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February 15, 2014

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No, you can't do a better job. You'd be messing with someone's gold plated iron bowl, probably someones in the Army, with lots of convenient weapons.

My own modesty in these things generally knows few bounds, but in this case you're wrong.

The Bolivarian screw ups have been immense, to little political benefit. The exchange rate and electricity subsidies are exhibits A and B. And now it's killing the Chavistas.

That's a different question from the ease of fixing the mess now. As you know, because you commented on the post, I don't think that mess is easy to fix and I wondered why Capriles wanted to try!

So be fair, Shah8. I could have run Chavismo better had Hugo appointed me his right-hand man --- so could you! Moreover, I stand astounded at Maduro's economic inaction and political misaction in the face of the coming economic nightmare.

That said, I am open to a Mark Weisbrot (whom I respect) like case that Maduro has a strategy that will keep the Socialist Party in power at the lowest possible cost. In fact, I would be delighted to hear that case! As always, my opinion can be changed.

My mindset is usually that when things are crazy or irrational--that's because someone is making bank off of it. And in general, I'm always hesitant to call countries crazy or incompetent because usually, I don't know the half of it. Much of that time, I only know that that country is crazy because some propagandist or another has some reason to want me to know how crazy someone or some country is.

As far as the extent of the Bolivarian screw ups, I'm still disinclined to think of them as massive. Is it really as massive as any of the other screwups on that continent? I mean, you can't do worse than Paraguay in the 1870s, you know. More recently, even considering the different political circumstances, wasn't Mexico's handling of their domestic situation circa 1994 quite a bit worse? Fiscal deficit wasn't quite as bad, at 7% GDP, but maintaining an absurdly overvalued currency (and really all countries try to do that around election time, so how stupid is limited to how overvalued), and on top of that, sell bonds that inculcated massive currency risk into the country's financing mechanism? Not preparing at all for the trade consequences of NAFTA or prepping the domestic opinion (with the result of the Zapatistas doing the torches and pitchfork thing)? Taking forever to stop the bleeding, and when they did, just...sorta announce a total float out of the blue?

As it is, nowadays, I have a sneaking suspicion that Mexico is far more likely to blow up (politically) than Venezuela.

As long as the right wing in Venezuela continues to be of the repellent and intractable sort, I'm not sure it's possible to kill the Chavistas. If the likes of Thaksin (and absurdly wasteful rice subsidies) still keeps going in Thailand, Chavism certainly can keep going here. As for Venezuela itself, it's overall position is much less intractable than Brazil or Argentina. I mean, it's not as if there are constant police strikes in Venezuela, as far as I know, but I seem to remember that regular police in Venezuela aren't as well compensated or something. And for every crazy subsidy you can mention, I can come up with one from another country, such as Saudi Arabia's long term policy (only stopped recently), of using the Disi aquifer water to grow wheat as part of their food security program. At least in Venezuela, it was only money. Water in the desert is a lot more precious.

I'd love to be Chavez's right hand man. I'd bet he'd even like me (if I knew spanish)! However, that doesn't get you or me past Diosdado Cabello and his clique, nor does that mean we'd actually get the staff needed to give Chavez solutions to his problems. After all, Chavez will want answers. Easy to digest answers. Easy to implement too. With ready arguments against the interests most easy answers will penalize, and ready bargains to placate such individuals--all the while keeping the budget from blowing sky high, and not go crazy from all the whining that we've got all this oil money...

Well, technically you'd have to be Maduro's right-hand man right now.

More seriously ... yes, Chavismo's screw-ups really have been that massive. The Mexican, Thai and Saudi comparisons reflect very poorly on the Bolivarian Republic.

In Mexico in 1994, you had a sudden shift in market expectations that blindsided the government and monetary authorities. They tried to muscle their way through in the hope that foreign investors would come to their senses, but failed. There was nothing remotely like the disequilibria now facing Venezuela.

(I think you may have confused the fiscal deficit with the current account deficit.)

As for Thailand, well, I can't comment on the internal politics because I don't understand them. But the rice subsidy, while unsustainable, is not a pressing problem. There is no comparison between Thai economic management under its recent governments and Bolivarian economic management.

http://www.imf.org/external/pubs/ft/scr/2013/cr13323.pdf

Finally, Saudi Arabia has dumb energy policies. But Saudi Arabia can afford them. Moreover, the Saudi authorities prepared for and managed their adverse effects. There are no rolling blackouts.

It's true that Maduro is unlikely to provoke a crisis that will lead to the death of more than half the adult male population. But that's a rather low bar.

Why try to defend the indefensible? I'm a bit bemused.

Alright, let me allow to rebut your rebuttal!

1) Mexico's shift in sentiment had everything to do with Salina's highly top-down mentality and him trying to assert policy Mexico's internal political situation wouldn't let him cash. If you have assassinations and active internal rebellions, it might be expected that the international investment world will take money off the table (and make money doing so--just like Soros ripping off the BoE). And Mexico had every opportunity to realize that they couldn't afford to allow that to happen, since they they had been consistently dealing with trying to roll over debt (and doing crazy things, like dollar indexed peso bonds for general state revenue bonds). Yup, mistook current account for fiscal.

Thailand about as manages its economy as Papuans do in Irian Jaya. Okay, exaggerating a bit. We *are* talking post 1997, right? Even so, how many truly good years had Thailand had, post 1997? I am reasonably certain,that should I lift some rocks, I will find some pretty awful practices--just from reading about the controversial high speed rail line from Singapore to Kunming. Refreshing my memory of the bhat crisis does not make me feel good about China. Not the same currency risk profile with how China controls the currency, but still, plenty of the issues for Thailand before 1997 definitely is in play for China now. Wonder if the effects will be squeezed to some other unpleasant crisis rather than currency.

Bolivarian economics is pretty simple. Free for all on the oil money. To the extent that it was positive, there was more of an attempt at investing in areas other than Caracas and the big cities...Then again, OILOILOILOIL. That's why there are economic migrants *to* Venezuela, and said economic migrants have a better shot at doing well than the dirt poor migrants floating to Thailand. Also, compared to Saudi Arabia or UAE, much much more of the oil money gets to the population at large in Venezuela. In a macabre sense, the lack of solid management also assists (on a low level) economic vitality through all the leaks. Nothing like it would if there was good management for everyone's benefit (and nobody asking for bribes every five miles).

Saudi's *commitments* are far more extensive than Venezuela--they have to have a higher price than Venezuela to stay on an even keel. There are different blends of quality and vulnerabilities.

I don't defend the indefensible. I simply defend the concept that most countries have an internal political history that's rich and dense, and which offers many, often countervailing, incentives to insiders as well as many grandfathered programs well out of context of today. I feel that it's worth defending, because I want to promote a more continental wide perspective. I feel that Venezuela generally suffers from the same problems as most of its neighbors, and they do better on some issues and do worse on others. More than that, the idea that Chavismo is uniquely terrible rings false to me, since not only can they clear the bar of Paraguay 1870, but the current regime does seem to be about or more effective than, say, the government of Carlos Andrés Pérez both in good times and in bad times.

I do wonder whether there will be any coordinated currency barriers in a few years among Latin American countries.

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