Sunday, May 04, 2014

Venezuela through the fog of lazy (or worse!) conventional wisdom

"Venezuela is Latin America's biggest exporter of crude oil and has the world's largest petroleum reserves." - Brian Ellsworth and Andrew Cawthorne, Venezuela death toll rises to 13 as protests flare Reuters 02/24/2014

I'm not especially impressed with Aljazeera English's reporting and op-ed features on Latin American politics. Latest case in point for me: Remi Piet, Russia and Latin America: What gives? 05/02/2014.

Soviet Foreign Minister Lavrov is on a diplomatic tour in Latin America that includes Cuba, Nicaragua, Peru and Chile. Piet's opinion piece is mostly a catalogue of not-very-enlightening conventional wisdom about how flaky various Central and South American government supposedly are.

This was especially interesting:

Venezuela, once the economic driving force of the "Bolivarian Alliance for the Peoples of Our America" - the regional integration scheme promoted by Chavez - is now stricken by economic depression and a hyperinflation which forced Maduro to increase by 30 percent the minimum wage in the country for the second time this year. This populist move, in the naïve hope of contenting demonstrators, mostly increased the already alarming deficits which culminated at a staggering 11.5 percent of GDP in 2013.
"Hyperinflation" is a real scare word, although inflation in Venezuela has been severe recently. But that debt number has to be some kind of mistake. 11.5%? That would be minuscule! This chart from Trading Economics shows a 49.8% ration of debt-to-GDP as of now, far lower than that of most industrialized countries, even assuming this is excluding debt of Venezuelan states and municipalities. I see no good reason to thing that's a particular concerning level of debt for a petrostate like Venezuela.

For publicity and propaganda purposes, an inflation rate of 30% will for the foreseeable future sound horrifying to average "middle class" people in developed countries. But if you have a government like the one in Venezuela who takes active measures like selective price controls and measures to increase wages so that ordinary workers' real income can keep pace with inflation, it may not be so horrifying.

It's a nice little touch that Piet adds in saying that a 30% increase in minimum wages is being done "in the naïve hope of contenting demonstrators." Gee, raising people's income by 30% sounds like a pretty good way of producing greater contentment to me!

Mark Weisbrot has a recent piece on Venezuela that provides a much more level-headed and, from what I call tell, realistic picure of what's going on in the current political conflict there, The Story of Venezuela’s Protests May Be Different From What You Are Told CEPR 04/28/2014. For instance, he writes, "Of course the increased shortages and rising inflation over the past year have had a political impact on Venezuela, but it is striking that the people who are most hurt by shortages are decidedly not joining the protests. Instead, the protests are joined and led by the upper classes, who are least affected." In that sense, Piet may be right when he says the increases isn't a promising way of "contenting demonstrators." The demonstrations appear to be more a product of grumpy but comfortable segments of the country.

This is also an important point from Weisbrot about the Venezuelan media, who one would think from the conventional coverage is virtually dominated by the national government:

As for the media, state TV in Venezuela has only about 10 percent of the TV audience; the New York Times recently had to run a correction for falsely reporting that opposition voices are not regularly heard on Venezuelan TV. They are on TV, even calling for the overthrow of the government – which has been the announced goal of the protest leaders from the beginning. These are not like the protests last year in Brazil, or the student protests from 2011-13 in Chile, which were organized around specific demands.
He's right about the diplomatic support that Venezuela is getting in this current situation from fellow UNASUR members:

The strategy of Venezuela’s extreme right is to make the country ungovernable, so as to gain by force what they have been unable to win in 18 elections over the past 15 years. It is clear from the statements of Brazil’s former president Lula da Silva and current president Dilma Rousseff that they have no illusions about what is going on in Venezuela. It is now 50 years since Brazil's coup brought in the military dictatorship that put them in prison, but they can remember what a coup looks like. So, too, can the other governments of South America, who have made similar statements.
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