Tuesday, July 13, 2010

China ousts Venezuela

As Colombia's second largest trading partner, anyway.  The antagonisms, especially Hugo Chávez freezing relations and threatening to cut trade as well, have led to a 68.9% drop of exports to Venezuela in May, following a general trend since the 2008 bombing of Ecuador.

The net result has been more access for China to Colombia's commodities.  However, Colombian exports of manufactured goods (like machinery and spare parts) have dropped 4.5%, due in part to Venezuela's sagging economy.

Who would have thought that a trade dispute between Venezuela and Colombia would ultimately benefit China the most?

16 comments:

Anonymous,  12:24 PM  

Venezuela is a sinking ship. So, while the transition will be painful, it's in Colombia's interest to extricate itself. Sort of what Chile went through with Argentina and natural gas.

Only idiots like Mark Weisbrot still think Venezuela's economic policies make sense.

Slave Revolt,  5:23 PM  

Anonymous: sinking ship?

Hardly. Greg needs to keep in mind that globilization is not the be-all, end-all. Witness, global capitalism and its discontents.

The majority of the world's people get poorer, the ecological devastation is necrophilic and pornographic---but rich elites keep getting richer.


Of course, Greg cannot accent this empirically-based line of critical analysis. It wouldn't be conducive toward the goal of obtaining tenure in the empire's academy.

Anonymous,  7:08 PM  

Yes, sinking ship. Crime infested, corruption everywhere, highest inflation in the Americas, and in continued recession.

It's what happens when leftists take power.

Alfredo 9:14 PM  

Anon you just made me laugh.

Anonymous,  9:19 PM  

Yeah, countries in collapse are funny!

Peter T. Hooper 9:11 PM  

Anon, a couple of things. First, two of the countries that have exhibited the best economic performance in Latin America have been Chile under Bachelet (of the Socialist Party) and Brazil under Lula, both good leftists.

Second, I am currently in Venezuela doing field research, and it strikes me that much of the US perception of VZ is overly simplistic. Yes there are economic problems, but Chavez can rationalize a few policies and keep the economy largely afloat (if, as BBVA and others predict, that oil prices will exhibit a steady increase over the next 3 years). Crime exists, but here in Caracas, people go about their days just as anyone else would; going to and from work, spending time with family out of doors, and enjoying the World Cup. There is food in the stores (no bread lines), TVs and other electronics to available for purchase, and no Chavist - Anti-Chavista clashes.

Anonymous,  9:17 PM  

Neither Bachelet nor Lula followed left-wing economic policies.

The only good thing Lula did was to keep in place the policies of his predecessor.

He also got lucky on commodity prices.

Venezuela is a disaster and Caracas a dangerous dump. It's the only major country in the region still in recession.

So what if 'people go about their lives'? They do that even in Cuba and North Korea. They are still economic basketcases.

leftside 2:58 PM  

First, two of the countries that have exhibited the best economic performance in Latin America have been Chile under Bachelet (of the Socialist Party) and Brazil under Lula, both good leftists.

Based on what data??! Using my calculations from World Bank GDP figures, Brazil has averaged 3.9% growth from 2004-2009, Chile average 3.7%, while Venezuela doubled those rates and averaged 8.2%, Argentina was next I believe at 7.1% growth.

Peter T. Hooper 8:31 PM  

Anon: I have spoken to many of the major economic policymakers in Chile over the last 20 years (e.g. many ministers of finance), and I assure you that they are committed leftists and Keynesians. For example, Chile, in the middle of the worst of the economic crisis increased government spending 17.8% in 2009 to ensure stability of social policies and to pick up employment that the private sector dropped. This was, by ratio of spending to GDP, the 5th largest stimulus package in the world. It worked. Their economic policies are restrictive during the good times, but liberal on the downside. BTW, have you been to Caracas. I'm looking out my window here in Caracas right now. No murderers, no ruffians, and no gunshots in the distance. There are, however, people going to the mall to buy things and watch Twilight or whatever. It has its problems, yes, but the presentation in the US media is wildly inaccurate. So come on down and expand that mind of yours. You'll be glad you did.

And Leftside, economic growth is not the only indicator of economic performance. In fact, economists have long touted that VOLATILITY OF GROWTH, or lack thereof, is an incredibly important factor. Chile and Brazil have achieved this while Argentina and Venezuela have not. For more on this I suggest "Chile menos volatil" written a few years ago by Chile's current finance minister.

