Saturday, April 22, 2006

Three Months of Evo

Today's La Razon published the following graph evaluating the current administration.

According to the graph, the following acts are positive:
1. Constituent Assembly and Referendum: Although the article cites this as positive based on how quickly the law was approved (1 month), is does not mention that the CA could signal the death for Bolivian democracy. If we consider that Chavez is Evo's role model, can we still put this among the positives? 'Fraid not.

2. Austerity: The graph says it is positive that the government cut salaries in the executive power half. However, by cutting the salaries of government workers in half, Evo is giving them incentives to become corrupt. If anything, Evo should have raised the salaries so that people working for the government do not have time or incentives to embark in corrupt activities, because they'd earn so much as it were anyway. What good does it make cutting a miserable president's salary in half, when the president is later caught trying to get $30 million richer? This should be another negative point.

3. Tarifa Dignidad: The president reduced, by decree, the cost of energy in 25%. While this is thought to have affected 2,4 million people, one should always be wary of government fixing prices. Today's the cost of energy, by tomorrow we have all prices frozen and a crisis similar to that in Allende's Chile or Siles Zuazo's Bolivia. When will governments learn that markets work best when left alone? Another negative.

4. Propais: In the last few weeks, the government said that it would create 100,000 jobs with $47 million. With only $470 per job (not taking into account administrative costs and the "corruption tax" that this administration will surely apply), it is doubtful that the jobs will last long or pay enough to make a difference. The government should realize that the best way to create jobs is giving incentives and security to private initiatives and not getting involved? Now, the logic behind this item may well be keynesian: the government is trying to boost aggregate demand. However, theory speaks of a closed and productive economy. Bolivia is neither. Therefore, this injection will probably end up increasing imports and not domestic production. I guess investors would appreciate more if the MASistas trying to take over institutions or the Sin Tierras are detained that this "boost to aggregate demand".

5. Pensions: Evo, once again by decree, ruled that pensions will be inversely proportional so that people who earned less will receive more..... what?!? Why exactly should this happen? Why should a person that earned less (and therefore contributed less) get in the more than a person that produced more and contributed more? Where does the money come from? The answer can only be explained with populism. Another negative.

6. Chile. Evo got closer to Chile and is about to start negotiations. OK, one positive. At least until Evo opens his mouth and messes things up.

7. Police. Evo is restructuring the police. While this was long overdue, there is the posibility that Evo turns the police into a political instrument, which would be bad. Thus, don't count this as a positive until it's done (and the police is not turned into a Gestapo).

Negatives: The negatives talk about corruption, loss of soja markets, extortion claims, nepotism and the reserved expenses cases that I have been blabbering about for the last 2 months. There is no mention about the unwilligness to enter into Free Trade Agreements (this is mentioned later in 'controversial actions'), inference into the Judiciary and lamentable state of the rule of law.

Pending: Nationalization, annulment of the 21060 Decree (the decree that ended years of statism and liberalized Bolivia's markets) and the minimum wage, which Evo wants to double. All of them would be negative.

Controversial Actions:
1. Replacement of public authorities with MAS militants, which Evo says is needed to go on with the revolution, is nothing but a shameless attempt to get unconstrained power. Negative.

2. Corruption. Negative.

3. Free Trade Agreements. The government is not willing to negotiate them. Negative.

4. Free Identification Program. Financed by Venezuela, this is nothing but an attempt to commit fraud in the forthcoming CA. Negative.

Balance: Heartbreakingly awful.

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Anonymous eduardo said...

May I ask what you or what you think should have been done differently?

7:18 PM  
Blogger Alvaro Ruiz-Navajas said...

You mean besides what I list here?

2:51 AM  
Anonymous eduardo said...

I take it that you would be against raising the minimum wage, yet raise the already disproportionate high public sector wages. Wouldn't that continue the practice of making these jobs more of a prize, rather than moving it to more of a public service type job?

Reducing the wages for reduction's sake is not very productive. However, the number of additional jobs in other sectors increased through this measure.

Where would the money for the raise in salaries come from?

4:03 PM  
Blogger Alvaro Ruiz-Navajas said...

What I wrote about increasing wages for government officials was specifically intended to curb corruption. If you pay the people more, the idea is that they will not need to engage in corruption as much as they do today.
Now, are public sector wages disproportiantely high? NO, they are not. In fact, they are the lowest wages in the whole Americas and many entreprenuers earn more than them. On the other hand, if you compare these wages to the minimum wage, they are high, but you can't seriously argue that a president be paid the same as a window cleaner.

In the case of Evo, cutting public service wages is nothing but a show. Evo is cutting his salary in half, from $2000 to $1000, i think, or something around those lines. This means that in 5 years, the state will save $60,000 in wages. Yet, he just signed a Decree overvaluating a road in $30 million. The net loss for the state is $29,940,000. That is corruption. Evo is a corrupt official and it may have something to do with him not getting enough money as it is, don't you think? Only God knows how many deals he did we are not aware of, and how much they are worth.

As for the number of additional jobs that are being created with that money, I haven't seen any figures yet, so I will assume that no jobs have been created. For all I know, the only beneficiary of these cuts could be Evo: Are you 100% sure that those savings didn't go to the overvaluated road ar other corruption deeds? In any case, you have to ask yourself this: are these extra state-sponsored jobs needed or is this just a cheap ploy of MAS to get loyalty among their followers? Why are they creating those jobs and not building infrastructure, for example?

Obviously, it is a completely different thing doubling the minimum wage. To see why minimum wages are inefficient and not desirable, I will refer to this post. Also,you have to bear in mind the inflationary pressures that increasing wages by decree would cause. So that unemployment wouldn't be the only consequence.

Now, I don't get if the last question refers to the hypothetical increase in public sector wages or to the increase in the minimum wage.

10:20 AM  
Anonymous Anonymous said...

Hmmm so you say Evo is a "corrupt official", what are you basing this on? I find your rantings about his failures (i.e. not creating jobs) to be a bit off mark. Since when has any elected official anywhere turned around an economy, created thousands of jobs, etc. etc. in THREE months!

Your references to Gestapo are a bit much and out of line.

It seems like you are taking the typical Neo-Liberalism line of reasoning, thrown in w/ a little bit of "fear" generation!

I think its too soon to judge Evo's work to date, and his future. I know one thing for sure he has challenges beyond imagination. When I was last in Bolivia Neo-Liberalism WAS NOT working for the people of Bolivia. Yes, maybe for the multi-national companies, and they of course do so much good for the country of Bolivia.

Bolivia's problems are not black and white, nor are the solutions. Perhaps many of Evo's actions are for "show" as you say. However lets put it in perspective. The $60,000 saved by the cut in his salary would employe about 40 Bolivianos for a year.

7:01 PM  

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