Thanks for your post.
You did not delve too much in that question: why would the CEPR produce such a flawed report?
How is it possible those famous economists of such think tank fail to see the pretended growth in non-oil sectors is based basically on the petrodollars pouring onto them? (the so-called oil-based increase in whiskey glass production and silicon-breast surgery)
Do you think this is due to ignorance on their part? Or rather: is it intentional? And if it is: why should it be?
Starts?
Ow,
I think the loan from non-imperialist good, nice communist PSF-fine China to Venezuela's revolutionary government is only 4 billion dollars...for 200 thousand barrels a day. I wonder: for how many years?
No, there were two loans of four billion each that added up to 8 billion total. Then Venezuela itself chipped in $4 billion to the fund (really just moving money from one Venezuelan account to another) so tha the total Chinese-Venezuelan development fund was $12 billion.
I see. Thanks.
While there is much with which I disagree with you in regard to Venezuelan development policy, I agree that the CEPR is being too optimistic. But, how is Venezuela doing in comparison to other countries in the region? And, what is the solution? I've given mine already, the need for coordinated regional action to buttress demand during the recessionary hurricane. Have you given this much thought? Perhaps, you have addressed this recently, if so, I have missed it.
now that I finshed the post I'll comment on some of your comments in this thread and the previous one tonight.
I might also do a post in the next week reviewing some of the measures the government has taken in the past couple of months. For all I disagree with them on they actually are taking what I consider to be some important and prudent steps. In fact in the late fall I did a post contrasting what Marc Wiesbrot recommended that they do with what I thought they should do. So far it looks as though they might be acting more along the lines of what I wanted to see them do.
ow
I am not sure that it is worth spending so much time on Weisbrot. Or is it yet another way to avoid discussing reality like Flanker did with his manpad post?
An interesting question is why this relatively sluggish growth in 2008.
I guess that in the high growth years before there were a lot of unused capacities, which could be make productive easily.
At a certain point, though, you need productive investment for more output. With the highly distorted relative prices in the venezoelean economy and the lack of security for investors, there was lower private investment and the public investment simply wasn't productive enough.
Unfortunately, Lemmy, the position of the Venezuelan Government seems to be that they can do things better than the private sector.
Frankly, this to me is Alice in Wonderland stuff.
Now that the government has in place a law to expropiate ANY industry if it's considered of National Importance coupled with the law under discusion now, in which the entire territory (read land) also belongs to it, don't be surprised if the only investment that occurs does so by paying high government officials a "commision".
No investor in his right mind would invest a penny in a country that does not respect Private Property. OR at least as a minimum offer a playing field where the rules are clearly spelled out and do not depend on the whim of a mentally unstable, uneducated hick.
Oh boy OW, you're totally lost my friend. This post is full of falsehoods, assumptions, and careless statements that sprout from your own laziness to actually research these topics.
To not waste time, I'll just address this one point, which has been the crux of your argument for a long time now:
The two policies that probably had the biggest impact on slowing growth were the Venezuelan government slowing down its spending and trying to limit growth of the money supply to tamp down inflation and its maintaining a fixed and highly overvalued exchange rate.... The second policy is almost certainly completely self defeating, stops in its tracks any efforts to diversify the economy (as the CEPR itself has noted on numerous occasions), and is almost certainly the main cause of Venezuela's declining industrial output.
This statement is just total nonsense, and can be demonstrated as such with even the most cursory look at Latin America's economic history.
If an overvalued exchange rate prevents a country from building manufacturing, or diversifying the economy, then you would need to explain what happened in Latin America from about 1940 to 1970 during which time most major Latin American countries maintained an overvalued exchange rate ON PURPOSE and engaged in import substitution industrialization which BOTH significantly built up their manufacturing base, AND diversified their economies.
Mexico, for example, averaged 7 percent growth in the 1960's, and manufacturing expanded at 7 percent annually. Exports were diversified, etc. Other countries in the region had similar experiences.
Now, I am not giving 100 percent endorsement to the ISI policies during that time, but rather simply showing how false your assumption is that an overvalued exchange rate prevents a country from expanding manufacturing.
Just right there, with a simple look at Latin American history, your statement is shown to be complete nonsense. But if we go another step forward, and actually consider the current Venezuelan reality, we see even more holes in it...
...When we look at the current Venezuelan reality, your statement is equally false, because it lies on the false assumption that an undervalued currency would lead to private sector investment in manufacturing, and that would lead to manufacturing growth, which would lead to economic develoment overall.
These are some major assumptions, which are mostly false. First of all, since Venezuelan capitalists are not interested in building national industry (and never have been) but rather simply interested in acquiring profits with as little risk as possible, it is very unlikely that they will invest in national industries (especially when most private capitalists do not trust the Chavez government at all). It is much more likely that they will continue to invest in the things they always invest in (real estate, commerce) since it is less risky and easier profit.
In that case, devaluing the currency would not increase private investment in manufacturing. As has been understood for a long time by development economists, in underdeveloped countries like Venezuela, most of the riskier investments (like national industries) will have to come from the state anyway, and devaluing the currency will have little to no effect on whether or not the state invests.
However, even if private capitalists DID begin to invest in manufacturing after a devaluation, it would be the kind of investment that places like Mexico or Colombia get, which does not lead to economic development anyway. This kind of investment does not create the kinds of linkages that are needed to develop a national industrial network, but rather simply exploits the cheap labor to assemble foreign-made products. (your statement about "Mexico's exports" is pretty appalling. You can hardly call it a "Mexican export" when the only thing they are contributing is cheap labor.)
Once again, the kind of investment Venezuela needs will have to come from the state anyway (or would have to be carefully guided and controlled by the state like in Japan or SK), and so the exchange rate is not so important since the production can simply be subsidized, protected, etc. in order to compete with imported production.
Tosh wrote: "These are some major assumptions, which are mostly false. First of all, since Venezuelan capitalists are not interested in building national industry (and never have been) "
Please name which Venezuelan Industry you were a part of, and please explain your level of expertise in running a manufacturing concern.
Tosh wrote : "it is very unlikely that they will invest in national industries (especially when most private capitalists do not trust the Chavez government at all)."
Gee, I wonder why that is? Could it be that Chavez has shown a propensity for bulldozing over them, violating his own pet constitution, and lumping the good with the bad? (Unless, of course, the industrialist is WITH Chavismo and lets his industry be used to STEAL money?) Rum, anyone?
Or could it be that he would rather import all he can in order to play footsie with exchange rate disparity, fake invoices and the like? (Can you say PDVAL?)
Look Tosh, the sad fact of the matter is that the Venezuelan Government ( from 1959 onwards) has been the worst executor of industrial projects ever. They rank right up there with,oh, Mugabe, in that regard.
Examples? Lately? CANTV, La Electricidad de Caracas, Conviasa, etc. etc. Pick a sector, they've f'ed it up.
On a personal note, my family and I have always believed in Venezuela's potential, and we stand ready to invest in our manufacturing concern there, to continue to provide honest work to honest hard working folks. Some of whom have been with us for over 40 years.
But in the current climate of naked aggression, uncertainty over the risks of being nationalized and the possibility that Mr. Danger version Venezuela will one day wake up and decide that he didn't like his breakfast and decides to nationalize the sector we work in, we will not risk our hard earned capital so that it can be taken willy nilly in return for worthless paper that is not even worth the ink on it.
Chavez should stop his grand standing, learn some manners and realize that a just solution for workers and industrialists can be had if he only decides to dedicate some time to it.
He's always had this opportunity, he just prefers to be an asshole and try to look good while tearing down what little remains.
Destruction is easy, construction is not. His way is to destroy for destructions sake, and if EL Pueblo gets fucked in the process, well so be it.
Revolutions have costs, and he's willing to have us pay for it. What we'll end up with will even make YOU tremble in shame and anger.
Roberto,
Thanks for demonstrating my point about Venezuelan capitalists. Your point of view is apparently one of a Venezuelan capitalist himself, who demonstrates a total irrational hatred for the Chavez government, a complete lack of understanding of Chavez's policies, and the naive belief that if you treat capitalists "right", and make a "good environment" for investment, that somehow private investment will "develop" the country. That is, of course, totally false, but you've demonstrated my point anyway.
Thanks for demonstrating my point about Venezuelan capitalists. Your point of view is apparently one of a Venezuelan capitalist himself, who demonstrates a total irrational hatred for the Chavez government, a complete lack of understanding of Chavez's policies, and the naive belief that if you treat capitalists "right", and make a "good environment" for investment, that somehow private investment will "develop" the country. That is, of course, totally false, but you've demonstrated my point anyway
lol
lol = "I have no argument"
Roberto says:
No investor in his right mind would invest a penny in a country that does not respect Private Property. OR at least as a minimum offer a playing field where the rules are clearly spelled out
Yeah, like China. No one invests there!
This roberto is a real genius.
Tosh is a troll. Just ignore him.
"El Minpopo de la Salud advierte: Si usted sufre de incontinencia, absténgase de leer los comentarios de Carlson/Tosh o mantenga varios Securezza en su inventario."
Reading comprehension for the lose...
Yeah, like China. No one invests there!
