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Chavez policies a boon for the poor?

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ThorsMitersaw posted on Tue, Jan 12 2010 11:13 PM

reposted form elsewhere: (note: I do not agree with the premise)

 

 

Just watch how the US is going to interject itself in the politics (both media and CIA capitalist spin).

Venezuela’s Chavez Announces Currency Devaluation, Two-Tiered Exchange Rate

Venezuelan President Hugo Chavez announced a devaluation of the official exchange rate of the bolivar currency and the creation of a second rate denominated the “oil bolivar” for non-essential imports, in a nationally televised address on Friday.

The bolivar would be devalued from 2.15 per dollar to 2.6 per dollar, Chavez said, while the “oil bolivar” will be pegged at 4.3 per dollar. The measure represents a 17 percent and 50 percent devaluation respectively.

The Venezuelan government moved to regulate foreign currency exchange in 2003 after a two month long bosses lockout in the oil industry aimed at ousting the democratically elected Chavez from power caused an estimated $20 billion damage to the economy. The latest devaluation is the first since an 11 percent devaluation in March 2005.

The Central Bank of Venezuela (BCV) will also intervene directly into the unofficial dollar market where the bolivar is currently trading at approximately one-third the official rate in order to check capital flight, “This is a very firm resolution, the sectors that move in this economic ambit are well aware what I am referring to,” Chavez said.

The devaluation is aimed at revitalising the economy and strengthening national development after the country experienced a 2.9% contraction in 2009 due predominantly to lower oil prices resulting from the global economic crisis, he explained.


“This is to boost the productive economy, to reduce unnecessary imports and at the same time to stimulate exports,” he said, “We have to leave behind the oil rent model.”

The 2.6 rate will apply to imports from priority areas such as food, health, machinery and equipment, science and technology, books and education items as well as imports for the public sector, family remittances, Venezuelan exchange students, accredited consuls and embassies in Venezuelan territory, and pensions in some special cases.

The second rate will be applied to imports for the automotive, trade, telecommunications, chemicals, metallurgy, computing, and construction sectors as well as rubber and plastics, electrical appliances, textiles, electrical services, electronics, graphics, tobacco and alcoholic beverages, among others.


Economist Orlando Ochoa, from the Andrés Bello Catholic University told El Universal that in particular the state-owned oil company PDVSA and the basic industries grouped in the Venezuelan Corporation of Guayana (CVG) would benefit from the measure because “they are going to import the inputs they need to produce at 2.6, but they will receive 4.3 for their exports. This gives them a huge break.”

Venezuela—the largest oil producer in South America, whose income from oil accounts for approximately half the country’s GDP and ninety percent of exports—experiences an economic phenomenon known as “Dutch Disease” where high oil revenues act as a disincentive for domestic investment and production in other sectors making the country heavily reliant on imports.

The devaluation will boost the government’s spending power, as it will receive double the amount of bolivars per dollar from oil exports. However, it will also affect the general population by increasing the cost of imported goods in the country where inflation reached 25.1 percent in 2009.

In order to offset the impacts of inflation the government maintains price controls on a range basic food items including meat, bread, milk and coffee among other things, as well as a network of subsidised supermarkets, and free health and education services. However, a heavily subsidised petrol [gasoline] price of approximately five cents per litre is viewed as unsustainable by many analysts.


Further economic measures are expected in the coming days, it is possible that Chavez could announce further subsidies.

During his address to the nation the president argued that the economy should be at the service of humanity and therefore socialism.

“Economics is a social science in the service of human development (...) In capitalism the economy is in the service of bourgeois elites, which through their neo-liberal capitalist laws and constitutions, institutions, place it at the service of a minority and it becomes a source of exploitation of the majority.”

“Venezuela is an example of this: in the 20th century, despite the oil wealth, we ended the century with more than half of the population living in poverty and misery,” he recalled.

He compared this situation with the past 10 years, during which the Bolivarian Revolution has dramatically decreased unemployment and poverty, and free health and education programs have considerably improved the life of the country’s poor majority as noted by the United Nations Human Development Index.

“We’ll do everything so that this global crisis does not affect Venezuela,” he said, recalling that in 2009, while the economies of northern Europe and the U.S. lost millions of jobs, in Venezuela the unemployment rate remained stable at around 7 percent.

The state is a disease and Liberty is the both the victim and the only means to a lasting cure.

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Chris replied on Tue, Jan 12 2010 11:25 PM

I read about this yesterday in the WSJ.  The real black market exchange rate is 6.25:1 for the bolivar:dollar.  People were cleaning out the shelves at stores because they know prices will go through the roof.  On top of all this Chavez is making it illegal for businesses to raise prices, so there will now be shortages (understatement:  empty shelves).  Chavez is an arrogant [expletive].  Maybe next week he will claim that he can defy the law of gravity.

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Kakugo replied on Wed, Jan 13 2010 8:28 AM

Latin America will never change... their monetary politics have always been the subject of endless jokes and this latest bout of insanity from Hugo "US-symbiont" Chavez is no exception.

Together we go unsung... together we go down with our people
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Bogart replied on Wed, Jan 13 2010 8:45 AM

Chavez or any other socialist can wish that because he feels for the poor and because he believes that he is gifted enough to manage the economy using violence that the economy will provide for his subjects.  In other words he is going directly against the Economic Laws or redefining them to support his wishes.  This is equivalent to building a perpetual motion machine or having Venus suddenly stop and reverse direction around the sun.  This is the Fatal Conceit that infects all central planners be they in the US Federal Reserve or the Chavez administration.

There was a statistic that in 1959 the income of the average person in Venezuela was 70% of the average persons income in the USA and growing faster.  There is no better example in history of the benefits of central planning than in Venezuela.

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We can only hope that the best possible scenario to come from this situation is the ousting of the boy Chavez...

"I don't believe in ghosts, sermons, or stories about money" - Rooster Cogburn, True Grit.
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Kakugo:

Latin America will never change... their monetary politics have always been the subject of endless jokes

True. I laughed long and hard at the late 1990's Argentine economic collapse engineered by neoliberal policy. At least workers' seizure of various enterprises was to follow. :)

Hard Rain:

We can only hope that the best possible scenario to come from this situation is the ousting of the boy Chavez...

I believe a military-commerce association briefly established control and suspended various constitutional provisions the last time an anti-democratic coup occurred there. ;)

The workmen desire to get as much, the master to give as little as possible...It is not difficult to foresee which of the two parties must force the other into a compliance with their terms. -Adam Smith

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hugolp replied on Wed, Jan 13 2010 10:05 AM

Why all this Chavez bashing? I mean, I think devaluating the currency is the last step socialist countries take before they fall, but Chavez its not doing anything the rest of the world is not doing. I mean the USA is devaluating their currency, China is devaluating their currency, the ECB is devaluating thier currency, even Swiss is devaluating...

As I see it at least Chavez is being honest about it. The real problem is that Chavez is going to force price controls, and that is fighting agaisnt reality.

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Sieben replied on Wed, Jan 13 2010 10:33 AM

hugolp:
Why all this Chavez bashing?
Cus we used to get cheap oil from old venezualan elites. Now chavez sells it to us at full market price and laughs at us.

Venezuela also has the world's largest unconventional oil reserves in the form of very viscous black oil. We can't get to it with current technology, but Venezuala is poised to be the new Saudi Arabia in the next 50 years. Check this out its pretty scary.

This is dangerous cus Chavez is not our boy.

hugolp:
The real problem is that Chavez is going to force price controls, and that is fighting agaisnt reality.
Well other countries do this too. You're right that there's nothing special about venezula.

 

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