the-man-burns-during-the-burning-man-2013-arts-and-music-festival-in-the-black-rock-desert-of-nevada-august-31-2013-by-jim-urquhartI was disappointed to see Miguel Angel Santos, normally so lucid, join the unhinged chorus of voices passionately arguing against a straw-man made to stand in for Francisco Rodríguez’s position on macro-economic adjustment. I can understand why a guy like Luis García Mora, who plainly doesn’t understand what adjustment is, could find comfort in arguing against an aggressively dumbed down versions of F.Rod’s argument – but when guys like Santos are following him down the rabbit hole, things have reached a state.

On one level, it’s slightly mystifying that F.Rod’s position draws the level of ire and misrepresentation that it does. Here we have a guy saying that Maduro’s administration is pursuing the same ruinous cycle of pre-election over-valuation, post-election devaluation we’ve seen again and again since the Lusinchi era, a miserable cycle of politically-engineered and motivated boomlets followed by miserable contractions that destroy longer-term prospects for growth and development, and that’s somehow read as a defense of the government’s line! Some very strange forces are at play here.

To be clear, F.Rod is not arguing that “¡Ya! Los problemas económicos se van a resolver,” and much less that “Ramírez y Merentes son una suerte de Tim Geithner y Larry Summers.” (#FFS, Miguel Angel.)

He’s arguing that precisely because our economic policy-maker remain every bit as venal and dim-witted as they’ve always been, and because their basic objective remains the same it always has (to accumulate influence, build their patronage networks and steal), they’re likely to try to do what they can to hang on to power.

And when you’re a big-time oil exporter with a cash-flow problem, the very obvious elephant in the middle of the room remains the same as it always was: a big-time devaluation that has the same effect as a major tax hike, a one time shift of purchasing power from people at large to the government that abates the main macro (NOT micro) imbalances out there, leaving the country every bit as screwed up in the medium to long-term, but the government relatively better off.

If you’re the government, or someone the government owes money to, that’s good news. For virtually anyone else, it’s bad news. It just so happens that F.Rod’s job description is heavy on cluing in people the government owes money to.

The bigger question, to me, is why F. Rod’s in some ways perfectly conventional analysis draws the  ire and the fevered conspiracy theorizing it does. The best way I can explain it to myself is the Briceño León Effect. You’ll remember Briceño León as the hack sociologist who made up the 24,763-murders-in-2013 figure that has been quoted totemically by just about everybody in the opposition despite containing exactly zero information about 2013.

For fair minded opponents to the chavista regime, the Briceño León episode should’ve been cause for alarm: a clear demonstration that powerful group-think processes are at play in the opposition public sphere, cognitive biases that immediately predispose us to accept any information confirming the view that the government=catastrophe (without inquiring too closely into its provenance), and to just as uncritically reject any information that challenges that position as self-evidently biased/bought/wrong.

This is what I refer to as the Opposition Bullshit Machine: a powerful, deeply entrenched set of cognitive biases that together form an impregnable echo chamber that mirrors the government’s own (though of course without the access to mass media the government’s own echo chamber enjoys).

To me, it’s impossible to see the debate surrounding F.Rod’s adjustment hypothesis and not see the Opposition Bullshit Machine fully mobilized, wounded, and on the defensive. The guy’s real sin is breaking the catastrophist consensus among bits of a commentariat heavily invested in a collapse-is-just-around-the-corner narrative. It’s a sin too many in the opposition won’t forgive.

But if you insist on pillorying anyone who tells you something you may not want to hear, can you really be surprised later on to find out you don’t understand what the fuck is going on?

* Ojo: None of this is meant to say that F.Rod’s hypothesis is definitely right. For all I know, he could have it dead wrong. The government could choose to tank and default amid hyperinflation rather than to devalue and paying its debts. If it does, his failure will be as public as failures can be, his career effectively over, and the F.Rod haters are welcome to do a victory lap or two. How, exactly, F.Rod is meant to be doing himself (or BoA) any favors by purposefully misleading their clients into thinking Venezuela won’t default when they secretly know it will is just another of those little mysteries the Oppo Bullshit Machine would prefer not to tug at lest they see the ludicrous whole conspiracy theory unravel.

24 thoughts on “Strawmanslaughter

  1. An important remark here and it is a bit OT. Briceño León is not a hack. He never occluded his methodology. He mentioned its limitations openly and publicly. It was a compromise between the lack of info and the lack of resources. Briceño León has many very important publications within and outside the realm of violence.

    Maybe you are being sarcastic, in the write up, but clarification was needed.


    • In quoted article:
      “Well, let’s see: for starters, I’d like OVV to publish rather than hide the accuracy (or lack thereof) of their guesstimate. For instance, they tell us that “el rango de las afirmaciones podemos hacerla con un 95% de confianza,” but this doesn’t really make any sense, because they’re not publishing a rango, they’re publishing a number! That point estimate without a confidence interval is close to meaningless. Are they 95% sure that the interval 75/100,000 to 83/100,000 contains the true homicide rate? Or are they 95% sure that it’s between 20/100,000 and 138/100,000? For all we know, the government’s figure – 39/100,000 – is within OVV’s range.

      Then they compound the problem by reporting what they’ve already told us is an estimate with extreme numerical precision – 24,763 deaths, rather than 24,762 or 24,764 – lending the figure an artificial air of exactitude. Not amusing.”

      Mayby not a hack, but what? numerical illiterate? Lazy surveying its research team?


  2. Ay papá… Bueno, en este pleito prefiero no meterme, sino para señalar que Miguel Ángel tiene puntos sólidos, así como los tiene Francisco. Si el vaso está medio vacío o medio lleno … podría no importar un bledo si es que Maduro no demuestra liderazgo. Y es ahí donde el mayor escepticismo radica, porque Ramírez podrá querer subir el precio de la gasolina todo lo que quiera, pero va a necesitar un peso pesado en la parte política que apague a un país (y a un PSUV) incendiado. Si usted piensa que Maduro es ese peso pesado, bien por usted!


        • Subir la gasolina = Traicionar la memoria del muerto metiéndole un cuchillo por donde no da el sol, vender la PATLIA al diabólico FMI, y la “única causa exclusiva del CARACAZO”.

          Están jodidos en su propio mito.

          Lo que pueden tratar de hacer es subir la gasolina, y cuando venga la avalancha inflacionaria sacar sus mismas excusas de siempre, “la guerra ecnómica hizo que todo suba, no la gasolina”, “no es un aumento, es un ajuste revolucionario”, “los pobres como no tienen carro, no les afecta el aumento de la gasolina” o todavía más estúpida “fué todo idea del comandante lamparoscópico, por lo tanto no pueden chillar.”


  3. A mi si me gusto como Miguel Angel trato el tema en su escrito. No estamos hablando de sutiliezas o bemoles, el alma de la venezuela productiva, comenzando directamente por su principal (y unica?) industria competitiva a nivel mundial, esta destrozada.

    Esta destrozada porque ha sido sistematicamente distraida de su objetivo y minada de incompetencia, corrupcion y politica (con p minuscula).

    La economia esta tambien destrozada, en mi opinion, por un diseno de dominacion politica (externo) y por la falla de probdad y decoro y nacionalismo de un establishment poilitico de miserables, quienes solo estan ocupados de robar (y dejar robar para mantenerse) desde el poder.

    Poco importa si el ajuste es por convencion o por necesidad. Lo importante es el resultado economico de devaluacion, inflacion, desajuste fiscal y monetario, cero trnasparencia en la gestion de las fianzas publicas y super importante, la perdida de capacidad de PDVSa para hacer negocio de energia.

    Finalmente, no solo PDVSa y La economia, mas aun la Nacion esta deshilachada y vulnerable. Ha perdido su espiritu y su alma. Esta a la deriva de intereses foraneos y sufrira las consecuencias nefastas de tanta irresponsabilidad de todos los que deberian protegerla y vigilarla.


  4. As totally innocent of any professional economic knowldege , and out of hones laymans curiosity could someone kindly answer the following questions

    Assumming that F Rod analysis is absolutely honest and professional and not guided by any consideration of BOA’s interests ( my own view) and that we (hypothetically ) know nothing of Briceño Leons opinions (which may be tarnished with a laymans ignorance) . Is it possible to query whether the regime is actually taking effective deliberate measures to balance the countrys macroeconomic imbalances and otherwise straighten out its financial difficulties by liberating the exchange rate controls so that it might recieve more bs for the dollars it sells to Venezuelan purchasers .?? In the same vein …

    Is there any support in Giordanis letter for the idea that there is an ongoing plan since 2013 to stabilize the external accounts of the country in order to balance the US$ of imports with the US$ of revenue received from its oil exports by cutting access to US$ for imports ??.