No investor in his right mind would invest a penny in a country that does not respect Private Property. OR at least as a minimum offer a playing field where the rules are clearly spelled out and do not depend on the whim of a mentally unstable, uneducated hick.
China started to progress when they decided that becoming wealthy was not a sin. That was many decades ago. What was it that a banana dictator said recently in a tropical country? Something about ser rico es malo?
Yeah Tank, because the Chinese government always respects private property, and always has the rules clearly spelled out...
Either you didn't understand my statement, or you really are that ignorant about China's investment regime, and how the US and Europe are constantly complaining about it.
"El Minpopo de la Salud advierte: Si usted sufre de incontinencia, absténgase de leer los comentarios de Carlson/Tosh o mantenga varios Securezza en su inventario."
Mario Terán | Homepage | 05.07.09 - 4:43 pm | #
Translation:
Tosh's comments are way over our heads, and we have no way of refuting them, so instead we'll resort to lame ad hominem attacks.... because that's all we've got.
Wait a minute...Tosh deserves some credit here. Has anyone here ever encountered a PSF who would be so fanatic and loyal to a cause or a man? One has to admire such loyalty and faith, even if it is misguided or plain wrong.
Wait a minute...Tosh deserves some credit here. Has anyone here ever encountered a PSF who would be so fanatic and loyal to a cause or a man? One has to admire such loyalty and faith, even if it is misguided or plain wrong.
AnonIII | 05.07.09 - 5:59 pm | #
Again, Anon has no argument, and cannot possibly refute what I've said above, so he'll resort to some more deperate ad hominem attacks in hopes that he can change the topic.
Its really amazing. Don't you realize how obvious it is when you simply attack the person, instead of the argument being made? Even a third grader can tell that you have no argument.
I do not have to refute anything because you did not say anything new or worth considering.
The PSFs who are still defending Chavez's economic policies are doing it out of faith or stubbornness. I know you are not stupid and that is how I know that chavismo has become to you just a matter of faith. That is OK. You are not alone. Look at the millions of Venezuelans that still believe in them.
Just engage with the fucking argument.
I'll note beyond tosh's commentary that these responses are sterling examples of why the Venezuelan oppo is flaccid and ineffectual: too stupid to articulate anything other than mockery, usually underlain by condescension
I do not have to refute anything because you did not say anything new or worth considering.
The PSFs who are still defending Chavez's economic policies are doing it out of faith or stubbornness. I
ZZzzzzzzzzzzzzzzzzzzzzzz.....
Just more of the same. But thanks anyway, Anon, for demonstrating that you are incapable of engaging the argument, and are only capable of childish personal attacks.
It is quite revealing, but sadly very typical of the Venezuelan opposition.
OW, are you really siding with the IMFs projections on Venezuela and Argentina? They are utter BS - as their past performance has shown. From 2003 to 2007 they were off an AVERAGE of 6 percentage points a year in their GDP projections (ie. predicting 3.5% and getting 10.5%). This is political nonsense by a US dominated institution that controls increasing purse strings in the world. Really a scandal that deserves condemnation, not defense. And now they say no growth through 2014???!!! Chavez will be damned if he allows that. There will be runaway inflation before that happens.
You are right in that Ven's growth depends a good deal on oil prices. But they don't need to get above last year's $88/barrel (or $100) to grow or have a positive trade balance. Venezuela was growing at double digits for 3 years when prices were between $40-60.
Venezuela has been faring better than most so far with this crisis (much better industrial production %s - we'll see the GDP numbers soon), so there is no reason to think they won't finish better. I hope you agree that Mexico is more dependent on the US, while Venezuela is more dependent on global demand (and global equity markets). I think this favors Venezuela - at least in the next couple years. But the point is not about Venezuela vs. Mexico, it is about cooking the books against those countries who follow IMF dictates for quick cash and those who say no thanks.
You are also making too much of the debt issue. Yeah, CEPR did not account for ALL of possible Venezuelan debt. They probably used a standard methodology. The fact remains that Venezuela is in a better debt position than most of its peers in the region. But this has little to do with growth rates the next 5 years...
I do agree that monetary policy tightening last year had a major affect on growth. But I don't think that is the "policy buffer" the IMF is referring to. The global recession and drop in oil prices are now more to blame.
Finally, I don't think CEPR ever argued that oil was not the main "mover" in the economy. They were merely showing that other sectors were growing faster and the "oil boom" argument has some gaping holes in it. That is significant any way you want to spin it.
Yeah Tank, because the Chinese government always respects private property, and always has the rules clearly spelled out...
Either you didn't understand my statement, or you really are that ignorant about China's investment regime, and how the US and Europe are constantly complaining about it.
Compared to Venezuela its night and day.
Just engage with the fucking argument.
I'll note beyond tosh's commentary that these responses are sterling examples of why the Venezuelan oppo is flaccid and ineffectual: too stupid to articulate anything other than mockery, usually underlain by condescension
Or you could read the older comments where we have discussed this same topic to death and get a clear picture of what Tosh, Me, Kepler, OW, Flanker, etc think... Im sorry but repeating the same stuff over and over is... hm... boring.
Both anons were me.
On other more interesting news: http://www.noticias24.com/actual...leras-privadas/
When in doubt... Expropiate!
Or you could read the older comments where we have discussed this same topic to death and get a clear picture of what Tosh, Me, Kepler, OW, Flanker, etc think... Im sorry but repeating the same stuff over and over is... hm... boring.
Anonymous | 05.07.09 - 11:26 pm | #
No, actually Tank, we have never discussed the Mexican Miracle, or how ISI allowed countries to expand their manufacturing base while maintaining policies that were similar in nature to the Chavez government's.
But, oh well, when you can't actually discuss the topic at hand, its always easier to sweep it under the rug and engage in some good ol' ad hominems isn't it?
Apparently OW, Maxa, Av2ts, Richard Estes, and I are all still interested in discussing these topics.
If you aren't interested, then don't comment here. It is pretty simple.
But, oh well, when you can't actually discuss the topic at hand,
You dont "discuss", you call everyone a moron and pretend you know it all.
Tank---
On the previous post I brought up (1) agrarian reform/food sovereignty as a viable development strategy and (2) why health/nutrition programs that may not be "sustainable" (whatever, indeed, that means--sustainable compared to what??) should nonetheless be considered extremely important developmental investments since they create human capital.
There was some engagement on the point of the agrarian reform, although little from the harsher Chavez critics that haunt this blog, and no response to the comment on health policies/nutrition policies.
Now, I'm sure it's true: there have been discussions on this blog. Have long-term impacts of health reforms and food programs on human development/cognitive capacities in the context of criticisms of the Chavez government for resorting to pseudo-clientelist redistributive measures been a big topic of discussion here? Is that "old hat"?
Or discussions of ISI, and agrarian reform in the East Asian exporters--is that irrelevant to Venezuela? There is also fresher research discussing how to dispel the research curse. What are the implications of that for Venezuelan development? For analyzing the practice and pratfalls of the Chavez government? The questions seem to be of more than little moment. But you're "bored." So what the fuck are you doing here other than posting glib, derisive commentary?
I have come to realize for some time now that people's incapacity to understand the nature of complex systems, even through (because of?) the use of some simplistic approximation, is what leads them to defend certain ideals that in practice are, and will continue to be, unsustainable and altogether counterproductive in the long term. This usually comes hand in hand with some dose of hypocrisy.
Like this whole discussion on foreign investment and development that arises from time to time in this blog and that seems to be another of ow's and the oppo crew around here to bash the Venezuelan government.
I'll illustrate this with one example. The Colombian Ministry of Commerce (Colombia seems to be on of those countries that will do so much better than Venezuela in the years to come according to the IMF) published its April 2009 report on foreign investment which has some very interesting data.
http://www.mincomercio.gov.co/
ec...ersionAbril.pdf
The country that has invested the most money in Colombia during 2008 was the US (don't count here money from Plan Colombia): US$1.74 billion. Most of it (1.5 billion) appears to have come from Drummond as part of its mining opperations in order to exploit coal in Cesar Department.
But if you look at the second and third places: Anguila was the second largest investor with 24% and Panama was the third one with 14%. Anguila and Panama... hehehe... you got almost 40% of your "foreign investment" coming from offshore positions in well known tax havens which, in a country as this, you know it means laundering a whole bunch of dirty bloody money, or in the less ilegal scenarios, evading a bunch of taxes.
This is not new. Check out the list of investors from 1994 to 2008:
Bermudas, Anguila, Cayman Islands, Virgin Islands and Panama made up 32% of Colombia's foreign investors.
http://www.slideshare.net/invier...n-19-marzo-
2009
Now, what good is this sort of foreign investment? Dirty money from drug trafficking which feeds thousands of paras and guerilleros which is the source of all this violence that has Colombia as the country with the second largest number of refugees (just short of Sudan) which is the excuse to send more weapons through Plan Colombia, etc.
That comes at a terrible cost unmesurable by the account of economic profits. Just as many other clean and legal investments which are an excuse to suck-up dry the country and that we could discuss with some more time.
