The Venezuelan government is making a frenzied effort to combat shortages of food and medicine. The FT reports that on Monday the country will begin auctioning off dollars to certain business in hopes of spurring them to import the basic goods it desperately needs. But critics claim that the new system won’t really do much to solve the problem:
“The total supply of foreign exchange to the economy via Cadivi [old system for getting foreign currency] and Sicad [the new system] is still likely to undershoot the overall demand in the economy for dollars,” [Goldman Sacs economist Alberto] Ramos said. He said to control the black market Caracas must fix underlying problems including high inflation, an unfriendly business climate, a misaligned currency, and exacerbated political and economic risk.
Venezuela’s economic woes are telling. Apologists for Chavez mentor Fidel Castro blame Cuba’s sixty years of economic problems on the US embargo. If it weren’t for Uncle Sam, they say, Castro would have built a socialist paradise by now.
Venezuela is the test for this talking point. Not only is there no US embargo in Venezuela, but the country also has huge oil reserves. And what does it have? Food and medicine and foreign currency shortages. A socialist paradise, indeed.
[Image of the Bolivar Courtesy of Wikipedia]