The Venezuelan economy, under the direction of President Hugo Chávez, is starting to unravel in the currency market.Crossposted on Soccer Dad
While Venezuela earns record proceeds from oil exports, consumers face shortages of meat, flour and cooking oil. Annual inflation has risen to 16 percent, the highest in Latin America, as Chávez tripled government spending in four years.
Exxon Mobil and ConocoPhillips are pulling out after Chávez demanded that they cede control of joint venture projects . . .
"This has been the worst-managed oil boom in Venezuela's history," said Ricardo Hausmann, a former government planning minister who now teaches economics at Harvard University. "A devaluation is a foregone conclusion. The only question is when."
JPMorgan Chase and Merrill Lynch expect Chávez to devalue the bolivar 14 percent in the first quarter of 2008 after he introduces a new currency Jan. 1 that will lop three zeros off all denominations . . .
Chávez terminated the broadcast license of the country's most-watched television network in May, sparking weeks of student protests. He has threatened to take over cement makers, hospitals, banks, supermarkets and butcher shops, saying they were not obeying price controls.
"It's like our director of marketing, our director of sales, our director of manufacturing is President Chávez," said Edgar Contreras, who runs international operations at Molinos Nacionales, a Caracas-based food manufacturer that employs 1,500 people. "We can't go on like this."
Contreras called the government-set prices on many products "fantasy prices" that are below production costs. Milk, chicken, coffee and flour have disappeared from store shelves in Caracas at times this year.
Wednesday, September 05, 2007
I figured Chavez might get away with his economic adventures for a certain time thanks to Venezuela's oil wealth, but the inevitable economic rot seems to be setting in immediately. From the International Herald Tribune: