By 15 y Ultimo
Evaluating the performance of the Recovery Plan one year after its launch is not a simple task and several non-minor details should be considered when doing so: Its promoters and defenders immediately name the blockade as the cause things have not gone as they were planned or at least as we all expected them to go. It makes sense, but it is also an easy detour.
Although this variable cannot be ignored – already converted into a constant – the problem is that those who seem to have forgotten it are the designers and executors of the August plan. In this sense, to say that the Recovery Plan did not work because of the blockade, is equivalent to saying that a war strategy X did not work for a country Y because … there is war. Put as it is, the case is that the recovery plan should have foreseen not only the permanence of the blockade but its resurgence. And if it did not do it or by doing so it could not counteract its effects, then it is a plan that did not succeed.
For the rest, it should be remembered that on more than one occasion official government spokesmen said that this could not continue to be used as an excuse , “that economic warfare will always exist as long as the Venezuelan people have the will to be sovereign and independent”, that “we must concentrate on building our destiny”, on “creating conditions for economic stability” that “we cannot choose to “vencer” and die, it is necessary to “vencer”, etc.
For example, in the press conference of the Minister of Communication of August 18, 2018 , it was affirmed regarding the use of El Petro and the anchoring of it to the Sovereign Bolivar, “which meant the death of a parallel dollar and would serve to confront the sanctions and the blockade ”. In fact, the president himself at a meeting of the IV Congress of the PSUV on July 30 of last year , speaking of the plan (not yet revealed), said so:
“May imperialism attack us? No more whining, okay, you don’t see me whining around, nor do I name you anymore, you don’t see me whining in front of imperialism. Let’s them attack us, it is our turn to produce with aggression or without aggression. ”
What all this evidences is that they were not only well aware of the context of the blockade and the economic war, but clearly that the Plan emerged with the purpose of addressing it: it was a formal part of their offer.
But in our view, and this is the second, the blockade is not the only issue to consider when evaluating the performance of the recovery plan. There are also another couple of things, which may be obvious when they are told, but in reality they are not so:
1) Are we still able to acomplish it [recovery]?
2) What plan exactly are we talking about? Do we make ourselves clear?
With regard to the first, the point is that certainly since one year has passed after the announcements, given everything that happened to date and how the picture to come looks, doing a review and accounting arises as a necessity. However, this may be a need for us, the ordinary people, but not the government and those responsible for the plan, because, in honor of the truth, the few times we talked about concrete goals (which includes deadlines and not simple declarations of intention or desires), the results were placed in the short measure for two years and even five, which is why technically speaking we should not expect anything good from it.
In the speech of the IV Congress of the PSUV that we mentioned above, the president can be heard when he says: “I calculate about two years to achieve a high level of stability, that we can see the first symptoms of new, economic prosperity without abandoning protection and social security, in housing, in education, in health, in bonds, in pensions, in the Homes of the Homeland”. And later: “We now have the most advanced comprehensive program that we have ever had, in at least 5 years, for the economic recovery of the country, for the growth of the reproductive forces and through recovery and growth to achieve economic prosperity ”.
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Although it is also true that in that same speech the president talked about achieving “early victories” “by hook or by crook” starting on August 20, especially when it comes to prices, there is no doubt that this is an aspect important to take into account when making an evaluation. And it is that in a strict sense, put this way, then it is still very early. We could perhaps claim the lack of early victories. Or to say that they were ephemeral, because if we are going to see the purchasing power (of ordinary Venezuelans) only recovered for a couple of weeks and rather as a result of the conversion (erasing 5 zeroes to the “Bolivar”) and meanwhile all the corresponding price adjustments were made, and when they adjusted all the prices, we lost all the gains.
But the problems surrounding this conclusion are more than obvious: do we Venezuelans have two or five years to wait? And what happens in the meantime? On the other hand, wait two or five years means what:
a) What will we progressively improve until we see results?
b) that we will go one step forward and two backwards?
c) that we must go through a scorching desert, of deficiencies and hardships by then within the proposed term and, almost as in a biblical account, the growth and prosperity will come?
