What was criminal about the whole thing is that since late last year Chavez and his team (?, can we really call the Giordani/Merentes an economic team?) have done nothing, have taken no preventive measures to try to avoid a recession that they knew would hit us someday. I truly hope that they hoped for a miracle because if indeed they did not think a recession would hit us, then they are way more stupid that I thought they were.
The only thing they did was to use up the meager savings we had, and when those run out they simply started emitting more debt bonds. Spending was cut not because it was a well thought policy to ensure sustainability of some social programs. Spending was cut because simply given obligations run out of money. Whoever run out of money first was told "tough luck", and that was that. New debt, once corruption s served, will be used only for those programs that make Chavez look best in electoral times. That is the economic program of the government.
But, again, this irresponsible and criminal attitude is just unforgivable because the slide in Venezuela economy started BEFORE Wall Street crashed in the second half of 2008. I am not
going to bore you with a long economic article, other known blogs take care of that much better than I will do. I will just show you this little graph that I got courtesy of PB, who got it from Goldman Sachs. It says it all.Clearly, if you examine this annualized GDP quarterly variation you can see that the slowing down of Venezuelan economy started in the first half of 2007, almost a year before the real estate bubble blew. The 7.2% increase of the thrid quarter of 2008 is the high time oil price coupled with increased electoral spending for the November 2008 regional elections. More worrisome, the decrease rate seems to be accelarting and promising us a third 2009 quarter with a decrease of maybe 5% if oil prices do not go up further. The year end average could be as much as -4%, second only tot he 2003 recession, this time with Chavez having no strike to blame.
What is terrible in the forecast is that all through this year chavismo has in fact been further harassing the only people that can help the economy stop its slide and maybe rebound. More than ever private property has been under attacks and private business blackmailed when not outright robbed. So, not only the previous growth was an artificial one based on an import and distribution economy, but the retreating productive sector got further hit in the last 4 quarters leaving it unable to help in a recovery, even if it were so inclined.
Tough days are ahead of us. And yet the government still puts all of its hopes in oil prices going back to100USD, which dramatically would now be barely enough to pay our debt interest, amen of the investment we need to do just to keep the lights on and water running in our faucets. Stagflation, recession, inflation are here to stay in a virulent for of Dutch Disease: the Chavez Disease!
-The end-