♠ Posted by Emmanuel in Anti-Globalization,Latin America
at 1/14/2009 12:09:00 PM
Blowhards from the left (anti-globalizers and Che Guevarra fanatics) and the right (Randians and that sort) are usually in front of the line when it comes to receiving a thrashing here at the IPE Zone. In today's feature, I present two archetypal leftists for your consideration, with the emphasis on the latter. Naomi Klein is a popular author among impressionable freshmen and the like railing about the world's inequities while leading a pampered existence--trustafarians. Her powers of reasoning and perception are quite limited, as demonstrated by her fondness for false analogies and inability to distinguish between a libertarian and a neoconservative, among other things. Meanwhile, Hugo Chavez is a tyrant fond of populist rhetoric, a la Zimbabwe's Robert Mugabe--they promise revolution but serve up repressionWhat's the relation between the two? Klein was one of the signatories to a letter of support for Hugo Chavez during 2004's recall election. Nevermind that the Canadian Klein signed on to a letter which reads "[w]e are disturbed by our own government’s [US] interference in your internal affairs," but this sort of thing wouldn't bother Klein anyhow. Being quite fond of commenting on disasters, it probably won't sober her up that Chavez's (somewhat) capitalism-free Venezuela isn't faring too well. Bloomberg comments on the "stealth devaluation" underway in which black market rates significantly exceed the official exchange rate and inflation is definitely galloping at 31% and rising:
Venezuelan President Hugo Chavez says he won’t adjust the oil-exporting country’s pegged exchange rate amid a plunge in prices for crude. Instead, seeking to maintain his popularity, he may devalue the currency by sleight of hand. The government is already cutting its sales of dollars at the rate it established in 2005, forcing travelers abroad to turn to a parallel, unofficial market where U.S. currency sells at a 61 percent premium. Venezuelans need government authorization to get dollars at the official rate.Chavez is a one-dimensional tyrant. Fueled by dear oil, he was riding high. Now that the opposite holds, he's probably hoping for the opposite as Venezuelan debt isn't exactly selling like hotcakes. It looks like capital markets aren't buying into the Bolivarian Revolution, either:
“What’s essentially going on is a surreptitious devaluation,” said Russell Dallen, head trader at Caracas Capital Markets, a unit of BBO Financial Services Inc., a Caracas-based brokerage and asset management company. “They’re pushing more people into the unofficial market, so that’s forcing a devaluation on more people.”
Chavez’s insistence on a pegged rate, which worked well enough as long as Venezuela was awash in petrodollars, turned into a liability since oil prices collapsed. The government can no longer afford to subsidize cheap dollars for the consumer imports Venezuelans have grown accustomed to. On the other hand, abandoning the peg would ignite a surge of inflation at a time Chavez is campaigning for a chance to run again for president.
Venezuela’s inflation, the fastest among the 82 economies tracked by Bloomberg, may accelerate this year as the supply of dollars at the official exchange rate shrinks, forcing importers to spend more for foreign goods. Consumer prices rose 31.9 percent in 2008.
Blaming the West for self-inflicted misfortunes is getting Mugabe-style old. Even former acolytes admit that Chavez's grasp of economics is effectively worse than Klein's. The numbers here speak for themselves. Interpid reporter Klein should do some fair reporting and comment on the fate of this populist movement. I guess George "El Diablo" Bush got the last laugh before leaving office. He'd probably tell Chavez the same thing he hold his infamous disaster honcho: Heckuva job, Hugo, heckuva job.Even after a recent rally, the benchmark 9 1/4 percent bond due in 2027 is down 32.8 percent since Sept. 10. Its 16.041 percent yield will keep the government from selling additional debt, said Claudia Calich, who manages $1 billion in emerging market debt at Invesco in New York. At current oil prices, devaluation is almost unavoidable without “massive” spending cuts, she said in an interview. Devaluation would boost the government’s earnings in bolivars for every dollar of oil sold. Oil accounts for 93 percent of exports and pays for half the budget.
Chavez and Rodriguez have said oil may be poised to rebound. In any event, Chavez says his socialist political project can survive low prices, as it did in 2001 and 2002. On New Years Eve he unveiled plans for $100 billion in projects over the next four years. “His mouth is writing checks that the oil price doesn’t allow him to cash at the moment,” said Dallen, the trader at Caracas Capital Markets.