But good ol' capitalism doesn't care too much about that. This reminds me the fears arose the proposed cutting of US's military budget and that would mean the reduction of some 100,000 jobs
"Regarding an estimate by defense contractors that 100,000 or more jobs could be at risk because of the cuts, Hale said job losses "were never discussed" during the formulation of the new budget. He said jobs lost in some sectors would be gained in
...
"Regarding an estimate by defense contractors that 100,000 or more jobs could be at risk because of the cuts, Hale said job losses "were never discussed" during the formulation of the new budget. He said jobs lost in some sectors would be gained in others."
http://www.washingtonpost.com/
wp...9050704239.html
I guess you just have to keep the war rolling. IMF will probably be happy knowing that the teacher-pet countries it loves to screw will make some money at least to pretend.
Now, on the positive side I have to say that the beauty of this economic crisis is probably the paradigm shifts, which will accelerate when dollar finally crashes.
Since it is the rich guys who are having some bad this time, they decided that Tax Havens had to be put to some scrutiny (something that nobody thought about - let's say - when they found Pinochet's secret multimillion dollar accounts in Riggs Bank or gold deposits in a Hong Kong bank).
http://www.washingtonpost.com/
wp...6121000302.html
It will be mainly cosmetics changes in this regard for the time being, but will see what happens in the years to come, just as with the IMF predictions.
"THE END IS NIGH", said the Jehova Witnesses and Chavistas alike.
"THE END IS NIGH", said the Jehova Witnesses and Chavistas alike.
I thought it was IMF and the usual profets of disaster who forcasted -0.1 economic growth in Venezuela for the next six years.
"OW, are you really siding with the IMFs projections on Venezuela and Argentina? They are utter BS - as their past performance has shown. From 2003 to 2007 they were off an AVERAGE of 6 percentage points a year in their GDP projections (ie. predicting 3.5% and getting 10.5%). This is political nonsense by a US dominated institution that controls increasing purse strings in the world. Really a scandal that deserves condemnation, not defense. And now they say no growth through 2014???!!! Chavez will be damned if he allows that. "
Absolutely, not. Please read the post. I dont' know anything about the precise IMF predictions or their reasons. I hoped I was clear about that in the post. But if you want MY guess as to Venezuela's growth over the next six years I would say I expect it to be low - the oil boom is over in Venezuela's case even if oil prices are moderately high by historical standards. I definitely expect Venezuela to have growth on average below 3% per year. That growth might be ok for a developed country but for a developing country like Venezuela it isn't. I believe it is attibutable to insufficient investment and bad economic policies.
"You are right in that Ven's growth depends a good deal on oil prices. But they don't need to get above last year's $88/barrel (or $100) to grow or have a positive trade balance. Venezuela was growing at double digits for 3 years when prices were between $40-60."
Oil prices between $40 and $60 was great a few years ago and led to a boom in Venezuela. Now it is insufficient. I did a post on this last fall that you might want to look for (probably around November ??).
The main reasons are:
1) Given that Venezuela's only motor of growth is increased government spending financed by oil revenues it needs constantantly INCREASING oil revenues to maintain high levels of growth.
2) Given that the governments exchange rate stays fixed (2.15BsF to $1) the if the government has flat dollor revenue (ie if oil prices stayed at $60 for a few years) it would go broke because its Bolivar expenses are still going up 20% to 30% each year while it would have a unchanging amount of bolivars coming in (dollars from oil exports unchanged and a constant exchange rate means the governments bolivar income stays the same).
So with current policies unless oil revenues go up from year to year the government has significant problems. From 2003 to 2008 they DID go up each year. Now that has stopped and even worse they have gone down. Hence the problems.
Tosh,
I still think you haven't sat down to think through the issued of the exchange rate as it applies to Venezuela.
Yes, for many countries having an exchange rate that was overvalued at the initial point of their industrialization could make sense. That would be the case for that large number of countries where it is the private sector that does most of the exporting and the government gets most of its revenues in local currency via taxes. That would be the situation for the large majority of countries in Africa and Latin America. And is that case if the government wants to lead an industrialization effort, and I think we agree it should, then it needs to get as much hard currency as it can and the way for it to do that is to have an overvalued exchange rate so that it can get the greatest amount of dollars for the given quantity of local currency income it has. In this way, money is transferred from the private sector exporters to teh government and the government has more resources to lead an industrialization effort.
So yes, in that case an overvalued exchange rate makes sense and that is probably what you are seeing in the books you have read.
However, Venezuela doesn't find itself in that situation at all. In Venezuela's case it is the government that has virtually all the hard currency income as it is the government that does virtually all the exporting. The private sector does almost no exporting and just looks to the government for all its hard currency needs.
Therefore, the government already has all the hard currency it needs and it has no reason to overvalue the exchange rate to try to get more - there literally isn't any more to get.
Further, when Venezuela has an overvalued exchange rate it is the government that loses because it is the government that is the main exporter and that is therefore getting less for its dollars than it should (remember, with an overvalued exchange rate it is always the exporters who lose out because they are getting less local currency for their dollars than they should - in the first case where it is private companies that export that is fine as private people lose out and the government gains. But in Venezuela's case it is the government losing income and the private sector gains.)
In Venezuela we therefore have the perverse situation where the government is losing out on a lot of income because it is giving out its dollars to cheaply. And who is gaining? The private companies who get cheap dollars to then import goods that get sold in shopping malls, the private people who get cheap dollars to take vacations abroad, etc. etc.
So by the government of Venezuela having an overvalued exchange rate the government itself gets no benefit and in fact loses out in a huge way. That is because it is the government itself that is the main exporter.
And that is the opposite of the situation that you are thinking about where it is the private sector that exports and the government wants to capture a greater portion of the hard curerncy that comes from those exports.
I think you should really try to think this through.
Ow, a wee bit OT: what do you think of Chavez's latest move (or mood) on the oil sector?
Just to scare some people, try to push up oil prices an/or sheer madness?
Tosh wrote:
"Thanks for demonstrating my point about Venezuelan capitalists. Your point of view is apparently one of a Venezuelan capitalist himself, who demonstrates a total irrational hatred for the Chavez government, a complete lack of understanding of Chavez's policies"
Yes, I am a Venezuelan Capitalist, and proud of it too.
I do not irrationally hate Mr. Chavez, my intense dislike are for his policies(which I understand just fine, thank you), not necessarily the man himself.
You show a supreme amount of ignorance, in the following statement: "and the naive belief that if you treat capitalists "right", and make a "good environment" for investment, that somehow private investment will "develop" the country. That is, of course, totally false, but you've demonstrated my point anyway."
Your answer speaks for itself.
Whatever form of government exists in a country, autocratic repression will never foster growth of any kind, whether the growth comes from the public or private sector. Couple this repression with extreme mismanagement, and the result will always be a disaster. That is where we are headed thanks to Mr. Peligro.
Private investment CAN be a boon to developing economies, if the rules are clearly spelled out and adhered to. I'll state the obvious anyway, CLEARLY SPELLED OUT AND ADHERED TO.
You complained a little earlier about discussion of the topic at hand, yet you were the one to open the door for me when you stated Venezuelan Capitalists were not interested in nothing but fast easy profits.
I also noticed you did not provide any sort of bona fides regarding your experience in Venezuelan Industry, from which I can conclude you don't have the faintest idea of what running a company is like. It's pretty easy for you, I guess, to still comment on something in which you have zero experience or knowledge. Provided you dress it up in scholarly language and such.
I notice you did not address either the wonderful track record of the Venezuelan Government post 1959, because it too is not convenient to your argument.
Nor for that matter, do you allude to the various examples of Mr. Chavez government mis- handling of several key enterprises that have a direct effect on Venezuela's future growth. Again, it is not convenient to your misguided and childish opinion.
So...if you can't afford to pay the bills, you just take over the companies? Is that the kind of import substitution model you subscribe to, Tosh?
And why stop there? Maybe the catering companies who feed the oil workers should be taken over as well. Perhaps the hard hat company will be next.
Yes, for many countries having an exchange rate that was overvalued at the initial point of their industrialization could make sense. That would be the case for that large number of countries where it is the private sector that does most of the exporting and the government gets most of its revenues in local currency via taxes.
Just look at the Mexican example. Most of their industrial projects during the ISI period did not come from the private sector. They were state investments and the state-owned industrial sector was massive. Mexico also gets income from oil, although not nearly as much as Venezuela of course. However only half of Venezuela's total state revenue comes from oil.
I think we agree it should, then it needs to get as much hard currency as it can and the way for it to do that is to have an overvalued exchange rate so that it can get the greatest amount of dollars for the given quantity of local currency income it has. In this way, money is transferred from the private sector exporters to teh government and the government has more resources to lead an industrialization effort.
Wow, you've changed your position on that. Earlier you argued that all developing countries should try to maximize exports, and in order to do that should keep an undervalued currency.
However, Venezuela doesn't find itself in that situation at all. In Venezuela's case it is the government that has virtually all the hard currency income as it is the government that does virtually all the exporting.
This is true, but oil revenue is less than half of total state revenues.
