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Hugo Chavez’ 30% poverty drop illusion

By Miguel Octavio

Caracas, 06.09.06 | On Sunday, President Hugo Chavez said in his variety show Alo Presidente that poverty under his Government had dropped by 30%, leaving speechless both opposition as well as Government analysts. Where did the President get that number? Is it possible? Who told him that? In order to explore the President illusory number we decided to look at poverty numbers as accounted for by both the Government, via the National Institute for Statistics (INE), as well as the Institute for Social Studies of the Catholic University (UCAB):

As you can see, no matter which numbers you take it is impossible for a 30% difference to have occurred at anytime during the almost eight years Chavez has been in power, since the level of poverty never went above 60.2% in the Government statistics and 55.6% in the UCAB numbers. Moreover, changes in the poverty numbers of both INE and UCAB were quite similar until 2005

Even if you use today’s numbers of 33.9% by INE, the 30% figure used by Chavez never materializes. This is much like the myth created by Chavez in his 1998 Presidential campaign that 80% of Venezuelans lived in poverty, a number never measured by any internal, external, official or private institution, but which Chavez popularized to such an extent that it is regularly quoted, as shown in an earlier post. A lie told a thousand times does indeed become the truth.

But what makes it intriguing is how the INE and UCAB numbers have begun to deviate from each other, showing today the biggest difference in the last eight years. The differences have always been methodological and it is difficult to prove or show that one methodology is better than the other, the only questions is then whether they are both honest or not. In 1999, the National Institute for Statistics (INE) began using its own CPI measure, while UCAB has continued to use the numbers given by the Venezuelan Central Bank. INE on the other hand, calculates its CPI by multiplying by a factor of two the increase in the price of foodstuffs according to their poll, thus imposing a very different measure from the Central Bank CPI which includes all goods. Given that the Central Bank numbers are not exactly “independent” then the same trends should be seen in both sets of data even if the absolute numbers differ.

But none of this explains the “miracle in 2005”, when poverty went miraculously down by 14.6%, according to INE, while remaining essentially the same in the UCAB numbers.

But we can look back at the origins of this magical improvement. The current head of INE, Elias Eljuri, was named to his position by Hugo Chavez when his predecessor was fired for giving out “bad” numbers for poverty. Chavez, in his usual know-it-all style, said something like what follows, during one of his Alo Presidentes in early 2005:

“I have no doubts that the methods used by INE to measure poverty are not right. They measure our reality using neo-liberal ideas, as if no revolution was taking place” (or something very similar)

The order was quite clear: Reduce poverty using revolutionary methodology or else!

Now, given that the INE number is based on only the increase of the price of foodstuffs, it is essentially impossible for that number to have dropped so fast, while the UCAB number has stayed flat. You see, the overall inflation measured by the Central Bank in the last twelve months, which is what UCAB uses, or any other time period in the last year and a half, has been lower and even much lower than that of foodstuffs for essentially any period you may choose. For example, so far this year, inflation for foodstuffs is up 17.4% and for the last twelve months it is up a whooping 26.7%, while the CPI is up only 10.4% and 14.9% for the same two periods. Thus, if anything, the INE numbers should be running higher than those of UCAB’s which is very far from what is being reported. In fact, in the last four months, inflation for foodstuffs has been up a scary 4.7%, 5.5%, 5.1% and 4.3%, which is twice what has been seen in the overall CPI of 1.6%, 1.9%, 2.4% and 2.2%. So, guess who should be showing worse numbers according to their methodology? You guessed it, INE should be, but who knows how their numbers are being manipulated.

In fact, you should have it clear that even if the absolute numbers in the last eight years have been different, the trends have always been the same up to 2005. This makes sense, because both the INE numbers and the UCAB numbers measure poverty on the basis of comparing income to inflation and the ability to purchase a basic basket of stuff and services with that income. Thus, the current INE numbers do not make any sense. But in any case, there is no 30% difference to any previous number reported by either group.

Like much of what Chavez says or does, it is simply an illusion, in this case a 30% illusion, with no basis or reality other than the wishful thinking of Chavez and his administration.

Source The Devil's Excrement



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