This not asking us an even more relevant question: what would the type of society and economy be resulting at the end of the “Recovery Plan”?
Which brings us to the second point: which plan exactly are we talking about?
Indeed, more than all of the above – the blockade, the waiting time – we believe that the main difficulty in evaluating the Recovery Plan is that everything indicates that we are not talking about exactly one plan but at least two. And depending on which one we choose, we can talk about good or bad results, failure or success, etc.
This is something that we have been commenting on this page since the beginning of the August reforms , to which we made several observations, the constant being that most – if not all – looked trapped in a contradictory logic where not only the media and mechanisms put into practice tended to aggravate the problems raised as objective goals to be solved, but between the goals themselves there were deep contradictions, to the extent that at best they could be achieved separately but not together, and in fact, in more than one case, the failure of one would condition the achievement of another.
Thus, in our view in August, two plans were launched, as we said, a first that we could call “heterodox-progressive”, which dominated the scene contemplating the anchoring of the Sovereign Bolivar to El Petro and from it to the barrel of oil, recovery of purchasing power, agreed prices, etc. And an orthodox monetarist version rather in the background, which posed to combat hyperinflation by reducing the fiscal deficit and cutting monetary emission.
The case is that the first one lasted exactly three months and eight days, because since on the occasion of the famous “correction” of November 28, 2018 this plan was abandoned or relegated to the background to openly move to the Orthodox monetarist version. Already by then the law of illegal exchange had been eliminated . Of which we said that, among other details, it had to be ambiguous enough not to clarify whether the decriminalization of currency exchange meant only the formal exchange market or also involved current commercial transactions. What was visible at that time was the unanchoring of the Sovereign Bolivar from El Petro, as well as the formalization of this in two versions: one as a unit of account on which certain values were anchored but fundamentally the salary. And another as a speculative crypto-asset that would vary as the DICOM increased (in fact, the exchange rate was obtained by dividing the value of the crypto-active petro between 60 and vice versa, without giving any reason for it). There, the hunt by the official exchange rate of the black market dollar (dolar paralelo) began again, which even today does not stop after the definitive exchange rate liberalization that occurred between April and May of 2019.
In this regard, it should be added that an enormous effort of analytical condescension is required to say, as some do, that it was a mistake to leave wages anchored to El Petro as a unit of account, while all the rest was anchored to the dollar DICOM first and banking later. At that level of economic policy there are no such unforced errors: evidently it was a deliberate decision whose purpose was – and is – to compress wages in order to reduce consumption, slow down prices and “ñapa” (additionally), reduce the fiscal deficit, both decreasing in real terms the monetary mass and the public budget and shrinking the payrolls of the State, since the destruction operated on wages brought about that of formal employment and associated labor rights, which also reached the private sector by reducing the labor cost to the minimum.
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The immediate achievement of this ultraliberal and ultramonetarist orthodox policy was certainly the slowdown of hyperinflation , which went from percentage changes above 100 between the end of 2018 and until February 2019 to variations below 50% the following months, even taking in counts the reports of the AN in contempt for the months of May, June and July (BCV figures were published until April). The problem is that it is a pyrrhic achievement, not because it is little but because it is a fragile achievement ( technically we are no longer in hyperinflation, but the conditions for it to return are waiting for a trigger and in any case to current salary levels, monthly price variations around 30% is no small matter) reached at the price of contracting purchasing power and economic activity in general at levels of pauperization, destroying wages, formal employment and the currency itself (the Bolivar), which in a year of life has not lost all its value for the sole reason that technically it is impossible for it to be devalued below zero.
Thus, as of August 20, 2019, the official opening exchange rate is 14,483.54 sovereign bolivars for US $. If we take into account the exchange rate with which the Recovery Plan started today, exactly one year ago (60 sovereign bolivars per US $), we are talking about a variation of 24,039.23%, which is equivalent to a depreciation of 99.58 % of the Venezuelan currency against the US dollar.
