Venezuela: Devaluation in 2011?

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

A major international bank is predicting a devaluation of the Venezuelan exchange rate in the first quarter of 2011. According to experts at Barclays Capital, the measure represents the best option for a government that will eventually be forced to balance its accounts. But leaving aside the speculations that may generate the report of the financial institution, the factors that Chavez should evaluate if he is planning a devaluation in the coming year are complicated.

A modification of the official exchange rate in 2011 would find justification in the long socialist recession that persists in Venezuela, the government deficit, the growing debts to government employees, the debt on the secondary market, the low tax collection due to the economic downturn , the oil price that has not returned to exceed $100 per barrel, and the 2012 elections which are relatively far away to absorb an impact of this nature and allow time for Chavez to regain some stability.

Unfortunately for the Venezuelan president, the 100% maxi-devaluation the government decreed in January 2010 is very recent, so launching a new macroeconomic shock could mean a trauma that is too close to the previous one, for the economy that has registered South America's worst performance in the past 3 years.

Furthermore, although PDVSA's lucrative exports have declined and the Chavez government has failed to manage it properly, the global oil market continues to live the most spectacular boom in its history, which produces a good income for an OPEC country like Venezuela. The current barrel is not worth the $140 he reached in 2008, but remains above $70, fairly high compared to the average of $36 per barrel from 1970 to 2008.

Also, from 2008 to 2010, Venezuela's economic conditions have deteriorated more than in any other year of the Chavez government, which, among other things, has adversely affected his popularity, lowering it to alarming levels for a populist leader. How do a new large devaluation would impact on this weak leadership? It's hard to believe it would be good, although missing 24 months for the 2012 elections.

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Chavez's attitude to the Costa Rica-Nicaragua case

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

In 2009, when Manuel Zelaya was overthrown by a polemical military coup, no one was so desperate for the OAS intervention as the Venezuelan government. Obviously, at that time was a Chavez ally who needed help and the Venezuelan President knew the more time Zelaya spent out of power, the harder he would return to office. So, Chavez called on all his allies to take a position as soon as possible, and pushed to such extremes on other governments that even Insulza fly in an aircraft as part of a dangerous counter-coup operation.

The same urgency showed Chavez for the intervention of the OAS when Rafael Correa was almost removed from power this year, in the police rebellion of September, but things change when indifference favors a revolutionary comrade. Now is Costa Rica who urges the OAS to mediate, and is Daniel Ortega -a Chavez friend- who benefits from the attitude of the current Venezuelan government. On November 12, 2010, the OAS voted unanimously to ask Costa Rica and Nicaragua to evacuate the disputed area for the moment and resolve the problem through dialogue; however, Nicaragua and Venezuela were the only two countries that voted against this resolution, and then Ortega announced that he would not abide it.

If he wanted, Chavez might influence his ally to take another position, but meanwhile the facts are imposed: The controversial dredging of the border river continues, which in practice would extend the rule of Nicaragua, as this country has by right the control of the San Juan river.

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The Costa Rica-Nicaragua tension

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

Beyond the cartographic considerations that gave rise to the boundary problem between Nicaragua and Costa Rica, it calls our attention the aggressiveness of the current Nicaraguan president to discuss the matter.

Daniel Ortega has made the difference in the current dispute, because although this conflict comes from long ago, previous Nicaraguan governments had addressed it in a more diplomatic way, obtaining very good results with this attitude. In fact, in 2009, the International Court of Justice recognized that the sovereignty of that territory rightfully belongs to Nicaragua.

There was no need to threaten war against a country that does not even have an army. In addition, the mobilization of troops by a government drowned in a terrible budget deficit, and with a very low risk of aggression, is an act extremely difficult to justify.

Everything seems to be more of what we are used to seeing on the extremists in the region: Correa responded with military threats to his problems with Uribe, Chavez has also warned to start a war against the Neogranadine country several times, Ortega himself wanted to restore Manuel Zelaya to power by way of force, and now shows his fists to Costa Rica. It is as if those who direct the diplomacy of the ALBA countries need to maintain external tensions to distract their countrymen from the serious problems that, internally, the revolutionary governments have not solved.

