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A Chavez séance on Venezuela's Economy, Part III

By Daniel Duquenal

The highlight of course was Chavez words on why Venezuela fell into a crisis. Until a very few days ago the official line was "the oil industry sabotage during El Paro is the origin of all our problems, and fortunately we are able to overcome this terrorist attack". (1) Now the new official line is "We were doing fine, maintaining growth and controlling inflation for the first time this century until the politics of the opposition in 2000 came to wreck everything”.

Besides being false, it is absurd. But when have revolutionaries bothered with actual historical facts?

Unfortunately for Hugo Chavez, the economic debacle started with the February 2002 devaluation. The political crisis started in November 2001 when the enabling law was promulgated destroying the last vestiges of economical confidence that were left. Whatever he says, his team was in charge from February 1999 until December 2001 when for the first time the opposition was able to call for a strike. This strike was called because Chavez refused to revisit some of the controversial laws dictated within the frame of the enabling law.

I doubt very much that a strike, just before the Christmas month long recess, would have been able by itself to provoke a devaluation 2 months after, so easily undoing 2 years and 10 months of allegedly sound economical policies. (2) Indeed, Chavez was setting the economic parameters for two years and 10 months before the opposition balked. That was long enough for the opposition to make up their minds as to the future of Venezuelan economy. Incidentally, the devaluation was in February 2002 and the "coup" against Chavez was in April 2002.

I suppose that soon we will be told that the nasty opposition was already plotting against Chavez before this one was born. All is possible for the man that has transformed Bolivar from the aristocratic scion of a rich planter family into a communist freedom fighter.

Notes longer than the text, like in scholarly books!

(1) This was the never ending line that when the PDVSA oil workers went on strike they trashed all installations. To date they have not been able to build a single case of sabotage against a single fired PDVSA worker. These were careful to leave under notary witness a description on how they left things when they went on strike. Apparently the new PDVSA management has not been able to make any charge stick to the now fired workers. This has become really one of the slimiest attack lines of chavismo and it is unbelievable that people are still buying it, even within the opposition. But it is a propaganda war, and thus this lie has still a few days ahead.

(2) Giordani was the architect, if one can call him that, of the Chavez policies in the first half of his term. A theoretical economist of the old school, without any real experience in the private sector he decided to gamble on monetary controls and debt payment to please the like of the IMF. That is, stay out of trouble outside while inside Chavez changed the constitution.

Giordani never managed to bring inflation to single digits, and along the way could not stop growing budget deficits. Still, he managed to reduce foreign debt at the cost of a ballooning internal debt. The breaking point came late 2001 and by February 2002 devaluation could not be avoided anymore. Amazingly this did not cost him his post. We had to wait until the April 2002 events to see Giordani leave as a sign of a new and improved Chavez. As soon as Chavez could get away with it, he took Giordani back into his cabinet, and at the same post certainly not helping confidence to come back. But Chavez has too few real faithful and Giordani is one of them.

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