    If this balance is achieved does that imply that there will be enough USD left after paying all unavoidable external debts and obligations for Pdvsa to sell at sicad 2 rates so as to improve its very threatened financial situation ??


  5. Francisco Toro,

    As you can already see in the comments, no direct reply to your main points. Sad how good logic falls on so many deaf ears, or is it blind eyes…


  6. Both Santos and Quico’s paramour FRod will probably be proved partially correct. The Govt. policy makers are a disaster, and will continue being so, but still have some wiggle-room left to avoid an actual default in the near-term. No major across-the-board devaluation nor gasoline hike are likely, since the destabilizing effects to the already-hurting Chavista D-E class base would be too great, but some further smaller adjustments can probably be safely achieved.


  7. Dear Francisco, you make some very good points. My two cents:

    HegemonCorp. media (represented by Hinterlaces, govt-alligned businesspeople and analysts, state owned media, etc.) is recently making all sorts of claims that correspond to a extremely bullish (complacent?) version of BofAML’s Rodriguez claims: that the adjustment is well under way, that economic indicators are already showing signs of recovery in key macro indicators, that the balance of payments crisis is averted, etc. Please refer to this link as it summarizes their position:

    They take a lot of legitimacy on the recent developments in the Venny bond market. Look at Venezuela’s 5y CDS spread:

    A reduction in default risk perception of 45% in the last 4 months is a very big deal, and easily the best performance worldwide (sovereign or corporate) in that time. Again, that was starting from the veeery negative outlook for the country right before the protests erupted.

    My view? That bullish position that has fostered the rally in Venezuelan debt of the last months can be explained by all sorts of things not necessarily related to the govt’s decision-making (which IS STILL marked by policy paralysis, in my opinion): chase for yield, “new neutral” views on EM markets (that we’re stranded in a period of low volatility in asset prices as a result of the global economy still below potential, and hence supported by easy central bank money), strenghening commodity prices -which support our debt payment capacity-, etc.

    As you said before, taking market views at face value isn’t probably the best idea. That being said, there are signs of a vote of confidence towards Venezuela from the capital markets; and the oppo talking-heads shouldn’t ignore this situation when talking about the economic outlook (at risk of sounding like they do right now: alienated from the consensus view), while still being able to present a solid case against what has clearly been so far a disastrous handling of the economy under Maduro.


    • My view? That bullish position that has fostered the rally in Venezuelan debt of the last months can be explained by all sorts of things not necessarily related to the govt’s decision-making (which IS STILL marked by policy paralysis, in my opinion): chase for yield, “new neutral” views on EM markets (that we’re stranded in a period of low volatility in asset prices as a result of the global economy still below potential, and hence supported by easy central bank money), strenghening commodity prices -which support our debt payment capacity-, etc.

      Concur. I also think there is some serious cheerleading going on to try and play in the overall market rally for the government to snag as much cash as possible from this persistently rumored large bond offering in the few couple of months (I’ve heard ranges from $5 – $10 billion, although I think they might be more likely to break that up into 2-3 parts).

      The paralysis thing is important. All the words they are speaking are only so much wind. So far, the “needed” policy adjustments that have been made are cosmetic at best and do little or nothing to solve the overarching problems facing Venezuela. Saying a unification of exchange rates is needed without providing a loose roadmap? Changing your highly dogmatic economic head for one that is somewhat less so? Devaluing the currency but not addressing the leakages in the economy? None of this makes the overall picture better, it just makes it more palatable to investors.

      What I see happening isn’t so much political as it is making miniscule adjustments without upsetting the balancing act between maintaining willing investors and sustaining power. I think this is why they spent so much time pinging every available source for loans or in-kind financing, from China to Russia and their other “strategic” partners to the oil companies in recent months (cf. the recent news on SOE and oil companies fronting capital for projects in Venezuela.)


      • Yours is a correct analysis: the regime is mindful of attempting to improve the economics but without any change in their persecutory poilitical policies .or any loosening in their absolute hold on power . .

