Giordani seems to think inflation of 30% is an achievement

Published: Wednesday, September 08, 2010

VenEconomy: Planning & Finance Minister Jorge Giordani denied outright that Venezuela would fail to meet payment of its foreign debt and fall into default.

According to the explanation he gave Jose Vicente Rangel in an interview broadcast by Televen, "Throughout its history, Venezuela has honored its commitments, and particularly during these ten years thanks to the political will of the government headed by President Chavez to honor them."

Perhaps because he was too young at the time or because his mind was on other things, Giordani does not remember the 1981 debt crisis, during the Luis Herrera Campins administration. Nor does he seem to remember the debt crisis at the beginning of the 20th century, when the British were given control of customs posts in order ensure servicing of the foreign debt of the day. Much less does he remember the many liabilities that this government has failed to meet as a result of expropriations and other matters subject to international treaties.

However, the important thing here is not the minister's bad memory, what's important is that, in his arguments for discarding default, he gave no hint of the elements that would guarantee payment in the future of the gigantic foreign debt incurred by this government. Among other things, he could have indicated where the resources for the payments will come from and which surplus or cash flow will be used to cover them, all relevant data, particularly bearing in mind that, for more than five years, both the national budget and the balance of payments have been sustained thanks to fresh borrowing.

Another unfortunate statement made by Giordani in that same interview with Rangel was when he said that the country's recession was a thing of the past, as the economy contracted less in the second quarter of 2010 than it had in the first. What Giordani did not mention were the factors that boosted the economy and that led him to make that optimistic forecast. The fact is that those factors are nowhere to be seen: no increases are predicted either in oil revenues or public spending, in private investment or consumption or in any other factor that would generate growth.

Another of Giordani's statements that looks hollow is that 2010 will close with inflation of less than 30%, for which there is no basis whatsoever.

What is worse, Giordani seems to think that inflation of 30% is an achievement, when the fact of the matter is that any figure above 3% is a disaster for any country. Nor does he seem to realize that Venezuela is the only country in the region with double-digit inflation.

All these statements by Giordani have electoral overtones, but, unfortunately, they reveal an even bigger vacuum: the lack of a clear strategy on the part of the planners of Chavez' revolution for getting Venezuela off the ground.