There is a lot of expectation regarding the upcoming economic announcements of President Maduro. There is an expectation because the stabilization strategies for economy have been unsuccessful until now. Devaluation and hyperinflation are having terrible consequences for the Venezuelan people.
By Emilio Hernández
In my opinion, and I do nothing but reiterate everything I wrote throughout 2018, there are fundamental errors in monetary and communication policy, which were accentuated at the end of the year.
A fundamental communication error is saying one thing and doing another. I read in these days a magnificent article by Eduardo Galeano in which he expressed how he witnessed a speech by Fidel Castro in which he acknowledged the failure of economic policy at the beginning of the Cuban Revolution. The truth must be an asset of the Bolivarian Revolution, as defended by Comandante Chávez. Let’s leave the hypocrisy and the deceptive language to the right, let’s be honest communicationally.
I do the same in my writings, it is not my style to perfume the manure, as Ali Primera claimed. We must call things by their name. And when I say that we have made mistakes and that, at the same time, we have real possibilities of getting out of the monetary crisis in the short term, it is because I really believe it.
Announcements without concretion
1.- To anchor the bolivar to the petro to BsS 3600 was announced and it was not implemented. On the contrary, a fluctuating parity was implemented between the bolivar and the petro based on the spurious price of the Dicom. That is to say, it is not that the anchoring has not worked, as some comments of neoliberal inspiration are heard. The reality is that we must say in all honesty that the anchor was never implemented. Anchoring was announced and a free market policy was implemented. We killed the tiger and now we are afraid of the leather [Venezuelan expression]. We always said that the fluctuation of the bolivar against the petro would be a failed strategy, as we have seen.
2.- To anchor the minimum wage to half a Petro was announced with the promise of increasing the salary in petros. Although 30 dollars were not enough at that time, the announcement brought great joy and hope as the beginning of the salary recovery. Because the Dicom price was used as a reference for the value of the petro in bolivars (specifically petro certificates) then the anchoring of the minimum salary to half petro never existed, except on the day of the announcement. The next day the salary was less than half a petro actually. At this time the minimum wage is less than one tenth of what a petro costs. An anchor of the salary was announced but was never implemented.
3.- A value of the petro was published in the white paper in function of several export raw materials, a weighted average, but it was never implemented. The official websites always said that the petro is worth $ 60 when in reality the petro must fluctuate against the dollar if its value is equivalent to raw materials. Why? Because the value of raw materials fluctuates in dollars.
4.- Later a “correction factor” was announced. Another communication error, because in fact it was a devaluation of the bolivar against the petro, from 3600 to 9000. The petro continued to devalue, so that the parity at BsS 9000 was not implemented. We can not invent expressions that hide reality because people realize the linguistic trick and that leave a bad taste in the mouth.
The void of the Dicom
A mistake without attenuating the monetary policy of the government has been the Dicom. First, Dicom was used to make people believe that it was an official exchange rate against the spurious price of Dollar Today with the vain hope that the parallel dollar did not rise. Evidently that strategy failed. The Dicom did not tickle the devaluation strategy of the parallel exchange rate.
In December of last year, an even more child-friendly strategy was used. An attempt was made to close the gap between Dicom and the parallel exchange rate with the vain hope that the exchange rate would be unified. Evidently the Vandals of Dollar Today and their henchmen die of laughter at such exaggerated innocence. When the Dicom was already reaching the parallel, in a week they took the parallel from 800 to 2000. Worse than the paradox of Xenon and the turtle.
Consequently, we must stop listening to the neoliberal advisors. As Che Guevara said, you can not implement socialism with the jagged weapons of capitalism.
All Venezuelan revolutionary economists agree that the bolivar must be stabilized. The recent monetary policy has been to devalue the bolivar to the rhythm of the unofficial exchange rate.
