I was thinking that after my post yesterday on how the regime has no clue as to what to do to boost exports, it would be fair for the readers of this blog to list what could be the bare, minimal measures that seen from ground zero could help Venezuelan producers to stay in business and perhaps increase production.
I must warn the readers that this is not a list about recovering the country: this one would be much longer and would require several years of work, and the end of the current "model". What I am listing below are simple measures that would bring back some good will, some desire to reactivate some production sectors and that would, for a couple of years, avoid further decline in the production of food stuff. In short, what I am proposing is what the regime could do to gain a couple of years until it settles its internal affairs and decide what it wants to do on the economy. Assuming of course that inside the regime there is a sector large enough that does not want to see the country turn into a Cuban style outright rationing of goods. If the internal balance of power is going the Saman way, more controls, more hard stance, ration cards are to be expected by the end of the year.
The basic problem of the regime is to get dollars so that some productive sectors can purchase raw materials and supplies to increase production of whatever can be increased inside Venezuela, considering the extensive damage that has been wrought on the industrial and agricultural sectors in the last decade. We are not talking expansion here, we are talking recovering the 100% capacity of production which is currently between 30 and 80% depending on the sectors (my estimations, there is no comprehensive evaluation that I know of, even Polar is not working 100% because they do not have enough raw material). The idea would be for the "pragmatic sector" of the regime to get more bang for the buck by producing some stuff locally rather than importing the finished goods (which does not please the corrupt trafficking gang but let's assume that the pragmatic sector of the regime can rein in their appetite for a couple of years).
The first measure is thus to create a dual exchange system (Miguel speaks of a possible return to the famous "permuta" of a SICAD on fluoride). I personally think that a dual exchange is best and simplest and slightly less corruption prone than SICAD or permuta. The 6,3 current exchange rate is pushed to 8 and reserved strictly for import of raw material and supplies for food and medicine. Everything else is sent to a fixed exchange that I would put at least at 12 to start with. Preferably 15 outright. Inflation would be pushed by another ten points but at this point, with monthly rates in the 6-8%, who cares really..... The economy would crunch fast but whoever can work may start working again and in 6 month we could "grow" again.
This working devaluation needs to be compensated for the chavista masses and the regime needs money to subsidize a reduced social program that includes only Mercal and Barrio Adentro. Where to find the money for that? In addition to the dollars already needed for the devaluation described above so that its purpose can be accomplished.
Gas price hike is one way. To avoid major upheaval, it should be calculated such as to bring in, say, and extra 500 million a month by reducing gas consumption to at least stop the current gas imports bleed. The impact on inflation would be rather minor considering the current situation.
Explain to allies that they will need to tighten up their belt. That is, out of Petrocaribe and Cuba, another 300 million a month must be obtained.
Stop all weapons purchases whatsoever for at least 2 years, postpone any current contract execution for at least two years. Limit infrastructure purchases for one year strictly to what is needed to recover current communication ways (no more trains, no more highway from Portugal, no nothing, just start filling up holes in highway and fix up bridges and the like). Have Mision Vivienda, pared down, and sent to local constructors to build cheap homes, who can do it cheaper in dollars than the idiots of the sino-russian mafia involved. There is at least another 200 million there.
All in all the regime needs to find an extra billion dollar a month to import supplies for folks like me so we can produce food again. Not to become self sufficient but at least to stop the constant increase in food import. It is quite possible, it is quite feasible but it involves the will to put a stop to the mafia easy contracts.....
But that is not all: we need also real incentives for us, producers, to risk again our assets and health to produce in this hell.
There is a real need to render flexible price controls so as to adjust them to inflation fast. Inflation can only be curbed when production reaches reasonable levels again so that some competition will start. There is no other way around. Since we have inflation already anyway, might as well harvest its benefits.
The regime not only needs to declare the provisional end of expropriation for at least 2 years, but should have the guts to recognize that the expropriations that led nowhere should be returned to their original owners. That is, AgroIsleña should be returned to their old owners if the regime intends agricultural production to return. And lands that have been expropriated without results should also be returned, through some form of ad hoc commission. That commission may not do shit but at least it will reassure those who still have productive land.
