April 30, 2009

The number cruncher

Juan Cristobal says: - In recent days, Hugo Chavez named former Finance Minister Nelson Merentes to head Venezuela's Central Bank. The move would not be chavista if it wasn't controversial, as there was no public hearing on Mr. Merentes' nomination.

Most of the criticism stems from the fact that Merentes is not an economist - he is a mathematician. To me, this seems curiously off-base, specially considering how economics and mathematics have a lot in common, more so each day.

It's not the training he lacks that is the problem, it's what he's willing to do with what he has.

The real danger comes from the fact that Merentes is not only a yes-man but a particularly clever one. As Daniel chronicles, his rise to fame came from devising a voter cheat-sheet that ensured that chavismo, with 60% of the votes, got 97% of the seats in Venezuela's Constitutional Assembly. He was also allegedly involved in numerous shady dealings while at the head of our Treasury.

Merentes left the government to start a "polling firm" that was so closely linked to chavismo, he named it "Grupo de Investigacion Siglo XXI," which practically mirrors the government's pledge to take us to "Socialismo del Siglo XXI."

The polling firm's track record was pretty bad. For example, Merentes predicted the opposition would win two states in last year's regional elections, when in fact they won 5 plus the race for the now-defunct Caracas Mayor's position. He also predicted Chavez's candidates would win Libertador by 37 points (they won it by 12); Petare by 7 points (they lost by 12), and Miranda by 19 points (they lost by 7 points).

Yet in spite of his spotty track record, Merentes gained a reputation as a loyal number cruncher. You would think a number cruncher would be a good fit for the Central Bank, right? Think again.

It's common knowledge that most of what the government publishes is not to be believed. At the same time, BCV figures are, for the most part, still relied upon by economists in Venezuela and abroad. This will probably change.

Putting Merentes at the top of the BCV can only mean the BCV Statistics Office, which has so far escaped relatively unscathed from day-to-day politics, will become the statistical arm of the government.

The implication is that we can kiss the days of reliable economic indicators goodbye. Just like in Cuba, where government statistics make the claim that its GDP per capita puts its population's purchasing power somewhere between that of Brazil and Colombia, so too will we begin to see Kirchnerian number fudging.

Inflation is a problem? Merentes will take care of it. Recession? He'll wipe that off too. International reserves dwindling down? Just add a couple of zeros.

I hope I'm wrong, but I'm probably not. As Hurricane Feces makes its way to our shores, the number cruncher will be there to convince us that everything is "excessively normal."