Unhinged economic planning

We have often heard about the lack of resources available to fund institutions such as the National Exchange Commission. The latter, by the way, would be much better off reviewing and stamping prospectus’ of new issues with stamps such as “Danger - Opportunities and Risks - Issue Not Controlled” than creating the illusion of exercising effective control. We vividly remember the Bank Superintendency during the recent bank crisis.

However, some new government initiatives such as the new Banco de Comercio Exterior (Export Bank), are receiving ample budgetary support via capitalization (this should not be construed as being a criticism or as trying to belittle the importance of Bancoex). No one can dispute the fact that economic planning seems to be a bit disjointed.

Additionally, we all have heard about the ambitious investment programs being implemented by sectors such as Petrochemicals. However, when we read in the local press about the strict orders issued to firms such as Cadafe and Hidroven, both of utmost importance for the development of the country, to drastically reduce their investments supposedly in order to fight inflation (by reducing “excess” liquidity), there is no doubt that national economic development seems to lack a backbone.

We must remember that one of the main justifications for the Reactivation of Marginal Oil Fields program was that a great number of the wells were shut down, not for lack of productivity, but because it would have required large amounts of resources and investment, and that PDVSA, lacking these resources, preferred to invest in areas that held more promise and higher returns.

Now, PDVSA is being asked to cut back on its expenditure in 1998 in order to join the attack on inflation. For the third time, we dare put forward the thesis that there is total dyslexia in our national economic planning. A more extreme interpretation of this seems to imply that investment in marginal fields under the oil opening program may go ahead while development of the high yield wells operated by PDVSA must by scaled back.

Additionally, without trying to discuss the reason why, the country has been suffering though high inflation without the corresponding devaluation of the national currency. This real appreciation of the currency flies directly into the face of the efforts of those businesses trying to compete in the international arena via exports of goods or services such as tourism.

The cutback order by the national executive in the investment programs of the above-mentioned entities specifically and unbelievably excludes the purchases of imported goods and services, paid in hard currency all under the assumption that these disbursements do not adversely affect monetary liquidity in the country. We come back again to the thesis that national economic planning is basically brain-dead. Another extreme interpretation is that it is forbidden to buy locally produced goods (no compre Venezolano) while the purchase of imported goods are encouraged.

The dramatic reduction in the economic activity of the country over the past few years has created unemployment and hunger in a great part of its population. It cannot be disputed that we urgently need to develop a plan to reactivate the economy. This plan must go much further than simply stimulating an increase in the demand for consumer goods, which is usually a simple hedge against inflation and not the result of a coherent plan.

However, when we observe that our planning teams, lacking the courage to confront inefficient public spending, the main cause of all most of our ills, continue to raise smoke screens such as the argument of excessive liquidity, we can only add another attribute to our national economic planning, lack of heart.

I’ve mentioned this before in a previous article and I repeat it now. The omnipresent preoccupation with excess liquidity is like a physician who worries about possible leftovers of food when a patient refuses nourishment and begins to fade away. The problem is not the food, it is the appetite. The problem is not excess liquidity, it is the lack of a healthy economic plan aimed a generating production and productivity.