Eat this Venezuela!

[N35t0r]

Chavez is to blame on Venezuela's energy shortages. The comparison to the US is a troll. This shouldn't need pointing out in this forum.

[KrazyHorse]

Venezuela's per-capita GDP growth has been similar to, e.g. Brazil's during the Chavez era, despite the fact that oil makes up close to 30% of Venezuelan gdp and has quadrupled in price since Chavez came to power.

Usually I don't ascribe overall economic performance to the actions of politicians, but when they make the sort of radical changes to the economy that Chavez has, the case for blame/praise is a little more clear.

[Theben]

If the US continues with its current economic and foreign policies, I suggest learning to love your new Chinese overlords in the near future.

China is useful right now. When the economies of the West are a bit healthier I expect some more action to bring China's currency in line with its "real" value, at which point the Chinese will feel the pinch.

After that they'll be a world economy, but that's a way down the line.

[HalfLotus]

Mr. Soros disagrees with your assessment. He paints a picture of a strong Chinese economy and a weak American one - that the Chinese will be the "engine" of the global economy, and the US will be a "drag".

In particular he says the value of the Dollar will have to decline substantially in order to address the US's enormous account deficits.

I don't think he addresses the Chinese currency directly, but to my knowledge Beijing has in the past strongly resisted western overtures to adjust its value in the way you're describing.

[The Mad Monk]

UPDATE 1-Devaluation ups stakes in Venezuela election year
Sat Jan 9, 2010 2:05pm EST

By Frank Jack Daniel and Eyanir Chinea

CARACAS, Jan 9 (Reuters) - Venezuelans rushed to the shops on Saturday, fearful of price rises after a currency devaluation that will let President Hugo Chavez boost government spending ahead of an election but feeds opposition charges of economic mismanagement.

In a bid to jump-start the recession-hit economy of South America's top oil exporter, Chavez on Friday announced a dual system for the fixed rate bolivar.

It devalues the currency to 4.3 and 2.6 against the dollar, from a rate of 2.15 per dollar in place since 2005, giving the better rate for basic goods in an attempt to limit the impact of the measure on consumer prices.

The opposition seized on fears that prices for imported goods will double as shoppers formed lines of more than a hundred people outside some stores in the capital Caracas.

"It was a Black Friday, tinted red," said sales executive Diana Sevillana in reference to the crimson color of Chavez's socialist party. She stood in a line of 30 people outside an electrical goods store in a middle class neighborhood.

The socialist Chavez believes the state should have a weighty role in managing the economy. During his 11 years in office he has nationalized most heavy industry, and business and finance are tightly regulated.

The devaluation is politically risky but means every dollar of oil revenue puts more bolivars in government coffers. That allows Chavez to lavish cash on social projects and fund salary increases ahead of parliamentary elections in September.

Opponents were quick to criticize the socialist, who a year ago promised the global financial crisis would not touch "a hair" of Venezuela's economy. He announced the devaluation on Friday night during an important baseball game.

"By establishing the exchange rate at 4.3 bolivars per dollar, the quality of life for Venezuelans is automatically devalued since we now have half the money we had before," said Caracas Mayor Antonio Ledezma, a Chavez opponent.

BLACKOUTS, WATER SHORTAGES

Opposition parties, emboldened by public dissatisfaction at frequent blackouts and water shortages and a 2.9 percent economic contraction in 2009, hope to strip Chavez of his legislative majority in September.

The devaluation is embarrassing for Chavez, who resisted calls from economists and many government allies to make the move last year when oil prices were at their lowest and elections a long way off.

"Venezuela's decision to devalue the Bolivar culminates an event that the market has been anticipating for a long time," said Walter Molano, an analyst at BCP Securities. "It helps alleviate the country's fiscal woes and puts it on a sounder macroeconomic footing."

The measure is a relief for state oil company PDVSA, which has struggled to pay service providers and meet requirements to fund social projects since crude prices dropped sharply last year. It also makes Venezuelan businesses more competitive.

Holders of Venezuela's foreign debt are also pleased, since the devaluation improves government finances and lessens the need to issue more bonds.

However, Chavez risks taking a blow to his popularity ratings, which are about 50 percent, as prices for many products inevitably will rise in the country of 28 million people, which relies on imports for much of its consumption.

Finance Minister Ali Rodriguez said the devaluation will add 3 percent to 5 percent to inflation, already the highest in the Americas at 25 percent last year.

"The popularity of the government is obviously going to be sharply and negatively affected," said economist Pedro Palma. "The inflationary impact of the measure diminishes the real income of people. People can consume less."

The new two-tiered exchange system offers the 2.6/dollar rate for goods deemed essential including food, medicine and industrial machinery. Other products, including cars and telephones, will be imported at the higher 4.3 rate.

Last month, BMO Capital Markets cut ratings on Colgate-Palmolive Co (CL.N), Avon Products Inc (AVP.N) and Kimberly-Clark Corp (KMB.N) to "market perform" saying a possible devaluation in Venezuela could hurt the U.S. consumer goods makers' profits.

