I lived in Venezuela for five years during one of the countries worst ever financial and poliical crises-1993-1997. I currently spend 50% of my time there and I am writing this from Caracas as I speak. I can relate to the type of poverty you speak of and all the other types of things which you describe because I have been all over this country on my bicycle , through hundreds of small peublos, and have seen it firsthand. I dont think the political situation here is nearly as charged as in Mexico, because Venezuela is smaller and has tremendous oil wealth, which enables the government to keep most of the people content, even after the politicians skim about 99% of the ingresos.
I would like to comment on the Korean situation, because the reaction of its president yesterday to the country's financial crisis was quite interesting, and gave me a deja vous . When Rapheal Caldera took office in Venezuela in 1994, after the prior president was impeached, he shortly thereafter inherited a banking crisis which brought the country to its knees(or at least to the IMF), the likes of which had never before been seen in this country, and, for that matter, on a relative basis, probably amoung the worst ever suffered by a so called democratic country in recent history. Caldera, a prior president about 20 years before, was a populist type politician and he was completely overwhelmed by the magnitude and severity of the financial crisis. I wont get into the details of the crisis or the genesis of the crisis, because that is not my point. My point is that it took Mr. Caldera , in my opinion, over a year to really get an understanding of what was happening to his country and an ability to begin to constructively cope with the crisis. In the meantime, he imposed strict currency controls which served to devalue the bolivar from 125 bolivars per dollar to approximately 450 bolivars per dollar(other things obviously contributed to this devaluation). His intial comments upon the dawning of the financial crisis appeared to be completely out of touch with reality, almost as if the guy had no understanding of the most basis of economic concepts, much less theory. However, to make a long story short, Mr Caldera came through in spades for a variety of reasons and the country is completely turned around 180 degrees with a vibrant economy , taking advantage of its only real economic strength, OIL. Now, Venezueal is not Korea, and its economy is nowhere near as important to world wide economic growth , etc. But, I think that given some time , this new leader in Korea will grasp the severity and complexity of the situation, that they will take the correct measures, and that they will capitalize on their strenghts to emerge from their cuagmire. However, he needs time to completely reeducate himself in the types of matters in which he will need expertise. This will take time, as it did for Caldera in Venezula. But, to judge him by his comments now(as financial markets always will do) is irrational. Remember that during the crisis in Venezula the price of its brady bonds declined to about 27 cents on the dollar, a value which wasnt more than around 10 cents per dollar above the US Treasury Bond collateral which secured the bonds. This was a riduculous price given that Venezuela has oil reserves which could have paid off all the external debt many times over and still have plenty left over. Hell, they could have publicly floated a small percentage of their national oil company PDVSA, and used these proceeds to pay the debt(of course this would have been a political impossibility). Nonetheless, the market was concerned that Caldera would allow a default on the public external debt. It didnt happen, the bonds, within two years reached almost 100 cents on the dollar, and the rest is history. Korea will eventually emerge from this crisis-it may take a lot longer, but it will survive and thrive. In the meantime, I plan to take advantage of , what I am sur will be gross distortions in the price of financial assets linked to its creditworthiness. |