Dollarization
One effect of the current monetary policy of turning its back on the bolivar has been the dollarization. The electoral promise of the opposition in 2017, which the Chavistas fiercely opposed, including President Maduro, is becoming a reality as a collateral effect of monetary decisions. These days I heard an interview on a radio program on an opposition station, in which the interviewee was very happy, exultant, for the de facto dollarization that took over our country.
Dollarization has only one cause: the refusal to defend the value of the bolivar. The petro can not replace the bolivar, we have said it countless times, for several reasons. One is that it does not have paper money, another that we do not have service coverage to guarantee transactions at all times and in all places.
Also, it is a terrible idea to replace the bolivar. Not only is it unconstitutional and we Chavistas can not badly trample the constitution that we promoted. Monetarily it is convenient to have the bolivar internally and the petro as a Venezuelan currency, with a fixed parity between both currencies.
What will be extremely damaging is dollarization, especially in the context of the financial embargo in dollars that Venezuelans suffer and will suffer the most in the future.
Announcements that would bring hope
Personally I would like to hear the following announcements from President Maduro, denoting a change in the current monetary policy, given that it does not correspond to the announcements of last August. If we stabilize the currency we can later stabilize other aspects of the economy.
1.- Announcement of a true anchor of the bolivar to the petro.
True anchoring is fixed anchoring, a constant parity and not dependent on spurious references such as Dicom or any other speculative fluctuating price. For those who say that the anchor has failed: the fixed anchor has not been implemented. What part of fixed is not understood? Fixed is fixed. Always in 9000, for example, or in another value that we choose, but always fixed.
The neoliberals will say that a fixed bolĂvar-petro parity is unreal, that it does not respond to supply and demand. As if the Dollar Today and the Dicom had something to do with supply and demand. In addition, the monetary policy of the bolivar and the petro depend only on us. We can issue petros to cover all the demand and thus avoid parallel exchange rates for the petro.
The truth is that we need a special period of fixed parity bolĂvar-petro, a parity of the Bolivar controlled by the State without fuss like the Dicom, in the same way that we need a cast for a while if we break a bone. The fixed parity must be defined until other economic parameters stabilize, in which case we can define a fluctuation mechanism in a narrow band.
2.- Announcement of the elimination of Dicom.
Dicom has been an unrealistic system because almost nobody can participate in it. It has been unreal because in the end there are non-transparent mechanisms that move the threads of their reference price.
If we have a fixed parity of the bolivar to the petro, why would we need the Dicom? Not at all, obviously. We would eliminate this mechanism of economic hypocrisy.
3.- I announce a great national agreement about the petro.
Venezuelans and economic actors in general should know that the Venezuelan State guarantees the value of petro in foreign currency in the same way that it can guarantee the value of a sovereign bond denominated in foreign currency. Although there were problems, for the first time, to honor the payment of bonds in 2018, Venezuela has generally honored its debt commitments.
The issuance of petros becomes a credit alternative that we do not have through the “conventional” route, which is to go to multilateral organizations. The sale of petros in bolivars complies with (1) stabilizing the exchange rate and (2) providing a negotiable currency instrument to the national economy. The sale of petros in foreign currency fulfills the objective that the State can refinance debt and make strategic purchases.
Although the petro is better than a bond because it is more liquid and can be divided, you can think of petros exchange mechanisms for foreign currency bonds with expiration dates after 2025. The national agreement should revolve around the guarantee of the value of the petro in foreign currency.
4.- Announcement of the immediate creation of a Law of Rational and Transparent Use of Petro.
The free convertibility between bolivars and petros, with emission of petros to cover the demand, could have as a side effect the flight of capital. A historical illness in Venezuela. The stabilization of the bolĂvar-petro exchange rate already brings peace of mind to investors and, in general, to any citizen. Although the confidence in the currency is recovered and the pressure to change the bolivar for other currencies to conserve the patrimony, we must protect ourselves from the historical problem of the flight of capital.
A Law of this type would establish obligations for petros buyers, not those who have petros savings certificates. The obligations would be related mainly to imports for amounts equivalent to the petros acquired.