        From an economic perspective they have certain favoured traditional constituencies they want to keep happy .:
        1. the foreign bondholders and those representing their interests (to help them roll over the international debt when the current bonds fall due)
        2. the gaggle of latam and caribbean countries which ‘in time of need’ support it in international forums (which means selling them oil at discounted prices and easy payment terms)
        3. the mass of their D-E class supporters ( wich means maintaining as much as possible the hand outs ,subsidized stapples and other benefits theyve become accostumed to ) .
        4. their Chinese allies who provide then with loans on much easier terms than the bondholders ( against a securitized future supply of oil and a stake in developing the country’s natural resources) .
        5. The clique of corrupt military and boliburgues racketeers (‘enchufados’) who provide the regime with strong arm protection ( military ) and the regime leaders with sleasy personal business opportunities (boliburgueses) .

        Now Ramirez is attempting to add two more constituencies to the above list , two groups which before where in the trash heap of govt attention: first , certain big muscled providers of oil industry services to try and keep oil industry operations going and help build various key projects . and second, certain oil companies with deep pockets to help finance and carry out some ambitious oil gas production ventures .

        They are also loosening the noose on some economically strapped local producers of basic stapples allowing them to raise their prices but without giving them the full forex monies they need to pay for much needed imports.

        Everyone else in in the trash heap of the govts concerns and can expect to see their situation deteriorate by the day with no end in sight .!! that means the whole of the middle class , all other business groups , and govt and pdvsa ordinary creditors contractors and suppliers .
        Doubt that there will be any additional bond issues ( unrelated to the debt roll over exercise) because they are very very expensive compared to obtaining easier money from the favoured sources listed above.


  8. Obviously, they still have to devalue. Now: if they devalue as they should from the book keeping principle,
    what could go wrong?

    Imagine suddenly less and less companies would import.
    The government will suddenly have more money and would see the need to take over
    the import business even more, the distribution, etc…but we know how inefficient it is already.
    Wouldn’t this cause a major crisis? One about actual distribution of food and actually spare parts for virtually many more things than now?


  9. Quico
    I really like your Opposition Bullshit Machine theme, but inevitably you are always going to find yourself in scarce company here, unless you include the chavistas who BTW brand the opposition as “disociados” to signify the same thing. But of course the chavistas live in their own deluded version of the Bullshit Machine.

    In fact, and inevitably, we all live in our own bubbles and don’t like them to be burst by anyone, we love them so, they keep us safe (emotionally). It’s painful to burst them but in the end that is how we grow.

    The saying goes that in war truth is the first casualty. The bullshit bubbles are the trenches of the polarization war. When you leave the trenches you are exposed to attacks from every side. No one wants you out there so they will shoot you down, pick your trench and stay in it!


  10. F Rodriguez, because of his history of participation within Chavismo, still has friends in the inner circles of the government. This gives him insider information on the intentions of the main actors as well as on the true status of the accounts in the Venezuelan Gvt. He has used this information to successfully predict Venezuela’s economic decisions (especially re bonds) at BoA and to gather enough influence to participate in initiatives like bringing together institutional investors as potential bond buyers and the Venezuelan government, where insider information was shared. He has profited enormously from his access to the inner circle. I would not doubt that giving F Rodriguez insider information is part of the Venezuelan Gvt strategy, even if F Rodriguez is no longer an official Chavista. I think the gut reaction against F Rodriguez by those outside the loop has to do with this type of profiteering.


  11. Does the Rodriguez analysis which is the subject of a “straw man” argument appear online anywhere?


  12. Plese read The Economist this week. Bello column
    I think is all said in there from an outsider point of view (no BoA nor oppo types)


  13. Reading the F Rod analysis again as described by the Economist , two things strike me as strange ,one that the balancing of the external accounts by a planned restriction on imports i(specially private imports) are viewed as a deliberate govt measure, while there are a lot of signs that the regime simply run out of forex to continue with the rate of imports it had fostered in the past . A dearth of forex income which has become more serious as forex debt to bondholders , foreign contractors?suppliers and china mounted cummulatively Secondly that such measure somehow appears to contradict Giordanis assertion that the govt threw the house by the window in allowing a flood of cheap imports to help Chavez get reelected in 2012 and perhaps Maduro the following year.


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