Peter T. Hooper 8:38 PM  

Oh, another thing, Anon. Lula didn't get "lucky" because of a commodity boom. He prudently managed the resources from the boom, which is not an easy thing to do (which, for example, Venezuela has not done well - I'm surprised that you failed to make this connection considering your attention to Venezuela's failings, real or perceived). One of the things that Lula has done with this money was to pay down external debt that he inherited from his predecessor(s).

leftside 2:47 PM  

Sorry Peter, but you are not going to convince me that Chile or Brazil's half as good economic performance has actually been "the best" or better than Venezuela's or Argentina's just because you think it has been more steady.

And I know Lula talks a lot about paying down the debt, but the numbers, again don't really back it up. Brazil's public debt remains much too high - 45% of GDP, down from 58% in 2004. Meanwhile, Venezuela has paid down their debt from 43% to 19% in 2009.


BTW, I am not trying to dog Lula - I like him, especially this second term. But his record is not that great.

Peter T. Hooper 5:14 PM  

leftside: the one thing that I would argue that you are overlooking is that the much higher inflation in Argentina, and especially Venezuela, has negated whatever higher rate of GDP growth there has been. Another important economic variable to consider is exchange rate stability, which Brazil, and especially Chile, have been very vigilant about maintaining (by keeping down spending of commodity revenues) in order to keep the non-commodity export sector viable. In Venezuela, the currency is so overvalued that the export sector has basically ceased to exist, deepening the dependence on oil and weakening long-term economic prospects. At least that's my argument. I understand that you likely see things differently, and I respect that. Lastly, it is also worth keeping in mind that Chile could easily have been growing at about 8% from 2003-2008, but the economic policymakers there have opted in favor of steady growth rates of 3-4% over the long term, via the structural balance rule, instead of potentially higher, but erratic rates of growth (this based on conversations with these people). This sounds weird, but they did consciously choose policies designed to not allow the economy to overheat at the expense of reducing short-term growth rates. The upshot is that social spending has been going upwards at a steady, linear trajectory, ensuring adequate and uninterrupted funding of important social projects.

The one last thing that I would add is that Venezuela has admirably paid down its external debt, but internal debt has been increasing dramatically.

Anonymous,  6:57 PM  

Peter,

Yes, Lula managed not to spend all the benefits from the commodity boom. But that's not too much to ask of a leader. The key basic macro policies is what he kept from previous administrations. And that is much more important.

And while the foreign currency portion of public debt has dropped in Brazil (as it has in most countries in Latin America, by the way) there are two huge caveats:

a) It wasn't that high when Lula took power (only about 30% of al public debt)

b) He simply replaced foreign currency debt with local currency debt, so that the overall debt burden (debt to GDP) remained roughly the same, slightly over 60%. (Don't look at Brazil's misleading 'net debt' figures).

If you are going to define leftist in a Latin American context as Keynesian, well then everyone is a leftist. I was referring to the macroeconomic populists like Chavez. Different breed altogether.

Justin Delacour 6:15 PM  

leftside: the one thing that I would argue that you are overlooking is that the much higher inflation in Argentina, and especially Venezuela, has negated whatever higher rate of GDP growth there has been.

That's just wrong, Peter. Leftside is not talking about nominal growth rates. He's talking about real growth rates. Any economist will tell you that real growth rates are always adjusted for inflation. The notion that growth rates are "negated" by the rate of inflation is simply false.

Justin Delacour 6:25 PM  

I do agree, however, with Peter's point that Venezuela has yet to show much of a long-term strategy for economic development.

Boli-Nica 3:42 PM  


Using my calculations from World Bank GDP figures, Brazil has averaged 3.9% growth from 2004-2009, Chile average 3.7%, while Venezuela doubled those rates and averaged 8.2%.


Leftside, again, the fact that Venezuela grew so much from 2004-09, is hardly surprising. When you are historically, one of the top oil producers in the world that happens when oil prices hit a record high for a sustained period of time. It has happened in Venezuela in boom times before, even as other Latin American countries were going through economic shocks of some sort or another.

The key questions with all this oil wealth - and decent oil prices -why is the country's GDP now shrinking? and why is the country even more dependent on oil than it was 15 years ago? And where has all that revenue gone, besides Miami Real Estate.

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