We have a draft of this Law, which we make available to any constituent or official that may be interested.
5.- Announcement of the limitation of the monetary base based on gold reserves.
Although this measure in isolation would be clearly insufficient to avoid the devaluation of the bolivar unless there is real change of bolivars for gold, which we do not want, can help to establish discipline in the monetary scenario.
The limitation does not need to be strict, but to move in a band in relation to gold reserves, to issue bolivars that are later withdrawn with fiscal policy.
6.- Announcement of the refinancing of the debt contracted in foreign currency.
Issuing petros as an alternative to the scarcity of credit through the “traditional” route does not exclude at all the possibility of resorting to conventional mechanisms of refinancing and obtaining lines of credit, which we need as oxygen. Hopefully we can announce some kind of refinancing that gives the State a relief with its commitments.
7.- Announcement of an increase in salary in Petros.
If the bolivar-petro anchor is set at BsS 20,000 per petro, which would induce a reduction in the current Dicom exchange rate, the minimum wage fixing at BsS 20,000 would establish a minimum salary for a petro, which is very low $ 60. Later there should be other increases but leaving the parity fixed at BsS 20,000. Any increase in bolivars would also be an increase in petros.
All socialist policies should be based on the strengthening of the wage against the policies of the right that seek to strengthen profits.
8.- Announcement of the prohibition to trade in the country in dollars and other currencies or cryptocurrencies.
Although anyone could use the dollar as a reference or unit of account to set prices, it is unacceptable for the strengthening of the bolivar that transactions can be made in any other currency. Commercial transactions of movable and immovable property must be made in bolivars and, in any case, if there is a fixed parity bolĂvar-petro, in petros. This elementary rule of defense of a currency, seems to have been erased from the knowledge of those who make decisions about our bolivar.
9.- Notice of the payment of taxes only in bolivars.
The payment of taxes must be made in bolivars exclusively. With fixed parity bolĂvar-petro perhaps Petros could be admitted. However, demanding payment of taxes in bolivars strengthens the bolivar. It is the mechanism per excellence to collect the money that has been issued as if it were a loan to stimulate the economy.
10.- Announcement of the Mission Services.
Without services there is no possible economic reactivation. In Venezuela, essential public services, such as water, electricity and, to a large extent, Internet access, are provided by the State. One proposal that I raise to the authorities is to create the Great Mission Services, which requires a lot of resources, temporarily slowing the Great Housing Mission if necessary. The Housing Mission is the flagship of the Revolution, of course, but symbolism or sentimentality must sometimes give way to reason.
Conclusions
It does not make sense to regulate prices without first stopping the depreciation of the bolivar. The depreciation of the bolĂvar stops with the fixed parĂ bolĂvar-petro, the sovereign guarantee of the value of the petro in foreign currencies and the sufficient emission of petros to cover the demand. A Law of Rational and Transparent Use of Petro should aim to prevent the flight of capital in this new scenario.
Prices must reach a balance linked to regional prices, otherwise the smuggling of extraction will continue. In fact, that trend has been observed. The CLAP program must continue until the minimum wage is regularized in accordance with the prices.
We hope that the economic cabinet does not get carried away by the neoliberal calls, as it seems to have happened in the sense of not having implemented the bolivar-petro anchor as President Maduro announced. The economic policy of a socialist country can not be a red carpet for the bourgeoisie and clap boxes for the people. This situation must be overcome.
I am sure that at the end of the road, which we hope will not be so sinuous or stony, we will end up implementing the socialist ideal because the base of Chavismo demands it.
We have the possibility of overcoming the monetary problem this year, and in succeeding years attacking the structural productive problem, but the first thing is to give up the case of the neoliberal advice that has contaminated our monetary decisions.
After stabilizing the monetary system, the arduous work begins, which is the productive diversification to overcome the rentier oil model. But we will also achieve it. Socialism or nothing. Venceremos!
Source URL: La IguanaTV
Translated by JRE/AR