But you apparently missed the point. My argument was not that this policy is giving the Venezuelan government an advantage in terms of the most bang for their buck. That may or may not be true, but isn't what my argument was about. (although, since devaluation would make inflation shoot out of control, it certainly is better to not devalue the currency, especially since a devalued currency wouldn't increase private investment in manufacturing anyway)
My argument is just to show you how false your claim is that an overvalued exchange rate prevents a country from expanding their manufacturing base. That statement is clearly wrong whether we are talking about Mexico, Venezuela, or anywhere else. I see you carefully skirted by that point and chose to not address it.
In fact, even the most elementary knowledge of Venezuelan history would also prove you wrong. Venezuela maintained an overvalued exchange rate during the 60's and 70's too, right during the expansion of their ISI industrial base.
I think you should really try to think this through.
ow | Homepage | 05.08.09 - 10:07 am | #
I'm pretty sure I'm not the one that needs to think this through. Your statement has been clearly refuted.
Just to clarify a little here OW, because I can already anticipate your response, and I know you will probably not address my point, but try to skirt around it again.
You have repeatedly made the claim that Venezuelan manufacturing will not be able to grow with an overvalued currency because it makes imports artificially cheap and exports artificially expensive. This would be true regardless of whether we are talking about Venezuela or Mexico or anywhere. However this is obviously not true, since most Latin American countries did just that during the ISI years, significantly expanding their industrial base.
Now, you could be correct that it does not necessarily give Venezuela more bang for their buck since the government is the major holder of dollars. I am not exactly sure about that, (and that wasn't what my comment was about) however devaluing the currency would only be worse. It would increase inflation, making another devaluation that much more necessary down the line, which would then repeat the inflationary cycle. This is clearly spelled out in most economic development literature, and I can cite you specific passages if you want.
So, not only would devaluing be bad for inflation, but the potential benefits would also not make it worth it. Yes, the government would get more bolivars to spend per dollar they recieve from oil exports. However, since the bolivar would immediately inflate at a higher rate than now, it would once again become overvalued. Secondly, for reasons already explained above, it would not increase private investment in manufacturing. Thirdly, since Venezuela still imports a huge amount of what they consume, it would only make imports more expensive for the general population and the state too.
In my mind, the benefits certainly do not outweigh the costs, and since it doesn't affect manufacturing growth in general, I don't see the point.
Roberto:
You did not address any of my points above with any facts or coherent argumentation. All you did was restate your opinion, and engaged in some childish personal attacks. For that reason there is nothing I could possibly respond to.
JSB,
Maxa said:
So what the fuck are you doing here other than posting glib, derisive commentary?
maxa | Homepage | 05.08.09 - 1:23 am | #
I think we all would like to know the answer to that.
To clarify, when I said:
This would be true regardless of whether we are talking about Venezuela or Mexico or anywhere. However this is obviously not true, since most Latin American countries did just that during the ISI years, significantly expanding their industrial base.
I did not mean that it is not true that imports are artificially cheap, etc.
I meant that it is not true that manufacturing growth is impeded by an overvalued exchange rate. That is demonstrably false.
Well, if there is one thing we have to admit is Tosh's intellectual honesty...wee joke, wee joke.
Funny, isn't it?
Have a nice Friday evening.
Tosh:
Any comparison of PDVSA both before and after Chavez is sufficient argument to bolster my point of how his government continues to take what functions well, and for political reasons, ends up FUBARRED. Just look at accident statistics, production and fatal accident statistics in both periods and you will realize I am correct.
CANTV and La Electricidad de Caracas are two other shining examples that refute your position that Chavez' government runs things well. Rather than just keep doing what these companies did, they "changed" them for the "better".
Your weak attempts to discredit my points are nothing but a cover for your own intellectual dishonesty, bith to yourself and to others.
ANd I'm stil waiting to hear of your experience in running a business, even if it's Josefina's taco stand.
Roberto,
More of your own opinions, backed by zero facts.
And, as for you repeated statements about my personal life, I don't discuss my personal life here, nor is it in any way relevant to my points. Likewise, any development economist (or anyone else for that matter) discussing these points would not feel it necessary, and would actually look stupid, if he tried to use his own personal experiences as validation for these broad economic theories. (and, just for your information, managing a business would not be recognized as a relevant qualification by anyone in the development field)
In addition, your repeated attempts to attack me personally are simply ad hominem attacks that attempt to take the focus away from the topic at hand. Telling me that I'm "intellectually dishonest" or that I have "weak arguments" doesn't prove my argument wrong nor does it prove you right. It simply makes you look desperate, and shows how lacking your argument really is.
Tosh,
You wrote:
"managing a business would not be recognized as a relevant qualification by anyone in the development field"
Tell me which ones of them have actually MANAGED to get a country developed.
There are actually a lot of people in the "business of sustainable development" but a lot of them have made more damage than good. It is a sustainable business, not sustainable development they do.
Extreme left NGOs are your only reference
Tosh, it's a FACT that service companies are being taken over because they're stopping work due to unpaid bills. I ask you again, is that the kind of import substitution you've favored? Do you think it's a wise course of action?
Also, Tosh, do you support investigating Globovision for reporting earthquake FACTS?
Tosh, it's a FACT that service companies are being taken over because they're stopping work due to unpaid bills. I ask you again, is that the kind of import substitution you've favored? Do you think it's a wise course of action?
jsb | 05.10.09 - 5:56 pm | #
If the government can do it cheaper than the private companies that are currently doing it then why would that not be smart? And it is pretty likely that the government can do it cheaper because they do not need to make a profit doing it.
But what on earth does that have to do with import substitution? It is when you say things like this that you reveal you don't even know what ISI is. So the question then becomes, why are you trying to debate about something when you clearly don't even know what it is?
Maxa had it right JSB. You don't come here to have a discussion. You come here to post retarded commentary that has no productive purpose.
"Just look at the Mexican example. Most of their industrial projects during the ISI period did not come from the private sector. They were state investments and the state-owned industrial sector was massive. Mexico also gets income from oil, although not nearly as much as Venezuela of course. However only half of Venezuela's total state revenue comes from oil."
What does this have to do with my point? My discussion was about why what you do with your exchange may vary depending on who controls the hard currency coming into the country. That Mexico had lots of state investments has nothing to do with that and makes me think you didn't take the time to read the point carefully. And for the record I have stated numerous times the state will have to make most of the investments or at least provide the capital for investments. But that is a separate discussion.
As far as Venezuela's government only getting half of its revenue from oil, again what does that have to do with this discussion. I dont' care where they get all their revenue from - I cared for purposes of my explanation who controls the dollars coming into the country and in Venezuela's case the government controls damn close to 100% of them. So that Venezuela's government has other income is irrelevant to this discussion because they can't go out and buy more dollars anyways - they already have them all.
That is why the government in Venezuela doesn't itself get any advantage from an overvalued currency and in fact loses big time by giving away all the dollars it has at way less than they are really worth.
"Wow, you've changed your position on that. Earlier you argued that all developing countries should try to maximize exports, and in order to do that should keep an undervalued currency."
Not really. 98% of what I have written on this blog pertains to Venezuela, not to other countries. For some it might make sense to have an overvalued currency for a very limited period of time right at the beginning of their industrialization efforts. But for Venezuela it never makes sense.
"My argument is just to show you how false your claim is that an overvalued exchange rate prevents a country from expanding their manufacturing base. That statement is clearly wrong whether we are talking about Mexico, Venezuela, or anywhere else. I see you carefully skirted by that point and chose to not address it."
First, off it isn't just my claim. It is well understood logically and empirically that having an overvalued exchange rate makes tradeables less competative and hurts your own industry. That is why Wiesbrot has pointed out many times in his papers that Venezuela won't be able to diversify its economy until it fixes its exchange rate problem. Or you can just google "Dutch Disease" or "Resource Curse" to get more information on this.
You then state that other countries have maintained overvalued currencies and industrialized. Who? Tawain, South Korea, and China sure never did - they kept their exchange rates undervalued. And of course L.A. countries aren't going to do much for your case as none of them have ever industrialized. Anyways, if you want to make the case that an overvalued currency isn't an obstacle to industrialization then you really need to present a detailed analysis of some country that had an overvalued currency over an extended period of time and managed to industrialize during that period.
And to think Venezuela helps your case it totally absurd. Present day Venezuela is a text book example of an overvalued currency undermining tradeables. Just look at how manufacturing stagnated last year and compare that to how quickly non-tradeables such as commerce, communications, and construction grew.
Also, Tosh, do you support investigating Globovision for reporting earthquake FACTS?
jsb | 05.10.09 - 5:57 pm | #
In my opinion, Globoterror should have been shut down a long time ago. Anyone with eyes can see that most of their coverage is total manipulation and lies with the intention of creating instability and agitation among the population. They have been caught on numerous occasions blatantly distorting and falsifying information.
As for the earthquake, it is just another example of how Globovision tries to generate fear and panic among the population instead of simply waiting for the authorities to give an official report.
You then state that other countries have maintained overvalued currencies and industrialized. Who? Tawain, South Korea, and China sure never did - they kept their exchange rates undervalued. And of course L.A. countries aren't going to do much for your case as none of them have ever industrialized.
HAHAHAHAHAHAHA!!!!!!!!!!!!!
