[OPE] important development in venezuela

That's interesting. I did not realise before, demographically, how young the
Venezuelan population actually is - approximately half of the population is
under 25 years (!). It's also a highly urbanized population. This must
strongly influence the proposals for social and economic renewal, and the
culture of the country.

Venezuela imports about two-thirds of its food needs, by value (!). In 2007,
Venezuelan exports to the US were about $40 billion (60% of total Venezuelan
exports), and US exports to Venezuela were about $10 billion (or 22% of
total Venezuelan imports). About half of the Venezuelan oil export goes to
the US and it represents about 10% of U.S. oil imports. Venezuela is one of
the top four suppliers of foreign oil to the United States, and the US is
Venezuela's most important trading partner, representing about one-fifth of
the value of Venezuelan imports and about two-thirds of the value of
Venezuelan exports on 2007 figures. Venezuela is the third-largest export
market of the US in Latin America, purchasing U.S. machinery, transportation
equipment, agricultural commodities, and car parts. All that calls for
careful diplomacy.

It is not really feasible now for American terrorists to overthrow Chavez's
government and install a client regime (though, most probably, the CIA
killers have schemes in the policy cupboard to assassinate Chavez), but it's
clear that the pattern of Venezuela's foreign transactions creates an
economic vulnerability, which is probably far more serious than a military
vulnerability. Simply put, if the US blocks Venezuela's overseas trade, the
Bolivarian revolution is in deep shit.

Remember how the US embargoed trade with Nicaragua 1985-1990 and tried to
strangulate the Nicaraguan economy (Reagan justified this by saying that
Nicaragua represented a "threat" to US interests, which wasn't credible, but
anyhow he did that). Something similar could conceivably happen vis-a-vis
Venezuela, you would get hyperinflation, the economy would crap out and
Chavez's popularity would probably be down the gurgler. But, in that case,
you might require nationalizations and militarization simply for survival,
and in this sense, the US could shoot themselves in the foot with their own
blockade.

Real output growth right now seems to be basically stagnant, and the
Venezuelan government policies are inflationary. Looks to me like one of the
biggest economic challenges in Venezuela just now is to keep the inflation
rate down, no economy can carry on with such high real inflation in the long
term. For an extreme example, in Israel, price inflation of the shekel hit
circa 445% a year in 1984, they brought it down to 20% in two years (with
price controls), and to circa 10% in another 5-7 years. So it is technically
possible. Of course, at the time, there were more US dollars in circulation
in Israel, than shekels, which people forget.

The official fixed exchange rate in Venezuela is supposed to be about 2.15x
new bolivars for a dollar, the black market rate is said to be 3,500-4,000x
new bolivars for a dollar, but hard to get (!). Four out of five Venezuelans
do not want a Cuban-style economy, and surveys suggest a prime concern in
the country is the issue of criminality and personal security. So, probably,
the real debates people are having are about civil norms and ideals, as much
as anything else.

Probably, I would say, Venezuela benefits most at this point in time from a
socialdemocratic-type mixed economy, i.e. a strategic state sector and a
clearly defined private sector. It doesn't sound very radical, or it sounds
Kautskyist, but many cultural and educational changes still have to occur.
If the supply of goods and services is insufficient to meet the people's
material needs meantime, you're really no further ahead.

Jurriaan

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Received on Sun May 24 08:11:39 2009