Continued deterioration in the Venezuelan economy

Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

The citizens of Venezuela continue to suffer at the hands of their elected officials.

Question for you to ponder: Is there a particular economic system that is causing all the suffering?

(Cross-post from my other blog, Outrun Change.)

2/29 – AP at Fox News – Inflation-hit Venezuela to print bigger bills – Central Bank president says Venezuela will start printing 500 and 1,000 bolivar notes sometime. No date mentioned.

Largest bill in circulation is currently the 100 note. At exchange rates in effect a month ago or so, that would be worth about US$0.10. Largest bill in circulation is equal to about one American dime.

How can an economy function in such circumstances? Not very well.

3/4 – According to dolartoday.com, the exchange rate is 1,105 bolivars to the dollar. That means 100 bolivars is 9.05 cents.

3/18 – Exchange rate is 1,211, or 100 bolivars is 8.25 cents.

3/18 – Foundation for Economic Education – What Did Venezuela Use Before Candles? Electricity.

Article starts with an old joke, but it’s the first time I have heard it:

Q: What did socialists use before candles?

A: Electricity.

In Venezuela there is a two-day holiday after Easter. To conserve water that drives a major hydroelectric plant, the government will give everyone in the country three extra days of vacation after Easter.

The plan, or hope, or dream, or fantasy is shutting down all economic activity in the country for a week will build up enough water behind the dam to generate electricity so the rolling blackouts, which can last for a couple of days at a time, will come to an end.

There are already massive shortages of electricity, food, medicine, and even toilet paper. Don’t count on shutting down the country for a week to solve electricity or any other troubles.

4/3 – Wall Street Journal – Water Shortage Cripples Venezuela – In additions to shortages of food and medicine, Venezuela is now facing shortages of drinking water. One pundit observes the lack of rain, caused by El-Nino effect, is affecting Venezuela but not its neighbors.

4/7 – Wall Street Journal – Venezuelans Get Fridays Off in Government’s Latest Bid to Save Energy – All workers in the country will be staying at home on Fridays for April and May. This is an effort to conserve energy.

Just as a wild guess, I’ll stake a claim that shutting down the economy 20% of the work days will have an adverse impact on the economic performance for the country and increase the inflation rate.

Immediate symptom visible in the article is the already existing electricity blackouts are becoming more common.

Underlying issue is the water level in the main reservoir driving the main hydroelectric plant in the country is at a record low.

Underlying cause, visible if you want to see it, is nationalization of the electricity industry in 2007. Many promised infrastructure projects have never been completed. Imagine that.

Advertisements
Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: