Sunday, 8 July 2012

Lula's love for Venezuelan petrodollars

A few days ago Lula, a social democrat, took party for Chávez in a way not even Angela  Merkel would have done for Sarkozy: he said Chávez' success was "nostra victoria". In a complete lack of respect for the sense of democracy and pluralism, he assumed whoever is a Latin American and a democrat would support the military Hugo Chávez. Thing is: even many socialists do not support Chávez.

But money seems to be more important for these so-called socialists à la Lula. Do you want to know why Brazil cares so much for Chávez remaining in power? Look at the chart above. This is the trade balance between Venezuela and Brazil in the last few years (more details, in the language of Camões, here).  Venezuela imports machines and other highly-elaborated products from Brazil plus maize, meat and other food products. Brazil imports iron, aluminium and some other raw materials. The thing is: it is not just that there is more trade, but that it is much easier for Brazil to export anything to Venezuela because Chávez has kept an overvalued currency at home, destroying Venezuelan competitiveness, has kept harassing Venezuelan producers because he is afraid they may get some clout and thus power and he prefers to use petrodollars to import everything even if that means destroying Venezuela's producers.

These people are telling us that we either export raw materials to the USA or to Brazil and import processed, higher value products from the USA or Brazil. The first thing is bad, the second is supposed to be good, just like that.

What if there is a third or a fourth possibility and that doesn't necessarily require adding yet more country names?

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