The Bolivarian socialists in Venezuela have been claiming for years now that the reason the wheels came off the economy there was because of the sanctions that the United States was imposing. Obviously, taking a middle income country, and oil rich one at that, into penury could not just be because the local politicians were following idiot economic policies. No, of course, if had to be Uncle Sam directing the gringoes to subvert the socialist experiment through sanctions. And now there's even a possibility that they could be right in the future.
For the behaviour of some economic managers has now become so egregious that there is talk of imposing real sanctions on the country:Venezuelan officials may face U.S. sanctions for profiting from food shortages that have exacerbated hunger in the South American country.Maduro put the army in charge of food importation and distribution just recently. And the allegation is that the army is enjoying this new found responsibility:The AP report published last month detailed a chain of dirty dealing by the military, including kickbacks to generals for food contracts and bribes to move food out of the port. Some of the food is purchased in the U.S. and some of the bribes passed through the U.S. banking system.It is possible to be cynical here and call this a masterpiece of realpolitik by Maduro. If you've half the population demonstrating against your government, you're doing everything you can to dodge a recall election and even your supporters are getting more than a bit tired of being hungry all the time then why not? Cut the army in on the graft available in the economy and make sure at least the top brass of the army is on side?
U.S. prosecutors are investigating senior Venezuelan officials, including members of the military, for laundering riches from food contracts through the U.S. financial system, the AP learned from four people with direct knowledge of the probes.
The Associated Press cited documents and testimony from business owners who pointed to food minister Gen. Rodolfo Marco Torres and his predecessor, Gen. Carlos Osorio, as key figures involved in fraudulent food imports.
In that sort of environment it's a better assumption than most that those with the power and the permissions are allowing some of the money to stick to themselves. Not a certainty, by no means, but incentives do matter and this is economics, no?
The solution to this problem from the Venezuelan end is entirely simple. Just abolish the multiple exchange rates and all other price controls and do it overnight. At which point there's no point in such graft as there are no permissions or corners to allow the graft. Plus, obviously, we'll be back to a reasonable market economy and price system within a week or two. Inflation would near cease overnight as well.
No, inflation would cease. For the reason it's so high is that the government is trying to pay all the usual bills and also provide that cheap imported food and there's not enough oil money to do both. Thus it is printing more and more money to pay the bills--that's inflation. Stop messing with the food market and that expense disappears. We've also seen this before. I was living and working in Moscow when the Soviet food price controls were abolished. It took about 6 weeks for there to be far more food on the market than there ever had been before. For markets really do actually work, d'ye see?
Monday, January 23, 2017
Thursday, January 12, 2017
Venezuela is no longer a country with a government, institutions and a civil society. It’s a geographic area terrorized by a criminal enterprise that pretends to govern, with a civil society made up of two sets of people: accomplices and victims.
More than 30 million of the latter.
The Hugo Chavez-led looting spree began in 2000. By “looting,” I mean fraudulent government contracts, a celebration of bribery, phantom payrolls across all government ministries, bogus government-grant programs, the sacking of Venezuela’s gold reserves and a massive currency-exchange scam.
More than $1 trillion has disappeared — some of it wasted on social programs that produced nothing — and a staggering amount has ended up in bank accounts in Andorra, Panama, New York, Hong Kong and Switzerland.
And the pillaging has turned Venezuela into a dystopian landscape. There are shortages of every imaginable foodstuff and basic necessity; diseases once thought eradicated are back with a vengeance; and a crime wave that has given Caracas the highest murder rate in the world.
Loving parents are putting their children up for adoption because they have nothing to feed them; the elderly are starving; patients with treatable conditions are dying in hospitals that lack basic medicine like insulin and oxygen, where vital equipment has been pilfered and emergency rooms operate without electricity. In a gruesome twist, even the morgues can’t handle the number of unclaimed bodies, so they rot in hallways.
In one city just before Christmas, more than 80 percent of supermarkets, bodegas and food stores were looted. The ransacking spread to private homes. Meanwhile, the government does little to stop the disorder. The more chaos there is, the less President Nicolas Maduro needs to worry about antigovernment protests or marches.
Meanwhile, those in power can focus on what they do best: looting the country’s natural-resource wealth and manufacturing and trafficking illegal narcotics. In fact, Maduro just upped his game by appointing Tareck el-Aissami, a drug kingpin, as vice president.
How did it come to this? Venezuela’s woes begin and end with a complete breakdown in the rule of law. From the presidency to the lowest civil servant, being “on the take” went from scandalous to a way of life.
I sued a group of Venezuelan criminals, accusing them of corruption in a Florida courtroom. The defendants starred in the most notorious case of sleaze inside Venezuela: the Derwick Associates case.
Imagine a group of 20-something American-educated Venezuelans who have never had any experience whatsoever in government contracting, let alone building power plants.
In 14 months, they obtained 12 contracts to build electric power plants for the government. They hired an American company to build nonfunctioning plants and then overbilled Venezuela’s government by more than $1 billion. These “Chavezkids” (Bolichicos) shamelessly bribed government officials.
And what did they do with the stolen money? They used US, Canadian and Andorran banks to launder and conceal the cash.
Then they lived like kings, purchasing real estate all over the world, including a $30 million hunting estate in Spain; renting a Fifth Avenue brownstone at 75th Street; buying an Olympic Tower penthouse across from Rockefeller Center, million-dollar beachfront condos in Miami’s Sunny Isles neighborhood, apartments in Paris, fancy cars and a $20 million passenger jet. Recently, they put $53 million of the stolen Venezuelan money into a sunglass start-up in Spain called Hawkers.
According to Bloomberg News and The Wall Street Journal, federal and New York City prosecutors opened criminal investigations into Derwick’s principals Alejandro Betancourt and Pedro Trebbau. In Venezuela? Crickets.
The legislature made a big deal of investigating Derwick but after enough money was spread to the right committee heads, the investigation came to nothing. Furthermore, the outgoing head of the legislature happens to be the brother-in-law of one of Derwick’s shareholders, Francisco D’Agostino.
When I started looking into the case, it wasn’t long before they began offering me bribes, too.
The Derwick case is one of hundreds just like it in Venezuela, a country rotting from the top. And once they’ve gotten the stolen booty, slime like the Derwick boys doesn’t stay in Venezuela. It moves to Miami, Madrid or Manhattan. Florida, Texas and New York are home to thousands of crooked Venezuelans who bear significant responsibility for the current financial crisis there.
Let’s hope that, since there won’t be Venezuelan justice, the US justice system does right by the millions of Venezuelan victims.
Monday, January 9, 2017
Sunday a 50 percent hike in the minimum wage and pensions, the fifth increase over the last year, to help shield workers from the world's highest inflation rate.
The measure puts the minimum monthly salary at 40,683 bolivars - about $60 at the weakest exchange level under the state's currency controls, or $12 at the black market rate.
"To start the year, I have decided to raise salaries and pensions," he said on his weekly TV and radio program.
"In times of economic war and mafia attacks ... we must protect employment and workers' income," added Maduro, who has now increased the minimum wage by a cumulative 322 percent since February 2016.
The 54-year-old successor to Hugo Chavez attributes Venezuela's three-year recession, soaring prices and product shortages to a plunge in global oil prices since mid-2014 and an "economic war" by political foes and hostile businessmen.
But critics say his incompetence, and 17 years of failed socialist policies, are behind Venezuela's economic mess.
They say the constant minimum wage hikes symbolize Maduro's policy failures and fail to keep pace with real on-the-street price rises.
Venezuela's inflation hit 181 percent in 2015, according to official data, though opponents say the true figure was higher. There is no official data for 2016, but most economists think inflation at least doubled from the previous year and will be worse again in 2017.
Venezuela's opposition has said inflation was more than 500 percent in 2016, while the economy shrank 12 percent. The government has given no gross domestic product data for last year.