Colombia, Venezuela and economism

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

As easy as when Paul the octopus chooses his oyster: “economic interests will prevail,” says almost everyone who has an opinion on the current Colombia-Venezuela border spat.

They do not take into account the ideological factor, because, apparently, some experts believe that modern man is born without the brain's right hemisphere, which makes him a perfectly rational being who does not know of emotions, superstition, prejudice, or imagination.

They also do not consider the position of other sectors in both countries, because, according to them, the only ones that count in this matter are certain Colombian exporters who are apparently lobbying to recover the Venezuelan market. What about the Armed Forces, the electorate, the media, politicians and businessmen that do not trade with Venezuela? All this is out of their speculations. The division of Venezuelan society is neither mentioned in their analysis, nor the position of other interested countries, such as Cuba, Brazil or the U.S., for example.

Everyone that analyzes the diplomatic tensions between Colombia and Venezuela is based, mostly, on economicist hypothesis to predict that conflicts between Chavez and Colombia will disappear with the arrival of Santos. Unfortunately, we suspect they will soon realize that homo economicus existed only in the imagination of John Stuart Mill.

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Expectation for Brazil's presidential election

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

Some Brazilian polling firms said, first, that Jose Serra was the favorite to win the presidency with a 10 point lead. Afterwards, they said Dilma Rousseff was ahead by a small margin, and they say now that there is a technical tie between the two main candidates in Brazil.

Initially, Serra was favored not so much for his work, but because of the economic downturn and the ruling party's time in government. Notwithstanding, economic conditions have improved significantly in the last months and Rousseff has managed to launch a more attractive proposition than simply being the Lula's candidate. While we note a weaker effort by Serra, currently.

Also, Brazil's electoral system has several deficiencies that compromise its transparency -fully automated and without manual audits of votes- which is an extra advantage that favors the ruling party, in this case, the coalition that supports Rousseff.

The pollsters expect a close fight and surely they will be jumping from one candidate to another when asking for the favorite in the remainder of the campaign. However, from our perspective, we don't see good possibilities for Jose Serra, so we think that Dilma Rousseff will be the next president of Brazil.

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Venezuela: Estimate of 2010-II GDP growth

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

According to our calculations, Venezuela's GDP should have dropped by 5,4% in the second quarter of 2010 over the same period last year.

This would mean the fifth consecutive quarter of economic contraction, while most other Latin American countries recovered growth since months ago.

Unemployment showed a slight decline during this period, but this was not enough to counter the electricity crisis and the fall in private investment. In addition, in this quarter the inflation rate had the largest increase so far this year and two extraordinary factors were added to the Chavez's recessive cocktail: There was an intense monetary trauma due to the insertion of the dollar-SITME in the exchange rate system, and the prosecution of almost all stock broker firms and “Banco Federal”, which caused a financial nervousness that did not do any good to the economy.

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Interview: Chavez or democracy?

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

In this link, we appear in an interview for the Ukrainian magazine "Український Тиждень.” We talked about the changes Chavez has made in the Venezuelan political system, why the shift to the Cuban model, Chavez's great mistakes as president, the real results of the XXI century socialism and other issues related to Venezuela's current political situation.

At the end, we say that if Chavez wins again in 2012, he would enact all the reforms he needs to install a communist regime, so Venezuela would definitely lose its democracy. In this case, we think Venezuela would look like Cuba or Belarus.

Economically, the system would be fully nationalized, but with a small space for the micro-private property. And politically, we would have a lifetime president and a privatized bureaucracy in the hands of Chavistas.

The original interview is in Ukrainian, but there are an English version here.

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The probable relationship Santos-Chavez

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

Juan Manuel Santos and Hugo Chavez are divided by ideology. The first is a democrat, the second a radical socialist.

They are divided by the FARC, because Santos is opposed to them, while Chavez has a very complacent attitude towards the socialist guerrillas. In this matter, by the way, they are also divided by the issue of the U.S. military in Colombia.

They are divided by the recent diplomatic tensions, which have caused the chronic stagnation that the two countries have been accepting as a habit.

They are divided by Brazil, because this has been one of the big winners of the fight between Chavez and Uribe. Venezuela now buys from Brazil what it previously imported from Colombia.

And they are also divided by Cuba, since trade between the Castro dictatorship and Colombia is relatively insignificant, which should be of paramount importance to explain the attitude of Chavez. Besides that Cuba does not share the Colombian government's interest of fighting terrorism.

For all this, although some people think that Santos and Chavez will suddenly be moved by a cold pragmatism, it seems very difficult for these presidents to improve the Colombian-Venezuelan relations to a level of warmth and understanding. They may have short-term goals, or statements that will try to dissolve the tension, but eventually, the elements described here should take things in another direction. Even we think Chavez will not lift his embargo against Colombia, he didn't during the worst of the Venezuelan electricity crisis, in spite that Colombians had the enough energy to mitigate the devastating shortages in Venezuela, then, why would he do it now?

Trade war and strong diplomatic tensions are the most likely scenario when the governments of Chavez and Santos begin to interact.

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Hyper-inflationary Statism

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

Belarus is, in general terms, a nationalized economy, even so, prices there usually rise at hyper-inflationary rates (8.4% in 2007, 14.8% in 2008 and 13% in 2009).

Vietnam is also, in general terms, a nationalized economy, even so, prices there usually rise at hyper-inflationary rates (8.3% in 2007, 23.1% in 2008 and 7% in 2009).

And in Venezuela, the government has also almost always had the habit of owning many businesses, a trend that has increased during the 11-year rule of Hugo Chavez. Even so, prices in Venezuela usually rise at hyper-inflationary rates (18.7% in 2007, 30.4% in 2008 and 29.5% in 2009).

The point is, if the government in these countries supply an important part of the goods consumed by the people, why the big rise in prices? It is a reality that contradicts socialist theories. It was assumed that the fault was in the private sector, but while these nations have economies with strong Statist characteristics, in them, the goods increase in value at vertiginous rates. In fact, in these havens of nationalization, inflation is much higher than that of the capitalist countries, as can be seen if we compare their records with those of the United States, Canada, Japan or the European Union members. Where inflation has only rarely exceeded 3% in the last ten years.

Inflation is a monetary phenomenon that is given mainly by government spending and the amount of money it prints, so when a country is affected by hyper-inflation, the government is the main cause. Removing the private sector from the system is not a guarantee that the general level of prices will stabilize, as evidenced by the cases described above.

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Double-dip recession, Stiglitz's third mistake

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

A small country like Greece do not have enough influence to destabilize the global economy. Furthermore, fears in Greece are based on the economic fundamentals shown by this country, contrary to what happens outside Europe, where most developed countries are presenting better results.

Europe is currently a weakened economy, and we expect low GDP growth in this region for the rest of the year; however, the solitary strength of Europe should not be enough to stop the joint recovery of countries like USA, China, India, Japan, Russia, most of Africa and almost all Latin America. Just the opposite should be expected: an export economy, like Europe's, will be influenced by the recovery of the rest of the world, a fact that eventually would also improve conditions in the Eurozone.

In 2008, Joseph Stiglitz said the credit crisis would represent the end of capitalism, but he was wrong. In 2009, the same author stated that the global reserve system based on the US dollar was in the process of fraying, but he was wrong. And now, in 2010, the winner of the Nobel Prize for economics says that there are great chances of a global double-dip recession, but it appears Stiglitz will be wrong for third consecutive time, because as we have said, neither the macroeconomic performance outside Europe, nor the solitary influence of the Euro zone, support the thesis of a second global recession in 2010 or 2011.

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