I can vouch myself on at least two sectors that can recover fast: poultry and coffee.
An adequate supply to poultry producers can restore Venezuelan self sufficiency in a mere year. If the price of chicken is too high for "el pueblo" the regime needs only to buy, say, 30% of the production and resell at specific Mercal programs at a lower price. Even that 30% subsidized would be cheaper for the regime than buying frozen chicken from Brazil.
If coffee prices are freed for good, I can assure you that within three years the Venezuelan production could recover enough to satisfy the market and perhaps even consider some small exports. In the first year the illegal shipments to Colombia stop, and in three years the existing deteriorated coffee farms can be recovered through some small credits and be put to produce again. It is THAT simple. But that would mean stopping buying coffee from Nicaragua, yet another mafia sure to bitch.....
Some other sectors like dairy will take longer to recover because it takes time to rebuild the cattle population. Grain production will not be rapid because too many lands must be recovered after improper expropriations, and we may simply not have enough farmers to get the job done since those that have been chased from the countryside through expropriations may not be willing to come back. Also that recovery is also tied in large part to personal security of agriculture people as well as repairing access roads, etc... But some sectors, like the ones I mentioned, can have a significant recovery in three years or less, if the regime let's them work.
You will observe that the measures offered are not drastic, do not even question the current model as they can be presented as a transition and do not preclude the regime to intervene again in production later with a "renovated model" maybe based on more cooperation while "el pueblo" is led to think that the government calls all the shots. You will also observe that what I propose does not promote new investments, just a refurbishing of what is already in place and that any positive effect would be seen over two to four years and then nothing more. But we need to start somewhere since nobody in his right mind will invest his or her own money in Venezuela today.
Yet, I am afraid that even such a simple plan is too much for the regime at this point who prefers to buy a highway from a Portuguese company rather than accept that local builders may be able to do it for cheaper. In that regard chavismo is alive and well and keeps driving us to the ground. Note: Portugal signed even though I am sure they know we are bankrupt and that the regime may not last much longer. At least the coming government can be sued for breach of contract and Portugal will get something anyway. So we are not done paying for the hubris of Chavez and his heirs.....
I must warn the readers that this is not a list about recovering the country: this one would be much longer and would require several years of work, and the end of the current "model". What I am listing below are simple measures that would bring back some good will, some desire to reactivate some production sectors and that would, for a couple of years, avoid further decline in the production of food stuff. In short, what I am proposing is what the regime could do to gain a couple of years until it settles its internal affairs and decide what it wants to do on the economy. Assuming of course that inside the regime there is a sector large enough that does not want to see the country turn into a Cuban style outright rationing of goods. If the internal balance of power is going the Saman way, more controls, more hard stance, ration cards are to be expected by the end of the year.
The basic problem of the regime is to get dollars so that some productive sectors can purchase raw materials and supplies to increase production of whatever can be increased inside Venezuela, considering the extensive damage that has been wrought on the industrial and agricultural sectors in the last decade. We are not talking expansion here, we are talking recovering the 100% capacity of production which is currently between 30 and 80% depending on the sectors (my estimations, there is no comprehensive evaluation that I know of, even Polar is not working 100% because they do not have enough raw material). The idea would be for the "pragmatic sector" of the regime to get more bang for the buck by producing some stuff locally rather than importing the finished goods (which does not please the corrupt trafficking gang but let's assume that the pragmatic sector of the regime can rein in their appetite for a couple of years).
The first measure is thus to create a dual exchange system (Miguel speaks of a possible return to the famous "permuta" of a SICAD on fluoride). I personally think that a dual exchange is best and simplest and slightly less corruption prone than SICAD or permuta. The 6,3 current exchange rate is pushed to 8 and reserved strictly for import of raw material and supplies for food and medicine. Everything else is sent to a fixed exchange that I would put at least at 12 to start with. Preferably 15 outright. Inflation would be pushed by another ten points but at this point, with monthly rates in the 6-8%, who cares really..... The economy would crunch fast but whoever can work may start working again and in 6 month we could "grow" again.
