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A Chavez séance on Venezuela's Economy

By Daniel Duquenal

Saturday 24, April 2004 - Rewriting history books in three parts (I) Thrusday night Chavez treated us to a cadena on economic matters, namely the supposedly successful placement of a new bond issue. Since I was busy on other things I did not turn off the TV, nor switched to cable and with a distracted ear I followed his ramblings. I was not disappointed. I do not remember exactly the sequence of events, but in Chavez speeches this is really not important. So I will describe a few of the themes that I picked up.

The democratization of bond issues

The main point was to talk to a captive audience of the virtues of the new sovereign bond (see Miguel's blog for details on bond issues). He addressed the audience as if it were a foreign crowd when in reality it looked just like the packed crowds that officials prepare for him, with a few foreign guests on the first files.

Chavez gloated that for the first time in Venezuelan history small investors had access to such bond issues, that for once a bond issue was not in the hands of a privileged few that set the conditions that best fit them. Maybe. But at 10,000 US dollars the smallest coupon, I would hardly talk of "small" investor. At the official exchange rate 10,000 USD are 19,200,000 Venezuelan Bolivares, VEB. As a reference 1,000,000 VEB monthly paycheck is considered today a decent paycheck and puts you in the middle class (1). With Venezuelan labor laws that 1 million monthly becomes perhaps a 15 million total at year end with bonus and vacations. I wonder how on a 15,000,000 VEB income one can save 19,200,000 VEB. Democratization? Give me a break! To be able to save such amounts in today’s Venezuela you must own your own business or be a high placed executive.

Or win the lottery.

Or be a corrupt official.

(1) For perpective, 1,000,000 is almost 5 times the minimum wage.

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