Re: Venezuela's oil boom

["michael a. lebowitz" <mlebowit@xxxxxx>]

At 11:38 03/12/2006, you wrote:
> NY Times, December 3, 2006
> Venezuela?s Economic Boom Buoys Chávez
> By SIMON ROMERO

Most of this article is pretty ignorant (even for 
the NYT) and could have been written almost any 
time in the last 40 years. Eg., if Vzla is 
importing only 'over half its food', that's a 
pretty good improvement because it was over 70% 
not that long ago. And, not much new re luxury 
imports (eg., new cars) which are to be expected 
in the oil boom which is floating the whole 
economy and significantly reducing unemployment 
(oops, no mention of that)--- but why no mention 
in this context of the new Venezuelan car 
production opened in the last few weeks (a 
Vzlan-Iran state company partnership)? Anyway, 
ignorance or perhaps deliberate distortion. Eg, 
of the reduced number of Mfg firms since 1998, 
how many went belly-up during the bosses' 
lock-out in 2002-3? And, how many of the 
co-operatives engaged in manufacturing are 
included in that figure for current manufacturing 
firms given by the opposition economist who was 
formerly at the central bank.... or is it only 
capitalist corporations that he includes (eg., 
does it exclude those factories recovered by 
workers and re-opened with state finance)?
        Having said this, yes, there is a 
problem with an over-valued currency that goes 
against the policy of endogenous development 
promoted by the government. We have a problem of 
two goals and one policy instrument being used. 
The second goal is keeping the rate of inflation 
down--- a serious problem with the oil boom 
(think Dutch disease) and especially in an 
election year. The instrument being used to keep 
inflation down, given the historically high 
imports in this hollowed-out economy, has been an 
over-valued fixed exchange rate, which 
facilitates imports. Obviously, this is a problem 
that needs to be dealt with in the next year (and 
maybe shortly after the election). And, yes, some 
progressive economists who support the Chavez 
government have been critical of this policy.
        Hmm. Maybe if you think the Bolivar is 
about to be devalued, it's a good time to get US 
dollars by buying CANTV stocks for Bolivars on 
the Vzlan stock market and then selling them in 
NYC for USD; might even help create a booming stock market.

> CARACAS, Venezuela, Dec. 2 ? To understand why 
> Hugo Chávez seems set for victory in Sunday?s 
> presidential election and a strengthened mandate 
> for what he calls a socialist revolution, 
> consider the vigor here of that most capitalist 
> of institutions: the stock exchange.

        cheers,
        michael
Michael A. Lebowitz
Professor Emeritus
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6

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