VenEconomy: Venezuela Remains on the Road to Hell
From the Editors of VenEconomy
If two economists get together, they will produce three different theories.
The economic emergency that Venezuela is going through is so grave and its causes and solutions so obvious that brought together some 60 Venezuelan economists in agreement, including one or two supporters of the so-called "Socialism of the 21st century."
These 60 professionals have developed a 15-page document addressed to the National Executive and to all sectors of the country, explaining the reasons of the crisis as they draw up proposals to deal with the emergency. This document was published in the web site of NGO Pensar en Venezuela (www.pensarenvenezuela.org.ve) on Thursday.These proposals are based on a reality that is well exposed in the document: "Venezuela requires the establishment of a market economy with strong social and economic institutions, forming part of a democracy where all national sectors will have their doors open to participate without fear in the national development." That is to say, a trilogy of democracy, legal certainty and inclusion.
The recommendations laid on the table by these economists in the search for "a different course" can be summed up in six main points:
1. Establish a new organized budgetary process aimed at reducing the public sector deficit, which should not exceed 4% of the GDP within two years.
2. Rescue the autonomy of the central bank with the appointment of a qualified board of directors not subjected to the guidelines of the Government, and that sets itself the following goals as top priority: suspend the monetary financing of more than two-thirds of the public sector deficit and the transfer of international reserves to the FONDEN national savings fund; let interest rates reward national savings and promote stability and the healthy growth of the financial system.
3. Execute a reorganization and financial restructuring plan for state-run oil company PDVSA in order to recover and raise the exploration, production and export capacity of crude oil and oil products of its own and its joint ventures.
4. Perform liability transactions to improve and reduce the maturity profile of the external debt of both the Republic and PDVSA, in addition to the review or suspension of other credit facilities received or provided to other countries, within a plan of reforms and new economic policy.
5. Remove foreign exchange and price control regimes as a primary goal within the economic plan – fiscal, monetary, financial – for which it is essential to create the economic and social conditions to improve the production, distribution and trade of goods and services.
6. Outline sectoral policies in the context of the changes performed on the country’s economic and oil policy, in order to bolster the economic recovery and a greater labor productivity in the agricultural, manufacturing, mining, construction, and tourism sectors.
It should be noted that, since 2009, a group of economists has been making this kind of coherent and sustainable proposal to the Government in an attempt to turn around its failed economic policy of the past 16 years. Unfortunately, it did not pay heed to these recommendations in spite of the fact that the crisis that ended up making explosion at the beginning of 2015, was already becoming unbearable even before the drop in oil prices. Now in spite of the fact that Venezuela has its external, financial and fiscal accounts in an extreme situation, which puts it on the brink of a hyperinflation process, Nicolás Maduro chose to condemn the country to remain on the road to hell after announcing his "new economic measures" in the Parliament on Thursday.
VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.
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