Economist Pavel Gomez of the IESA economic school said the new system will increase opportunities for graft in a country that already is corruption-ridden.

"Multiple exchange schemes are incentives for corruption, more so if they are applied in the Venezuela way," he said. "Those who have good contacts can buy at 2.6 and sell at 4.3."

Chavez, whose popularity usually rises in correlation with public spending, also said on Friday that the Central Bank had transferred $7 billion of foreign reserves to a development fund used to finance investment projects.

(Additional reporting by Hugh Bronstein in Bogota, editing by Vicki Allen)

http://www.reuters.com/article/idUSN096521320100109

Remember, before you can share the wealth, you have to make the wealth.

[notyoueither]

The new two-tiered exchange system offers the 2.6/dollar rate for goods deemed essential including food, medicine and industrial machinery. Other products, including cars and telephones, will be imported at the higher 4.3 rate.

How does that work?

Last month, BMO Capital Markets cut ratings on Colgate-Palmolive Co (CL.N), Avon Products Inc (AVP.N) and Kimberly-Clark Corp (KMB.N) to "market perform" saying a possible devaluation in Venezuela could hurt the U.S. consumer goods makers' profits.

What?

[Dinner]

It likely means they sell a lot of crap to Venezuela (soap, cosmetics, tooth paste, etc) and since the price of all that crap will now double they will likely sell less.

[notyoueither]

There're 500 million people in Canada, the US, and Mexico. There's gotta be another 500 million+ throughout Latin America.

27 million in Chavezopia, and they were already in bad shape economically.

How much lipstick do they use on that pig?

[Dinner]

I agree. CEOs love to latch on to the excuses for poor performance. This is just the latest because it is so much easier to claim it is all Chavez's fault then for the CEO to admit his advertising campaign for all of Latin America was a flop, no one likes his cosmetics, but he doesn't want to take responsibility for any of that.

[Darius871]

Why do you revel in the difficulties of other people? Because they're "socialists"?

No wonder the Venezualans have problems when the US has supported a military coup against their leadership, tried to assassinate Chavez at least twice, and maintained a posture of military and economic "full spectrum dominance" - trying to isolate them economically and diplomatically. Not to mention the IMF's continued rape of Latin America.

And just for kicks we bought another 7 military bases in Colombia for "Intelligence, Surveillance and Reconnaissance” operations and “expeditionary warfare” in Latin America. Sounds grand. All while 1 in 5 Americans is unemployed or underemplayed. Good ****.

Americans and their representatives need to learn to leave people the **** alone before they get another 9/11 courtesy of Latin America.

But then we'd have more unemployed or underemployed Americans. Where do you think that IMF-rape money ends up?

[Darius871]

And why does Hezbollah exist? Perhaps to defend against the preeminent terrorist state in the Mideast, Israel? A country for which the US gets on it's knees and sucks dick at every turn. Not to mention umpteen billions in funding and nuclear technology.

An anti-Semite too, no big surprise there.

[Darius871]

zakuHL

Thief.

[HalfLotus]

But then we'd have more unemployed or underemployed Americans. Where do you think that IMF-rape money ends up?

It ends up at the IMF, World Bank, and BIS. The US is a "creditor" nation to the IMF, not a debtor.

As if un-repayable IMF debt ever helped an economy - outside of your neo-liberal fantasies. Ask the third-world how well IMF policies have helped them, it's an unmitigated disaster.

And yeah, I oppose Israel's policies, so I obviously hate Jews. Nice smear and leap of logic. You were supposed to invent my hatred of "zionism" as well, and some nonsense about the "NWO". Try to do better next time.

I don't give a damn what religion they are, the policies of Israel with respect to Palestine are immoral.

[Darius871]

It ends up at the IMF, World Bank, and BIS. The US is a "creditor" nation to the IMF, not a debtor.

Isn't the whole point of being a "creditor" interest profits? Maybe if I just clue in my mortgagee that I'm a drain on it...

Ask the third-world how well IMF policies have helped them, it's an unmitigated disaster.

Yes, for them. I thought the word "rape" implies that at least one party gets his rocks off?

And yeah, I oppose Israel's policies, so I obviously hate Jews. Nice smear and leap of logic. You were supposed to invent my hatred of "zionism" as well, and some nonsense about the "NWO". Try to do better next time.

I don't give a damn what religion they are, the policies of Israel with respect to Palestine are immoral.

Yeah yeah, I'm sure David Duke would pull the same old "anti-Zionist, not anti-semite" routine too.

[HalfLotus]

Isn't the whole point of being a "creditor" interest profits?

When the creditor nation is already flat broke itself, and "loaning" money it doesn't have, it's a different story.

After all, why work when we can just print paper money and make "profits"? A pleasant fantasy, but not a sustainable one.

edit: In either case, the idea that federal stimulus is effective in job creation and economic recovery is at odds with the current reality.