Friday, 28 December 2012

News from Venezuela: rotten economy

Street vendors are selling maize flour - fundamental for most Venezuelans' diet - for up to 15 Bolívares, which is equivalent to 2.64 euros at the official exchange rate. That is more expensive than in Europe. Of course, the Chávez supporters will claim this is some capitalistic plot against socialism. Mind: Polar, the Venezuelan company that industrialized maize flour production, has had to shift most of its production to Colombia as Chávez has kept attacking them.

The official - regulated - price is 6 to 8 Bolívares. Venezuela has rigid price controls for several products and  the currency is highly overvalued as the government prefers to import everything with petrodollars and let the national industry - only viable if in private hands - rot or go to hell.
Made in Colombia for Europe by a Venezuelan company that has to run away from the "socialist" military caste

Chavistas are still trying to see when they can call for new elections if Chávez dies soon or it becomes clear he cannot pop up any time soon. The election time will affect the time when they will be forced to devalue the currency.

The ministers of Finance and Economy declared yesterday that Venezuela had a GDP growth this year of over 5%. Most Chavistas went bananas, believing this is really meaningful. Look how Europe is doing and we have more than 5%! What those ministers didn't say was that that growth was completely based on spending Chinese loans to Venezuela...that during the longest and strongest oil boom Venezuela has had. One day poor Venezuelans will have to pay for the Chinese refrigerators and TV screens they got now at "socialist prices"...but that will be after elections are over and "socialism" well in place...or so the military caste and the old whiskey communists think.

The minister of Information was the one who at the same time twitted that the prohibition to lay off workers will be extended one more year. It has been in place since 2003. How come a government needs to keep this law in place if the economy is doing so well? Of course, as it was the minister of Information who told the story via twitter, the ministers presenting the wonders of Venezuela's GDP growth didn't get that question at the press conference.

On another topic, Spanish oil company REPSOL announced it started production in Orinoco's Belt. It wants to take exploitation there up to 400 000 barrels a day. PDVSA has the majority stakes and REPSOL just 11%, but it seems it is doing its fair share of stuff just to get hold of some of the largest oil reserves on Earth. There are some other minor players from India as well.
Now, my questions are: how does it fit with Venezuela's total production? Isn't Venezuela just fulfilling its OPEC quota? It doesn't plan to do it? Is it just now going to be able to produce the quota it has assigned but was not producing?

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