As far as wages are concerned, the minimum decreed at the start of the plan (1,800 sovereign bolivars) amounted to US $ 30 per month (11 times below the regional average) and with which 20 kilos of chicken were then bought at the current controlled price. Today the minimum wage of 40 thousand sovereigns is equivalent to 2.7 US $ per month (122 times below the regional average). And with it, depending on the place, you can buy one or two kilos of chickens at best.
With regard to the conversion, in less than ten months an extension of the monetary cone was needed, which passed the highest denomination bill from 500 sovereign bolivars to 50,000, an extension that by way of practice eliminated the initial cone of 20 of August, being that of 500 and 100 still circulate because those of 10,000 and 20,000 are not easily found and they did not print out 1,000 and 2,000 bills.
As if this was not enough, the contractive policy that not only pulverized the value of the Bolivar in record time, is also ending its circulation . The highest denomination bill in August 2018 (500 sovereign bolivars) currently equals 0.03 cents of US dollar. While the one with the highest current denomination (50,000 sovereign bolivars) equals 3.4 US dollars. But in fact, if you divide all the amount of bolivars that according to the BCV in its last report currently circulate in our economy, it turns out that all that monetary mass at first sight is equivalent to US $ 761,672,100. It is less than half of the fortune declared by Lorenzo Mendoza (owner of Polar), which would equal more or less 45% of it to change all the bolivars to the BCV and definitely dollarize the economy.
Therefore, already about 50% of commercial transactions in general (and between 70 and 90% in specific areas, such as vehicle spare parts, vehicle sales, real estate, home appliances, etc.) are preferably paid in US dollars , but also in other currencies and means of payment other than the Bolivar, which includes bartering for informal retail trade and provision of certain services that can be paid for with food. All this while the informal influencers celebrate that the Petro cryptocurrency designed to circumvent the blockade so far for what is used is to pay for clothes in Traki (a department store).
The figures are so absurd in what has to do with the monetary and exchange rate that if the conversion had not mediated, the current exchange rate would be 1,483 million bolivars per dollar. As absurd as they are scary are those that reflect the size of the economic contraction , which is already around 60% in 5 years and consecutive free fall in the GDP: by the end of this year we can have an economy equivalent to 30% of the size it had on 2012-2013.
Last but not least: it must be taken into account that the policies of reduction of the fiscal deficit and contraction of consumption even under normal conditions are always terribly unpopular as are its harmful effects on the population. In order not to go so far, we have the recent case of Argentina with Macri, whose economic policy from the beginning has been exactly that and we see what is happening. Or that of (Rafael) Caldera in 1996, with the “Agenda Venezuela”, against which Hugo Chávez raised the Bolivarian Alternative Agenda in a totally different direction. However, doing so in a context of economic contraction and an inertial free fall of five years, is little less than suicidal.
Due to the official mutism on the matter, the current fiscal deficit is not known, but by the middle of last year it was around 20% of GDP. And the fact is that in order to close such a large gap, it is not only necessary to reduce public spending nominally and / or in real terms, but it must also be accompanied by a substantial increase in State revenues, generally through taxes or in our case through the increase in oil revenue. If not, the conditions are created for a fiscal catastrophe, which appear as the corollary of the economic contraction. At least since Keynes it is known that in the context of contraction the measures to reduce the fiscal deficit by contracting spending cause just the opposite effect, for the simple reason that – especially in economies such as ours with such an important weight of the public sector – lower public spending translates into lower consumption, lower consumption in less sales and less sales in lower tax collection.
If we add to this the well-known and not properly fought problems of tax avoidance and evasion, but also the long lists of tax exemptions approved as a “stimulus” to businessmen, all in a hyperinflationary context, of monetary contraction and a precipitous fall of the Oil revenue due to the decline in PDVSA production, ends up resulting in the picture that we have before our eyes with respect to the State and public services: the situation that was already critical has degenerated into a virtual standstill in many areas and an ineffective ending, imposing on the population and common sense of the “need” to privatize . It is a shock formula repeated again and again in other contexts and moments. It would be said that it is being done on purpose, if the case were not that it is a government that registers and claims itself in the totally opposite tradition…
And we are only in the first year of the plan and we have not fulfilled the two or five that the government projects …
What do you say: are we doing well ?
Translated by JRE/EF