"We are using medieval methods against inflation"

After taking over the National Academy of Economic Sciences in Venezuela, Luis Mata Mollejas, joins the debate and makes an analysis that outlines a country immersed in the discussion of awkward, obsolete ideas, with no rostrum in the rest of the world.

Queried if inflation high rates attest to a depleted price control, he adopts a didactic stance and explains: "Price controls were initially implemented in the Middle Ages; we are using medieval methods against inflation; it is not that this price control has been poorly done, but has never worked."

"Some believe that inflation has to do with more currency in circulation; it has to do mainly with supply; now, if on top of that you inject a stream of cash, you are trying to extinguish fire with gasoline. This is called absolute, total lack of knowledge about the laws of economy; anyhow, if you are dealing with engineers, don't try to squeeze blood from a stone," he comments in reference to Finance Minister Jorge Giordani.

While the numbers released by the Central Bank of Venezuela (BCV) tell that last year the country left inflation behind, to his mind, there is the need to delve into the labor market to have a clearer idea of economy.

"Presently, we have a country where 50% of the active population is underemployed and there is 6% open unemployment. The estimate is that an underemployed carries out half the work of someone who works eight hours a day. Therefore, such 50% underemployment rate is tantamount to 25% of open unemployment, which, added to 6% as acknowledged in the statistics, yields unemployment at 31%."

Therefore, does the unemployment rate reported by the National Statistics Institute (INE) mask the reality?

A reasonable unemployment rate is at 4%-6%. Venezuela would be on the threshold of full employment according to these numbers, but this means no underemployment.

Does such a situation explain the subsidies given by the government to a significant part of the population?

Absolutely. The government prepares missions (social welfare programs) and subsidies to give income to the people. Accordingly, you are conceding that the country does not produce because it has to aid them; its political action aims at helping jobless.

How do you assess the latest BCV report? In view of a 4% growth in 2011, are we heading for a period of sustainable growth?

Basically, such growth means spending. It is an accounting delusion that vanishes when looking at underemployment. The ideological stance has made the country move back. There was hard work to produce food, footwear; all that was torn to pieces. We are just like 50 years ago; we increasingly rely on the oil income.

Venezuela has always relied on oil income. While there was an industrial net, the drop started in the nineties, deindustrialization is not the only responsibility of President Hugo Chávez

Nobody is saying that deindustrialization is the fault of this government only; what we are saying is that this government worsened it.

On the basin of River Orinoco, which encompasses Venezuela and Colombia, there is oil and metal minerals and, on the other side, ploughland; that is, food and industry, something similar to the integration of Germany and France. Geography tells you that you should wed to Colombia, he elaborates.

What could happen if Venezuela eventually joins (the Common Market of the South) Mercosur?

You will shut the remaining industry and, as a matter of fact, in order to sell oil to Argentina and Brazil, we do not need to pull down our trousers; there is no need to join Mercosur.

You mentioned ideology as the main cause of the process that has led to growing dependence of oil income, why?

That ideological process means fighting against private capital and producing with State capital. We are preventing private capital from working to help Venezuelans.

As part of the steps at expropriation taken by the government, he explains, suppose that you have paid for the procurement of a company like (coffee manufacturing plant) Fama de América; there is one change of owner only; neither more jobs are created nor the production capacity increases.

vsalmeron@eluniversal.com

Translated by Conchita Delgado