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U.S. legislative elections, Chomsky and Stiglitz

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

In the November 2 elections, Americans voted to choose members of Congress, among other authorities. Contrary to what has been happening since 2006, this time the Republicans were favored by the electorate, taking control of the legislature from Democrats and simultaneously marking the relaunching of the neo-conservative politics in this country.

But, why is important the strengthening of the U.S. rightist faction in the last election? Well, among the many interpretations that this vote could have, we would not want to miss that, because of the 2008-2010 financial crisis, social scientists of the likes of Noam Chomsky and Joseph Stiglitz warned the end of the influence of the traditional political-economic ideologies to begin an era where the more progressive doctrines would dominate the electoral environment, including in the United States.

And that's where the Nov. 2 election appears on the scene, refuting the hypothesis of such thinkers, in the sense that when American voters decide to give the majority of the legislature to the Republicans, the last thing that is happening is that the American political system is becoming an archetype of the international left because of the global recession. Ie, after the financial crisis of 2008-2010, the American people chose to transfer the Congress from the moderate right of the Democratic Party to the purist right of the Republican Party. Indeed there was an ideological shift, but toward neoconservatism, very different from that anticipated by Chomsky and Stiglitz.

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Shock measures a la Cubana

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

When Fernando de la Rua in Argentina proposed an agenda of fiscal discipline and privatizations that copied the IMF's recipe, several leftist sympathizers in Latin America had to be hospitalized due to sudden heart diseases. Ironically, neither in the Domingo Cavallo's Argentina, nor in the current indebted Greece, the IMF technocrats came up with an economic program as ruthless as the one that the Cuban government has been pursuing.

With words similar to that of Milton Friedman, the Cuban regime is now talking about the need to eliminate "unreasonable expenses", but prefers an economic policy that would embarrass even the father of neoliberalism. 10% of the Cuban labor force was fired from its state employment as a saving measure and thrown into the streets to survive at its own, without social security, fixed income or solid legal guarantees to start its own business. 500 thousand human beings who are also only allowed to open small hair salons or mobile food sales, which means that a whole mass of people will start, at the same time, identical businesses to compete savagely in an archaic market with very little money movement.

To make matters worse, as these people have been working during years for a Marxist bureaucracy, they do not have the preparation or experience needed to succeed in private businesses.

As if it was not enough, these new local micro entrepreneurs must cope with the giants that come from outside the country, because Cuba is also privatizing several sectors of its economy into the hands of international private capital, with the hope to generate the development that the communist government was never able to materialize.

And like most governments looking for help of the International Monetary Fund, Cuba is forced to practice emergency measures once it is in the brink of a more extreme economic disaster, resulting in traumatic adjustments.

We can add the words humanism, socialism or global warming, which combine better with a Leninist propaganda, but economically, what Castro is doing is a grip so cruel that we do not remember having seen something similar in any of the IMF's bailouts.

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Venezuela: Estimate of 2010-III GDP growth

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

The Venezuelan economy would have grown -1.4% during the third quarter of 2010, compared to the same period last year.

This quarter was boosted by a bit lower inflation and the electoral spending of the parliamentary elections, but the weakening of the Venezuelan middle class -as consumer and merchant- continues to be reflected in the general state of the economy.

If our figures are correct, this would represent the sixth consecutive quarter of economic contraction in Venezuela, i.e., 18 uninterrupted months of revolutionary recession. Which also means that Venezuela is only two additional quarters of decline from an economic depression. Reality should not surprise anyone, given the socialist policies Chavez has implemented despite the lessons of history.

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Polls for Lima's mayoral election

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

On October 3, Lima residents will vote to choose a new mayor. According to Ipsos-Apoyo, voting intentions are Susana Villaran 42% and Lourdes Flores 28%. Other candidates appear with little chance of winning in this study.

Villaran is from the left, from the Fuerza Social party, but she says not to share the ideas of radical leftism on the grounds that the modern left is represented by Bachelet, Lula and Mujica.

For her part, Flores is from the Unidad Nacional party, centrist, representatives of Christian democracy in Peru.

Whoever wins will replace the current mayor, Luis Castañeda Lossio, from the Solidaridad Nacional party, also centrist.

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