Thursday, February 15, 2001

Only under strict invitation

Recently, Camdessus, former managing director of the International Monetary Fund, declared without blushing that “We have never forced any country to liberalize its capital accounts. Never!"The statement seemed to me similar to that of a drug dealer, who initially gives away the drug to create the addiction and then, in his defense, maintains that he never forced anyone to buy it. 

The IMF's policies at the time, which I quite protested, focused on increasing taxes, ignoring the fact that the country was in a recession and imposing a monetary policy with exorbitant interest rates. As a consequence, the recession worsened and the bolivar was artificially strengthened, thus killing long-term investment opportunities and attracting, due to the immense real returns, short-term speculative capital. Swallow capitals were not only a direct consequence of the IMF's policies, but also their mere presence was the main indicator to measure their success. 

If today there is awareness of the damage caused by such capital, why then is nothing being done? As in so many other aspects, I maintain that the cause of our timidity to act is due to a complex of globalizing insufficiency, caused by repeating the false mantra of “We globalize or we die.” 

In 1983, after the devaluation, when someone rebuked the authorities about why they had not put exchange controls in place before, they were responded with “why close the stable doors if the horses are already gone.” In this regard, I consider that to control speculative flows, it is better to do so before they enter the country and not after. Those who believe that something can be gained by letting capital in, and then retaining it against their will, do not know the matter. To begin with, the damage that these capitals cause when entering can even exceed the damage they cause when leaving. 

In a way, Venezuela has been lucky not to have had, during the last decade, the excessive confidence of the short-term investor. In the present juncture, when some nationalist economic rationality can once again turn Venezuela into a Boccato di Cardinale, we must ensure that unwanted guests do not sneak into the party.

In this sense, I suggest immediately establishing rules, taxes or special reserves that discipline the inflow of short-term capital. The moment may also be opportune for us, with tax exemptions and debt conversion programs, to demonstrate our interest in new long-term investments. 

When controlling the flow of capital, what matters most is its term and not its origin. For this reason, the controls must also affect Venezuelan capital, which although it has and always should have the right to leave, should not have the right to enter whenever it wants, just to take advantage of a short-term situation. 
Friends, I have not gone crazy when, in the midst of a recession, I intend to close the door to capital. I only seek to ensure that our country manages to attract the capital that interests it, also taking advantage of promoting Venezuela in the way that something truly good is promoted, that is, as something exclusive whose access is restricted. 

Published in El Universal on February 15, 2001
Translated by Google