreign mafias that attack our currency”, Mr Maduro said. No such mafias exist; Mr Maduro’s government is to blame for Venezuela’s plight.

Alas, he will not heed Bolívar’s second commandment: to “right the wrongs that lead to errors”. His controls on the prices of foreign exchange and basic goods have created shortages, rationing and inflation. On the black market the bolívar is worth less than one three-hundredth of its strongest official rate.

The armed forces, which oversee the distribution of food, are the biggest profiteers from scarcity. The halving since 2014 of the price of oil, almost the only export, makes these problems more acute but is not the underlying cause.

The dismantling of democracy worsens the consequences of deafness. The regime’s last democratic act was to hold parliamentary elections in 2015. The opposition won, and thereby in theory ended the Bolivarians’ 16-year monopoly of power. Since then Mr Maduro has sidelined parliament and blocked attempts to remove him from office by constitutional means.

The compliant electoral commission thwarted a referendum to recall him, which he would surely have lost. This month he delivered his annual state-of-the-nation speech before the puppet supreme court rather than the national assembly.

Venezuela needs both economic rescue and political renewal, but it is hard to imagine where these will come from. The best hope had been talks between the government and the opposition, which are mediated by the Vatican and by Unasur, a regional body.

But they broke down in December after the opposition accused the government of reneging on promises to free political prisoners (though it released a few) and restore parliament’s powers. The most useful thing outsiders can do is to urge the resumption of the talks.

Their aim should be to return Venezuela to constitutional rule and prepare emergency economic reforms, backed by money from the IMF.

The toughest messages must come from Venezuela’s neighbours and regional bodies. Mercosur, a South American trade bloc, suspended Venezuela last month for violating its democratic principles; the Organisation of American States should do the same.

The United States must act with restraint. Rex Tillerson, its nominee for secretary of state, clashed with Venezuela as boss of Exxon Mobil. In his new job he must champion democracy without directly calling for regime change.

The hard truth is outsiders’ influence is limited. Change may eventually come when one army faction or another decides that the risk of social collapse outweighs the chance to profit from the crisis. Even that is unlikely to be a good thing. Soldiers with political power are rarely good listeners either.

Source: The Economist

[winston]

Venezuela

Caracas possesses 5,000 Russian-made MANPADS surface-to-air weapons, according to a military document reviewed by Reuters.

It’s the largest known stockpile in Latin America and a source of concern for U.S. officials amid the country's mounting turmoil.

Source: Reuters

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Venezuela referendum: Big show of support for opposition
http://www.bbc.com/news/world-latin-america-40624313

[winston]

US Mulls to Financially Sanction Venezuela: Sources

As Reuters cited high-rank officials in the White House, the US is considering a financial sanction on Venezuela to prevent all USD transactions by the country's state oil company PDVSA.

This will significantly limit the crude oil exports of Venezuela and used up all of the government's USD reserve.

Source: AAStocks Financial News

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Venezuela: How a rich country collapsed
http://money.cnn.com/2017/07/26/news/ec ... plead-intl

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How Venezuelans stave off hunger amidst a food crisis
http://www.bbc.com/news/av/world-latin- ... ood-crisis

[winston]

Argentina

Argentina has been on the blacklist for some investors for a while, given its history of sovereign debt problems. And it’s looking grim on that front once again.

Sure, a year ago investors were cheering the possibility of reforms and projections of GDP growth of more than 3% in 2018. But things look much different now — as evidenced by the Merval’s MERV, -2.81% gut-wrenching 9% plunge Wednesday on the Buenos Aires Stock Exchange.

The current challenges, including debt tensions and rising inflation, are quite serious. The exchange-traded funds iShares MSCI Argentina and Global Exposure ETF AGT, -1.80% and Global X MSCI Argentina ETF ARGT, -1.39% are both off about 15% this year as a result.

Source: Market Watch

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Ecuador tightens entry rules for Venezuelan migrants
https://www.bbc.com/news/world-latin-america-45237368

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Nicolás Maduro’s magical thinking

Hocus pocus economics in Venezuela

The socialist regime’s plan to rescue the economy will probably fail


NICOLÁS MADURO calls it “a really impressive magic formula”. His paquetazo rojo (big red package) features a new currency that lops five zeroes off the nearly worthless bolívar, a sharp increase in the price of fuel and a rise in the minimum wage of more than 3,000%.

Forget magic. The president’s formula, even with some welcome new bits of realism, will almost certainly fail to rescue Venezuelans from their economic agony.

Venezuela has the world’s worst-performing economy among countries not at war. GDP fell by more than a third between 2013 and 2017. Inflation could pass a million per cent this year, says the IMF.

The country with the world’s largest oil reserves cannot import enough food and medicine. Water shortages and blackouts plague cities. More than 2m Venezuelans have fled, unsettling neighbours (see article).

Mr Maduro says this is the fault of “imperialist” powers like America, which are waging “economic war” on Venezuela. In fact, the catastrophe is caused by the crackpot socialism introduced by Hugo Chávez and continued by Mr Maduro after Chávez’s death in 2013.

Expropriations and price controls have undermined private firms, depressing production. Corruption has subverted the state. Mismanagement of PDVSA, the state-owned oil company, has caused oil output to drop by half since 2014.

Just as the regime has asphyxiated democracy, by rigging elections and governing without reference to the opposition-controlled legislature, so it has strangled the economy.

Belatedly, Mr Maduro has recognised the need for change. He has admitted for the first time that hyperinflation is caused by the unbridled creation of money to finance the budget deficit, which will exceed 30% of GDP this year, according to the IMF.

By reducing fuel subsidies and raising taxes, he now aims for a “zero deficit”. His paquetazo devalues the currency from the official rate of 250,000 old bolívares to the dollar—available to a favoured few—to the market rate of 6m.

But Mr Maduro has set up his plan to fail. The new “sovereign bolívar” is supposedly pegged to the petro, a new unit of account that is ostensibly backed by oil reserves. But since no one knows how the petro will work and nothing binds the new currency to it, this peg inspires little confidence.

In practice, the regime can still print as many bolívares as it chooses. The pledge to eliminate the budget deficit is undermined by a recent tax break for the oil industry and the rise in the minimum wage. This will swell the public-sector wage bill, stoke even more inflation and bankrupt firms. There is talk of tougher price controls, which would further discourage production.

A hat with no rabbit

With somebody else in charge, Venezuela might still have a chance. A competent president would keep parts of Mr Maduro’s therapy, such as the devaluation, and add new remedies. Business would be freed from price controls and given legal security.

The bolívar would be issued by a truly independent central bank, or perhaps replaced by the dollar. Venezuela would gain external credibility and financial support by negotiating an adjustment agreement with the IMF. It would start serious negotiations to restructure its foreign debt.

All this would need the co-operation of the opposition and of the international community. It is hard to imagine any of it happening while Mr Maduro is president. Venezuela needs real reform, not hocus-pocus.

Source: The Economist

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2018.08.26【文茜世界周報】委內瑞拉經濟瀕臨崩潰　經濟難民釀危機
https://www.youtube.com/watch?v=WesYYEU ... freload=10