This working devaluation needs to be compensated for the chavista masses and the regime needs money to subsidize a reduced social program that includes only Mercal and Barrio Adentro. Where to find the money for that? In addition to the dollars already needed for the devaluation described above so that its purpose can be accomplished.
Gas price hike is one way. To avoid major upheaval, it should be calculated such as to bring in, say, and extra 500 million a month by reducing gas consumption to at least stop the current gas imports bleed. The impact on inflation would be rather minor considering the current situation.
Explain to allies that they will need to tighten up their belt. That is, out of Petrocaribe and Cuba, another 300 million a month must be obtained.
Stop all weapons purchases whatsoever for at least 2 years, postpone any current contract execution for at least two years. Limit infrastructure purchases for one year strictly to what is needed to recover current communication ways (no more trains, no more highway from Portugal, no nothing, just start filling up holes in highway and fix up bridges and the like). Have Mision Vivienda, pared down, and sent to local constructors to build cheap homes, who can do it cheaper in dollars than the idiots of the sino-russian mafia involved. There is at least another 200 million there.
All in all the regime needs to find an extra billion dollar a month to import supplies for folks like me so we can produce food again. Not to become self sufficient but at least to stop the constant increase in food import. It is quite possible, it is quite feasible but it involves the will to put a stop to the mafia easy contracts.....
But that is not all: we need also real incentives for us, producers, to risk again our assets and health to produce in this hell.
There is a real need to render flexible price controls so as to adjust them to inflation fast. Inflation can only be curbed when production reaches reasonable levels again so that some competition will start. There is no other way around. Since we have inflation already anyway, might as well harvest its benefits.
The regime not only needs to declare the provisional end of expropriation for at least 2 years, but should have the guts to recognize that the expropriations that led nowhere should be returned to their original owners. That is, AgroIsleña should be returned to their old owners if the regime intends agricultural production to return. And lands that have been expropriated without results should also be returned, through some form of ad hoc commission. That commission may not do shit but at least it will reassure those who still have productive land.
I can vouch myself on at least two sectors that can recover fast: poultry and coffee.
An adequate supply to poultry producers can restore Venezuelan self sufficiency in a mere year. If the price of chicken is too high for "el pueblo" the regime needs only to buy, say, 30% of the production and resell at specific Mercal programs at a lower price. Even that 30% subsidized would be cheaper for the regime than buying frozen chicken from Brazil.
If coffee prices are freed for good, I can assure you that within three years the Venezuelan production could recover enough to satisfy the market and perhaps even consider some small exports. In the first year the illegal shipments to Colombia stop, and in three years the existing deteriorated coffee farms can be recovered through some small credits and be put to produce again. It is THAT simple. But that would mean stopping buying coffee from Nicaragua, yet another mafia sure to bitch.....
Some other sectors like dairy will take longer to recover because it takes time to rebuild the cattle population. Grain production will not be rapid because too many lands must be recovered after improper expropriations, and we may simply not have enough farmers to get the job done since those that have been chased from the countryside through expropriations may not be willing to come back. Also that recovery is also tied in large part to personal security of agriculture people as well as repairing access roads, etc... But some sectors, like the ones I mentioned, can have a significant recovery in three years or less, if the regime let's them work.
You will observe that the measures offered are not drastic, do not even question the current model as they can be presented as a transition and do not preclude the regime to intervene again in production later with a "renovated model" maybe based on more cooperation while "el pueblo" is led to think that the government calls all the shots. You will also observe that what I propose does not promote new investments, just a refurbishing of what is already in place and that any positive effect would be seen over two to four years and then nothing more. But we need to start somewhere since nobody in his right mind will invest his or her own money in Venezuela today.
Yet, I am afraid that even such a simple plan is too much for the regime at this point who prefers to buy a highway from a Portuguese company rather than accept that local builders may be able to do it for cheaper. In that regard chavismo is alive and well and keeps driving us to the ground. Note: Portugal signed even though I am sure they know we are bankrupt and that the regime may not last much longer. At least the coming government can be sued for breach of contract and Portugal will get something anyway. So we are not done paying for the hubris of Chavez and his heirs.....