OW, you're clueless my friend. Many Latin American countries greatly expanded their industrial base during the ISI years. Anyone who even has a basic knowledge of Latin American history knows that.
Apparently history isn't your strong point.
Anyways, if you want to make the case that an overvalued currency isn't an obstacle to industrialization then you really need to present a detailed analysis of some country that had an overvalued currency over an extended period of time and managed to industrialize during that period.
I already listed that example above. Mexico.
Care to actually respond to my argument?
"Now, you could be correct that it does not necessarily give Venezuela more bang for their buck since the government is the major holder of dollars. I am not exactly sure about that, (and that wasn't what my comment was about) however devaluing the currency would only be worse. It would increase inflation, making another devaluation that much more necessary down the line, which would then repeat the inflationary cycle. This is clearly spelled out in most economic development literature, and I can cite you specific passages if you want."
What you are saying here is that there would be a price to be paid to devalueing. That is true. IT would lower peoples purchasing power to a certain extent and boost inflation for a time.
So then another question that arises is why did the government ever allow the currency to get so far out of whack to begin with? Or another question would be if you could go back to when the currency wasn't overvalued would you recommend that the government allow it to become overvalued or that it prevent that from happening??
The only arguement you seem to be advancing for keeping the currency overvalued is that their will be pain in devalueing. I think that is a poor reason. The government screwed up and the fact that fixing its screw up will cause some pain is not a good reason for delaying fixing it indefinitely and making the damage and ultimate day of reckoning that much worse.
"However, since the bolivar would immediately inflate at a higher rate than now, it would once again become overvalued."
You keep saying this but I went through some time ago the calculations to show that even if Venezuela did a 100% devaluation inflation would at most go up by about 17% and almost certainly a lot less than that. So yeah, there is a cost there but not one that can't be with stood and delaying it just makes problems worse.
First, off it isn't just my claim. It is well understood logically and empirically that having an overvalued exchange rate makes tradeables less competative and hurts your own industry.
Yes, this is the case in the absence of other measures, such as import quotas, tariffs, subsidies, etc.
But my point is pretty straightforward OW, no matter how much you try to distort and skirt the issue.
ISI in Latin America was characterized by an overvalued exchange rate, and resulted in significant expansion of manufacturing in most Latin American countries. There really isn't any way around this. It happened. It is well-known and accepted history.
And by the way on a related note I assume you recall my assertion over the past few years that allowing so many cars to be sold and other consumer items like that was a waste of money to which you responded that they were "building market".
Hopefully, now that auto sales are down some 60 or 70% over the past couple of years you can see that they weren't building market - as that market is now much reduced. They were just wasting money.
The only arguement you seem to be advancing for keeping the currency overvalued is that their will be pain in devalueing. I think that is a poor reason. The government screwed up and the fact that fixing its screw up will cause some pain is not a good reason for delaying fixing it indefinitely and making the damage and ultimate day of reckoning that much worse.
No, this is not true. If inflation can be brought down as is happening somewhat this year, and will continue to happen if they can continue to increase local production capacity, then a devaluation would be much less painful because it would not create a situation of uncontrollable inflation that then requires a whole cycle of additional devaluations.
Therefore, devaluing later as opposed to now will not be worse. In fact, it could be much better as inflation would presumably be easier to control.
And by the way on a related note I assume you recall my assertion over the past few years that allowing so many cars to be sold and other consumer items like that was a waste of money to which you responded that they were "building market".
Again, your misunderstanding comes out of you not having a clue about what their strategy is.
It is well-known that for an inner-oriented development model to work it is necessary to have a domestic population that has high purchasing power and consumes a great amount. Otherwise the lack of economies of scale makes new industries likely to fail.
You really need to stop looking at everything through your East Asian dreamland perspective, and try to understand what they are actually trying to do in Venezuela.
You keep saying this but I went through some time ago the calculations to show that even if Venezuela did a 100% devaluation inflation would at most go up by about 17% and almost certainly a lot less than that.
Oh, so you mean inflation last year would only have been about, what, 50%? Geez, I wonder how long it would take for them to need another devaluation then? And that is accepting that your calculations are correct, which is a pretty dubious assumption.
Or another question would be if you could go back to when the currency wasn't overvalued would you recommend that the government allow it to become overvalued or that it prevent that from happening??
I'm not arguing that it benefits Venezuela to have it overvalued. That isn't clear to me, and you might very well be correct with your point about the state not really benefitting from this. I don't know enough to say one way or the other.
However, my point is simply that having the currency overvalued right now isn't necessarily preventing growth in manufacturing, or other domestic sectors (as it would if your claims were correct).
Countries can take other measures to create growth domestically, even when the currency is overvalued. Venezuela has import controls in place, and is subsidizing state industries, just like ISI countries did decades ago which resulted in impressive manufacturing growth in some cases, namely Mexico.
" There are no private lands, and I say it is so! In Venezuela there is no private land, all belong to the Nation! Here nobody is th owner, all are o-ccu-pants! And whomever occupies has the duty to work it out or loses the right [to occupy]. There are no land to go on holiday here"
- Hug Chavez, Sunday May 11th 2009
Tosh, since when do people have to wait for the state to say something about a geological event before speaking out?
This is so ridiculous. You are a daddy's son, but the funny thing is that your shame for that makes you try to behave like the most die-hard communist from Stalin times (not that Chavez is like Stali, he is more like our Gomez model, with Che Guevara sticks and red shirt)
"But what on earth does that have to do with import substitution?"
Many of the service companies are foreign, they import their technology and know-how. So I guess you could call these takeovers import substitution. But will there be enough know-how? I doubt it. Production is going to decline. But it shouldn't affect you given that your daddy is paying your bills.
"There are no private lands, and I say it is so! In Venezuela there is no private land, all belong to the Nation! Here nobody is th owner, all are o-ccu-pants! And whomever occupies has the duty to work it out or loses the right [to occupy]. There are no land to go on holiday here."
I wonder if landowners like Tosh's family would agree with this statement? Is any of your land idle here in the states, Tosh? Perhaps we should take it over.
Many of the service companies are foreign, they import their technology and know-how. So I guess you could call these takeovers import substitution.
Hahahahahaha!!!! Yeah, I guess you could call it that if you don't have a clue what import substitution is.
Tosh, since when do people have to wait for the state to say something about a geological event before speaking out?
You don't have to wait to speak about what happened. But you do have to wait to get the official data from state organs that report this data, and not try to give the impression that the state isn't prepared and/or capable of giving that data. Ravell claimed that he had to go to US agencies to get the data, when those US agencies just get the data from the Venezuelan government in the first place.
In other words, he was lying and manipulating to give the impression that the Venezuelan government wasn't competent.
I wonder if landowners like Tosh's family would agree with this statement? Is any of your land idle here in the states, Tosh? Perhaps we should take it over.
jsb | 05.11.09 - 8:06 am | #
Perhaps you should muster up enough brain power to actually make a comment here that isn't simply retarded, meaningless banter.
OW,
To get back to the topic, and ignore the childish personal attacks of opposition commenters here, there is another way in which your claims about the overvalued currency can be disproven.
If it is true that an overvalued currency impedes manufacturing growth by making imports cheaper than national prodcution, then why don't we look at a couple examples?
Take cars. As I said earlier, the state can use measures such as tarriffs, import quotas, and subsidies to protect national industries regardless of the value of the currency. So, in the case of Venirauto, the cars are much cheaper than imported cars. So, is imported production harming the growth of an auto industry? Obviously not, since they aren't undercutting national production. Why? Because the state subsidizes their production to make it cheaper.
Look at the computers or cell phones that are being produced in Venezuela. Are imported computers cheaper? Nope. They are much more expensive. Why? Because there are import taxes and tarriffs, and because the state subsidizes the national production. So, again, the theory doesn't hold true.
Take food production. Production of corn and rice has increased something around 200% over the last few years. What happened? Why didn't cheap food imports undercut nationally produced food? Well, because of import quotas and government subsidies.
My point is simply that there are other measures that the state can take to assure domestic growth, and that the value of the currency isn't the only determinant of domestic growth. An overvalued currency does not necessarily impede growth of national production, as can be clearly seen in the examples above.
Coye, vale, Jsb, saaamo, no seas maluuuuco con Chris Junior, que él no tuvo la culpa de nacer en cuna de oro.
Coye, vale, Jsb, saaamo, no seas maluuuuco con Chris Junior, que él no tuvo la culpa de nacer en cuna de oro.
Kepler | Homepage | 05.11.09 - 12:32 pm | #
It really is funny to watch how angry these morons get because they can't refute my arguments. What is exceptionally ironic though, is that they display their intellectual defeat so openly and obviously through these kinds of pathetic comments.
What is exceptionally ironic is how you can't help but to return three epithets for each one you receive, and then try to claim the moral high ground.
When I was in school, I was told that I should try to cut off all unnecessary adjectives and adverbs, in order to write more readable prose. Never quite understood why my teacher thought it so important, until today.
PS-. He who feels the need to continuously declare victory, might not be as victorious as he thinks.
PS-. He who feels the need to continuously declare victory, might not be as victorious as he thinks.
Escualidus Arrechus | 05.11.09 - 1:17 pm | #
He who feels the need to make personal attacks, (and now attacks on use of adverbs and adjectives? hahaha!) might be unable to actually answer the argument being made, or even engage in the debate, because he has nothing.
You guys couldn't make it much clearer that you are simply incapable of discussing the topic at hand.
Dilo, Tosh, dilo: que somos unos resentidos sociales.
Dilo, Tosh, dilo: que somos unos resentidos sociales.
Kepler | Homepage | 05.11.09 - 1:39 pm | #
I don't know about that, but you're obviously incapable of giving an intelligent response to my argument.
Ow,
Seen how Chavez is speeding up expropriation of people who don't collaborate? It does seem he is running out of money faster than we thought.
Tosh:
Where did you get the figures for corn and rice production?
200% increase, compared to what/when?
Tosh:
"Ravell claimed that he had to go to US agencies to get the data, when those US agencies just get the data from the Venezuelan government in the first place."
Ummm, the US Geological Survey DOES NOT get its data ONLY from their Venezuelan counterparts. They may ADD the data from other governments to that they collect on their own seismographic networks.
"There are no private lands, and I say it is so! In Venezuela there is no private land, all belong to the Nation! Here nobody is th owner, all are o-ccu-pants! And whomever occupies has the duty to work it out or loses the right [to occupy]. There are no land to go on holiday here."
This isnt an attack on you Tosh... This ws said by chavez on National TV last night.
Ummm, the US Geological Survey DOES NOT get its data ONLY from their Venezuelan counterparts. They may ADD the data from other governments to that they collect on their own seismographic networks.
As far as I can tell USGS only has one seismic station in Venezuela, way out in Merida, which would have made it pretty hard to gather accurate data about an earthquake in Caracas. FUNVISIS, on the other hand, has 35 stations all over the country.
Regardless, it doesn't make any difference. Ravell was trying to make it seem like the Venezuelan government was ill prepared for an earthquake in order to generate fear and panic among the population (as always). That point is true regardless of where USGS got their info.
Where did you get the figures for corn and rice production?
200% increase, compared to what/when?
revbob22 | 05.11.09 - 3:49 pm | #
The only place that issues these statistics is MAT. I don't remember the exact numbers, but corn production has increased by more than 200 percent, and production of other food items have increased by similar amounts during the Chavez government.
This isnt an attack on you Tosh... This ws said by chavez on National TV last night.
Tank | 05.11.09 - 6:12 pm | #
And I find it very telling that you would disagree with that.
I suppose you think people should be able to own vast tracts of land and not use it to produce anything? Nope, sorry, when the country is so dependent on imported food, all land needs to be producing. This is something that was accepted even in the Fourth Republic. The problem was they never enforced it.
Tosh, I check in every so often and you are as brainwashed as ever. Dude, seriously, try to think independtlty of what the revolution is trying to feed you. Hating the opposition should not cloud your intelect. You should know better than that.
Large tracts of unused land in times like these are not good.
Taking land by eminent domain is any governments prerogative.
Being fairly compensated in a timely manner in such circumstances, should be de rigeur. (Key words here are timely and fair)
When selective eminent domain is applied only to those who do not share the governments viewpoint, it is ethically abhorrent and abusive.
What's fair for the goose is fair for the gander.
Being fairly compensated in a timely manner in such circumstances, should be de rigeur.
Well, that's your opinion, and you're entitled to it.
However, I have a hard time seeing how compensating wealthy landowners for their land in any way benefits the society as a whole. It sounds like a waste of money to me. Especially if those landowners weren't even producing the land in the first place.
Care to explain how compensating wealthy landowners for unused land with limited government resources benefits anyone other than the landowner himself? Wouldn't it be smarter to take that money and invest it in the healthcare system or some national industry that creates jobs?
Tosh, I check in every so often and you are as brainwashed as ever. Dude, seriously, try to think independtlty of what the revolution is trying to feed you. Hating the opposition should not cloud your intelect. You should know better than that.
Impartial | 05.11.09 - 7:49 pm | #
Dude seriously, try to make an attempt to actually debate ANY of the topics being discussed here, perhaps then you wouldn't be such a waste of time.
It is really weird how infatuated you are with me personally. Why comment here if you aren't going to debate the topic at hand? When you engage in ad hominems it just shows that you have no intellect whatsoever but wish to discredit me with insults. Its extremely childish.
When you engage in ad hominems it just shows that you have no intellect whatsoeverI love this quote.
"seriously, try to make an attempt to actually debate ANY of the topics being discussed here, perhaps then you wouldn't be such a waste of time."
My background helps me read you like an open book. I see in you one of the most typical behavioural disorders that people have these days. I will not go into details for obvious reasons. Hence, it is useless to argue with you. The rest can keep trying, I know better than that.
BTW Tosh, tell Pdvsa where to get the funds to pay its debts. Check this out:
http://www.eluniversal.com/2009/
...1A2325255.shtml
Sure, they are doing it because it is strategic, not because they are broke. hahahahahahahahahahahahahahaha
Here's a question for anyone who knows the answer. Since PDVSA owes so much money to their service providers, can this be considered foreign debt? All of this will most likely go to arbitration, so one way or another they will have to pay something.
My background helps me read you like an open book. I see in you one of the most typical behavioural disorders that people have these days
It is really quite remarkable, Impartial, that you STILL can't get this.
You see, for all you know I could be a complete mental patient locked up in an insane asylum, but that still wouldn't make my argument false.
See, that is why ad hominem is a logical fallacy. Do I need to go back to Logic 101 so that you can understand this? Discrediting the source of the argument does not disprove the argument. This is really really really easy to understand, but apparently you haven't gotten it yet. If you can't disprove my argument, just say so.
Oh, and for someone who thinks it "useless" to argue with me, you certainly do feel the need to attack me and try to discredit me on a regular basis. I really am threatening to you aren't I Impartial? Why else would you make such an effort to come here simply to sling insults?
Talk about being able to read someone like an open book! Keep it up man. It is quite entertaining to watch.
I suppose you think people should be able to own vast tracts of land and not use it to produce anything? Nope, sorry, when the country is so dependent on imported food, all land needs to be producing. This is something that was accepted even in the Fourth Republic. The problem was they never enforced it.
The fact is they own these lands and the government cant just "take them from them" because it Chavez feels like it. There is a lot of "idle" land in Venezuela..but why develop it when you can take over land already developed or semi-developed?
We are not lacking land, we are lacking developed land. The government is looking for short term solutions to long term problems. Band aid fixes...
Exactly.
Tosh, I wonder if I can get inside La Chavera or any of the Chavez holdings under the nominal control of Chavez frontmen and plant my tomatoes and potatoes there. Can I?
And I want to build my house in Venezuela in Rodriguez's big hacienda.
"The only place that issues these statistics is MAT. I don't remember the exact numbers, but corn production has increased by more than 200 percent, and production of other food items have increased by similar amounts during the Chavez government."
Vegatables as a whole is up 50%. That stat can be found in teh slide presentation "10 Years of the Revolutions Accomplishments" which can be found on various websites such as RNV.
Agriculture as a whole is up much less - 20% or so.
And a big question is how much of that could survive without subsidies.
BTW, a government affiliated economist mentioned to me that Venezuela imports 70% of its food. Sounded really high to me but maybe its true. Its difficult to find comprehensive statistics.
"Regardless, it doesn't make any difference. Ravell was trying to make it seem like the Venezuelan government was ill prepared for an earthquake in order to generate fear and panic among the population (as always). That point is true regardless of where USGS got their info."
I think the governmetn is on pretty thin ice with its attack on Globo over this. Globo reported news - that is what news channels do. If they got it from the first web site that had information up on it - which happened to be in the U.S. - so be it. There is no reason they should have to wait for official government notification to report something. I don't recall the U.S. media waiting until after Bush spoke out to report the planes hitting the World Trade Center. They reported it as soon as it occured.
This looks transparently political to me.
"Take cars. As I said earlier, the state can use measures such as tarriffs, import quotas, and subsidies to protect national industries regardless of the value of the currency. So, in the case of Venirauto, the cars are much cheaper than imported cars. So, is imported production harming the growth of an auto industry? Obviously not, since they aren't undercutting national production. Why? Because the state subsidizes their production to make it cheaper.
Look at the computers or cell phones that are being produced in Venezuela. Are imported computers cheaper? Nope. They are much more expensive. Why? Because there are import taxes and tarriffs, and because the state subsidizes the national production. So, again, the theory doesn't hold true."
Sure, you can compensate for having an overvalued currency by subsidizing your own production. But why on earth would you want to do that????
That is a huge drain of resources just to overcome an artificial problem that you have of your own making and from which you derive no benefit.
MOney they spend subsidizing things is money they can't spend building up the industry more or building new industries.
Further, I hope you realize the subsidy may be small now because the goods are made mainly from imported components. But once they start to make more of their own components then the subsidies have to get much bigger because all the compenents then have the same problem of competing against cheaper imports.
Finally, in Venezuela there is only one wealth generating industry right now, oil. The idea is to create other wealth generating industries. But by having these subsidies these other industries rather than create wealth just consume wealth created by oil. That defeats the whole idea of "sowing the oil".
Just look at the aliminum industry. It is losing money hand over fist and begging for subsides. Why? There may be multiple reasons but one of the biggest is they get screwed by getting only 2.15BsF for all their export dollars. I bet they'd be making money if they could just sell their dollars at a fairly valued exchange rate.
So instead of creating wealth they are just one more piglet at PDVSAs trough.
Venezuela never sowed the oil. Oh sure, they pretended to, but corruption always got in the way.
The current governments dollar playbook is essentially unchanged from the past. Keep an artificial exchange rate, manipulate the parallel market and get more bolivars for your dollars.
No revolution there.
The fact is they own these lands and the government cant just "take them from them" because it Chavez feels like it. There is a lot of "idle" land in Venezuela..but why develop it when you can take over land already developed or semi-developed?
Uhhhh, what? I don't think you understand the issue here Tank. Yes, there is a lot of idle land in Venezuela, and that is exactly why they are expropriating idle land. You try to personalize it and say that it is because "Chavez feels like it" but, I'm sorry, this is in the constitution, and it was in the constitution during the Fourth Republic as well. I hardly think Chavez personally decides on each and every one of the thousands of hectares that have been expropriated.
We are not lacking land, we are lacking developed land. The government is looking for short term solutions to long term problems. Band aid fixes...
What? In what way? Who said Venezuela is lacking land? The whole point of expropriating idle land is to make the land more productive. How exactly is that a short term solution?
It sounds like you've come up with a lot of lame reasons to oppose a policy that is essential for development. Why exactly is it that you oppose land reform Tank?
BTW, a government affiliated economist mentioned to me that Venezuela imports 70% of its food. Sounded really high to me but maybe its true. Its difficult to find comprehensive statistics.
ow | Homepage | 05.12.09 - 9:00 am | #
Yes, Venezuela does still import a lot of their food, but that is because consumption has skyrocketed in recent years.
I think the governmetn is on pretty thin ice with its attack on Globo over this. Globo reported news - that is what news channels do. If they got it from the first web site that had information up on it - which happened to be in the U.S. - so be it.
That's not the point. They tried to generate panic by saying that the government was not adequately prepared and was not responding to the earthquake when that was totally false.
But, yes, Globovision has done much worse than this. They should have been shut down a long time ago.
Sure, you can compensate for having an overvalued currency by subsidizing your own production. But why on earth would you want to do that????
Uh, let's see, so that cheap imports don't undercut your prodcution? What you aren't understanding is that keeping the currency undervalued in light of continuously high rates of inflation isn't a viable option, not to mention the fact that devaluing only increases inflation. So, the alternative is to subsidize domestic production.
Further, I hope you realize the subsidy may be small now because the goods are made mainly from imported components. But once they start to make more of their own components then the subsidies have to get much bigger because all the compenents then have the same problem of competing against cheaper imports.
Once domestic production is increased that brings down inflationary pressures which will then make it easier to adjust the value of the currency.
Finally, in Venezuela there is only one wealth generating industry right now, oil. The idea is to create other wealth generating industries. But by having these subsidies these other industries rather than create wealth just consume wealth created by oil. That defeats the whole idea of "sowing the oil".
Practically every developed nation used these kinds of measures to protect their industries in the beginning. Are you saying that Venezuela should not subsidize their production until it can be more competitive? Why should Venezuela be expected to do it without subsidies and protectionism?
And, finally OW, I see you once again decided to skirt the issue.
Regardless of whether you disagree or not with the policies, you STILL aren't addressing my argument, which is that manufacturing growth isn't being impeded by cheap imports, which is what you have tried to say. The examples I listed clearly show that cheap imports are NOT undercutting domestic production.
Finally, in Venezuela there is only one wealth generating industry right now, oil. The idea is to create other wealth generating industries. But by having these subsidies these other industries rather than create wealth just consume wealth created by oil. That defeats the whole idea of "sowing the oil".
It is ludicrous to expect Venezuela to be able to create internationally competitive industries overnight. Domestic production needs to be protected with subsidies until it becomes more developed. Many first-world industries enjoyed subsidies and protection for decades, and most of them still enjoy certain forms of state subsidies today! First-world agriculture is one of the most subsidized sectors in the world, yet you are going to criticize Venezuela for subsidizing their agriculture?
During the ISI years industries were subsidized and protected throughout Latin America for decades, and still were not sufficiently developed to become independent of any protection. Yet you are expecting Venezuela to create industries in only a few years that are completely independent of all state support? Get real OW.
I find it ironic that you would criticize subisidies towards things like industry and agriculture when that is exactly what sowing the oil is all about!!!! Pietri was calling for the state to invest oil income in agriculture and industry!
"which is that manufacturing growth isn't being impeded by cheap imports, which is what you have tried to say."
Yes it is Tosh. Manufacturing grew only 1.4% in Venezuela all of last year. Further, it declined in both of the last quarters -.1%.
So clearly it is being impeded.
"During the ISI years industries were subsidized and protected throughout Latin America for decades, and still were not sufficiently developed to become independent of any protection. Yet you are expecting Venezuela to create industries in only a few years that are completely independent of all state support? Get real OW."
Of course infant industries have to be susidized and protected. But by having a messed up exchange rate you have to subsidize and protect them MUCH more and it is a huge and wastefull expense.
Just look at the Guyana basic industries which should be able to make a profit and yet they are losing money hand over fist. They do have operational problems but if they were getting paid fairly for their export dollars and think it is almost certain they would make money.
Instead, the government will have to spend at least hundreds of millions of dollars bailing them out because of the exchange rate induced losses. That is money that could be much better used building NEW industry.
Yes it is Tosh. Manufacturing grew only 1.4% in Venezuela all of last year. Further, it declined in both of the last quarters -.1%.
So clearly it is being impeded.
No, I'm sorry, but citing the growth numbers does not tell us WHY the growth numbers are low.
Your claim is that it is because domestic industries are being undercut by cheap imports. I have showed why that is not necessarily the truth.
So you better look for a different reason for the low growth numbers. My guess is that it is because the government has been focusing most of their efforts towards agriculture, land reform, etc.
Of course infant industries have to be susidized and protected. But by having a messed up exchange rate you have to subsidize and protect them MUCH more and it is a huge and wastefull expense.
Yes, but since there is no viable alternative to this policy, it is an unfortunate reality that they have to deal with. As I have explained above, it is not viable to maintain an undervalued currency when inflation rates are so high. It would require continuous devaluations, which would only increase inflation, and create a nightmare scenario of repeated devaluations and extremely high inflation.
The original statistician for the Chavez government was a " man" sitting at a desk in a one room office in USA, who almost never went to Ven . but who knew just exactly how to fake the numbers.
This has got to be the most naive and repetitive blog on the internet.
By the way, OW, since you seem to always compare Venezuela's growth numbers with South Korea, I just read something that I thought you should hear:
Most East Asian countries, while rejecting the inward-looking component of classical import substitution policies, also maintained high tariff barriers. The strategy followed by those countries was to focus subsidies and investment on industries which would make goods for export, and not to attempt to undervalue the local currency. In pursuing this and to boost its competitiveness in the 1970s, South Korea made large investments into heavy and chemical industries, such as shipbuilding, steel and petrochemicals. This focus on export markets allowed them to create competitive industries.
It should be contended, however, that outward-looking development did not pose as a choice for many countries. As mentioned before, for geopolitical reasons, many East Asian countries received open market policies and incentives for industrialization from the United States government, as a means of creating a "contention belt" of capitalist countries around communist nations in Asia. For instance: from 1953 until 1960, the United States financed 70% of South Korea's imports of commodities, which allowed it to rise from a rural producer to an exporter of manufactured goods in just seven years (Hong & Krueger, Trade and Development in Korea. Seoul: Korea Development Institute, 1975).
Anyone who expects Venezuela to follow the South Korean model has very limited knowledge of not only Venezuela's reality, but also of how South Korea managed to do it.
Since this post started out as ow's speculations on CEPR's speculations answering IMF's own speculations on Venezuela's economic near term future, I will give my own two cents of speculation. As I always say, time will tell who is right.
Today there were several interesting interconnected news:
1. Oil hits 60 USD for the first time since November
http://finance.yahoo.com/news/Oi...3&asset=&
ccode=
Along with oil, US gas prices are going up as well.
"Today, it's more of the weakening of the U.S. dollar, spilling into the crude oil space," said Jim Ritterbusch of Ritterbusch and Associates.
2. You can see how the Euro is trading against the dollar, for the last couple of years.
http://finance.yahoo.com/
echarts...ource=undefined
I think the trend will continue to show us a devaluationg dollar in the short to mid term.
3. Despite the devaluation of the dollar, the US trade deficit is increasing, not decreasing (this should add to Tosh's - Ow's discussion on weak/strong bolivar).
http://finance.yahoo.com/news/Tr...f-
15217483.html
4. GM shares fall to 76-year low after execs dump stock http://finance.yahoo.com/news/GM...5&asset=&
ccode=
I think they are preparing for the worst (for them), that is GM filing for bankruptcy (which I brought up so long ago when the guys here were discussing the innefectiveness of Veniran's opperations). The speculative capitals are so excited calling for the end of the crisis when the reality is that:
- 1 in 10 US jobs are auto related
- GM's bankruptcy or reestructuring will imply the closure of at least 2000 dealers, dismantling several brands, paralysing opperations in several plants (under way already), and thus severely hitting everything from auto-part makers to advertising companies.
- Auto dealers owe banks around 100billion USD right now.
That should be another hard blow to US banks even now that they still have to raise some serious cash.
We would have to add here the commercial real-state bubble that hasn't bursted yet, the ever-growing budget deficit, China's apparent un-willingness to buy more debt, etc.
Every time the dollar weakens is good for Venezuela: We get more money for our resources.
- Our international reserves, now in Euros and gold, grow.
- Our debt shrinks.
- The over-valuation of the bolivar is reduced.
This may sound like a prophecy of a doomsday advocate to some... but hopefully the dollar will devaluate so much that speculative buyers in Venezuela will start feeling the pain in their pockets. That will occur once the US accelerates the monetizing of its debt.
I think I'll post some more speculative ideas in a couple of months. So long.
So... its ok because we can count on the devaluation of the dollar to fix the mistakes of Venezuelan Economic policy (or lack of)?
Im not sure what the need is to bring the US into the discussion.. we should talk about the things Venezuela can control...
The amount and cost of external financing, the price of commodities, the back-up of your monetary reserves, the political pressures and military threats (direct or via proxies), are all elements that depend directly on the US and its government ... and above all the economic and political paradigms that move society:
The things people look up to, the reality of the so-called American Dream, the major economic and politic actors and alliances in the future world, the role of the State in the economy, the illusion of safeguarding my money by buying dollars.
You cannot control certain variables but you can assume positions in front of them. Or is it that you rather have Venezuela take the same measures as - just to name an example that I know pretty well - Colombia?
Venezuela is working on the creation of the Sucre, and if it weren't because of the strong Opec members' opposition to start princing oil in Euros (because of the inimaginable amount of money they would loose) I'm pretty sure it would press even harder to achieve this goal. So yes, Venezuela is contributing as well as it can in order to achive this dollar-crashing doomsday scenario.
On the other side, Medellin, the industrial capital of Colombia where I live has as of today an 18% unemployment rate and going up... And some guys around here have the guts to be calling here for foreign investment, export-driven economic models, privatizations and minimizing the role of the State in the economy.
As I posted before: People that are incapable of understanding the nature of complex systems are the ones who pretend to analyze Venezuela's economy without mentioning the US (or who pretend to mention only the things that serve to their biased analyses like oil demand).
The amount and cost of external financing, the price of commodities, the back-up of your monetary reserves, the political pressures and military threats (direct or via proxies), are all elements that depend directly on the US and its government ... and above all the economic and political paradigms that move society:
The things people look up to, the reality of the so-called American Dream, the major economic and politic actors and alliances in the future world, the role of the State in the economy, the illusion of safeguarding my money by buying dollars.
All points to take into account but bring nothing to the discussion. Externalities, factors we cant control and that should not be used as an excuse for the current mismanagement and usage of failed economic policies.
Venezuela is working on the creation of the Sucre, and if it weren't because of the strong Opec members' opposition to start princing oil in Euros (because of the inimaginable amount of money they would loose) I'm pretty sure it would press even harder to achieve this goal. So yes, Venezuela is contributing as well as it can in order to achive this dollar-crashing doomsday scenario.
The Sucre is a joke.
Latin America is not ready for a unified currency... Our governments are not as efficient as the European governments and the countries have economic policies that are too different, interest rates and inflation out of control, etc...
Think about the requirements countries need to meet to join the EU...
Tosh,
How is Pdvsa doing these days? Care to give your opinion? My sources indicate that the company is fucked. I know, the fact that they have not paid in the last 9 months does not mean they are out of money.
Also, what do you think of Ramirez claim that services companies were abusive in the pricing structure? Do you think he has the moral backing when Pdvsa pushed for the highest oil prices in history? IMHO, he should shut his trap.
Give me your comments, it is always a breath of fresh air to read your take on this joke that some people call a revolution.
a devalued dollar doesn't help Venezuela much. THe dollars it gets for its oil will be worth less too so that wipes out pretty much any advantage for VEnezuela.
I don't think there is much movement right now on the dollar. it is just kind of bouncing around - it is going down now some because people think the economy is recovering so they aren't seeking the safety of the dollar anymore.
Now, if the dollar crashed, and by that I mean lose more than 50% of its value, and stayed down for a while that would have HUGE repurcussions. And many people who don't think it through might not realize this but the HUGE winner if that were to happen would be the U.S. itself. Its trade deficit would quickly switch to a surplus and U.S. manufacturing would wipe everyone out. Dean Bake of CEPR actually mentioned it and noted that the Europeans, Japanes and Chinese would never let it happen because they know their industry would then be wiped out be the U.S. It would be like the 1950s all over again.
Richard at American Leftist has also talked about this I beleive. I think he thinks it is their actual plan. I dont' think it is their plan because I think financial capital still dominate in the US and the US government. But if the dollar does crash that will certain propel the US economy forward in a very big way.
"Now, if the dollar crashed, and by that I mean lose more than 50% of its value, and stayed down for a while that would have HUGE repurcussions. And many people who don't think it through might not realize this but the HUGE winner if that were to happen would be the U.S. itself. Its trade deficit would quickly switch to a surplus and U.S. manufacturing would wipe everyone out. Dean Bake of CEPR actually mentioned it and noted that the Europeans, Japanes and Chinese would never let it happen because they know their industry would then be wiped out be the U.S. It would be like the 1950s all over again."
Man, you really give pretty much credit to US's almightyness, don't you?
It is like last year's post where you stated that it was impossible that the US could loose in Iraq and that the excess oil would overflow the market and bring the prices down...
I'm willing to wait a couple of months to see what happens.
hah, where did I say that I thought it was impossible that the U.S. could lose in Iraq? For most of the war it wasn't clear who would win (and that is an incredible accomplishment for the Iraqi insurgency that they fought as well as they did).
But of course, it looks like the U.S. has won. Could that be reversed yet? maybe, but its looking unlikely.
And if the U.S. holds on to its military win there they almost certainly will get the oil flowing big time.
This is a good site for following that:
http://www.iraqoilreport.com/
BTW, can't yet find the exact article by Dean Baker I was thinking of but this one makes a similar point, at least with respect to China:
http://www.cepr.net/index.php/op...s-empty-threat/
ow,
Do you still think Pdvsa is doing just fine? I warned you for months about it going to shit: once again I am proven right.
Duh, about the bolivar/dollar spread: If the government sells much of its dollars "paralelo " if could make out quite well. No?
For my benefit, can you reiterate your position vis-a-vis agrarian reform as the core motor of development?
But of course, it looks like the U.S. has won. Could that be reversed yet? maybe, but its looking unlikely.
And if the U.S. holds on to its military win there they almost certainly will get the oil flowing big time.
this is certainly a maximalist view of the outcome of the invasion
my impression is that US has significantly curtailed its aspirations, and, hence, reduced the extent of hostility to the US presence
I wouldn't expect Iraqi oil reserves to be under US control anytime soon
Now, if the dollar crashed, and by that I mean lose more than 50% of its value, and stayed down for a while that would have HUGE repurcussions. And many people who don't think it through might not realize this but the HUGE winner if that were to happen would be the U.S. itself. Its trade deficit would quickly switch to a surplus and U.S. manufacturing would wipe everyone out. Dean Bake of CEPR actually mentioned it and noted that the Europeans, Japanes and Chinese would never let it happen because they know their industry would then be wiped out be the U.S. It would be like the 1950s all over again.
Richard at American Leftist has also talked about this I beleive. I think he thinks it is their actual plan. I dont' think it is their plan because I think financial capital still dominate in the US and the US government. But if the dollar does crash that will certain propel the US economy forward in a very big way.
ow | Homepage | 05.12.09 - 10:41 pm | #
yes, I have addressed this as an increasingly probable consequence of US policy
but, I doubt that it will result in a favorable outcome to the US if it happens
for more, go here
For Tosh and other pathetic socialist clowns, why, before opening your big illiterate mouth don't you read a little book by Henry Hazlitt called "Economics in One Lesson". First published in 1946, it might teach you a thing or two. The mistakes made then by European nations at the end of the second world war are now made in their criollo version. Sixty years latter seems like a long time these days to reinvent the socialist wheel while it will be squeaking same as before. Each generation seems to have to relearn first principles from scratch. What a loss of time, energy and gray matter.
After reading your report it is clearly obvious to me that their government are just like all the rest, in that they are clearly making people work for nothing and giving others something for doing nothing and like it is fast becoming here in England, we are becomming a nation of office workers and managers who earn the counrty nothing in the long term.
If what I predict is going to happen the world over, it will be intresting to see what happens to Venezuala when her oil has peaked, and to take what happens as a warning to the rest of us.
Again,
Making people work for nothing and giving others something for doing nothing doesn't work in the long run, let it be these two scentences that we can slot into and link with every walk of life be the warning sign for everyone.
Simply take a look around you and see what is a foot and you will have your answer, open your eyes and you will see.
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