Another day, another failure

Puerto Cabello – where much comes in, and little goes out

Back in January 2010, Hugo Chávez announced that his administration wanted to promote non-oil exports.

As is customary, he didn’t have a plan, but he had a catchy name for it anyway – in this case, a toll-free number, 0800-EXPORTA, to assist potential exporters.

The end result? Exports in the first quarter of the year fell by 8% relative to the same time last year.

Since 2000, non-oil exports have dropped by a third.

In the first quarter of 2012, Venezuela’s non-oil sector exported a paltry $1.05 billion. If we multiply this figure by 4, we would be exporting roughly $4.2 billion, or about as much as the exports of Nicaragua or Aruba.

That’s what our non-oil sector is like – Nicaragua or Aruba.

One of the least explored angles of why this is so bad for our economy is related to shipping costs. In countries where the flow of exports and imports is roughly the same, ships dropping stuff off can load goods for export. That way, shipping becomes less expensive, because the ship is not leaving La Guaira empty-handed.

But in our case, ships come in full and they leave empty.

Perhaps the problem is that the person in charge of the Exports hotline is Rafael Ramírez, who also functions as President of PDVSA, Oil Minister, Vice-President for Territorial Development, coordinator of Housing Policy, and Vice-President of the government’s party, the PSUV.

Think he might be feeling a bit over-extended?

(HT: LL)

54 thoughts on “Another day, another failure

  1. Countries that export more than our non-oil sector does:

    Cuba
    Malta
    El Salvador
    Cameroon
    Honduras
    Yemen
    Papua New Guinea
    Zambia
    Burma

    Man, that is one ghetto-ass list…

    • You guys don’t happen to have degrees in the social sciences, do you? I’m still a student, but even I know that a more fair comparison would be between the non-oil sectors in other oil-based economies. Like for example, how much do the non-oil sectors export in countries like Saudi Arabia or Kuwait? I’m not even sure that that would be a fair comparison, but at least I’m slightly concerned about being fair, not simply with making a wholly political argument. And I have no idea what the answer is–maybe Venezuela would look as bad as you want it to be in such a comparison…

      An 8% decline in exports is surely terrible news. But the fact that you still have to multiply the total amount of exports by a factor of 4 to match Nicaragua should tell you that an 8% drop–by itself–is hardly enough to put Venezuela where it is on that list.

      The truth is the long-term problem with the economy runs deeper than the Chavez administration. Venezuela would still have appeared on this “ghetto-ass list” under any opposition administration.

      • Venezuela would still have appeared on this “ghetto-ass list” under any opposition administration-not true. Venezuela could easily be exporting -aw hell-I will say 4-5 times as much within one year. Lots of stuff. The potential for growing and producing things for export is huge.
        Unsorted- you are a chavista?

        • VIP noche -
          The ad hominems, the lack of internal consistency, the use of straw men, the conclusion that anything bad that happens is not Chávez’s fault … obvious signs of the mental illness that you allude to.

          • i apologize for guessing that you lacked a degree in the social sciences. is that really an ad hominem, or a correction of your faulty comparison between the economies of an oil-producing country (Venezuela) and non-oil producing ones? of course the size of the non-oil sector in the latter are going to be larger! even straw men are not this dumb!

            • Iran-with-sanctions appears to look like an export and industrial giant beside venezuela. Was that the kind of example you were thinking? Its bad. Very bad.

              • Iraq also. Post war Iraq is doing better on non-petroleum exports. I think I will stop looking at comparisons now and have a drink.

              • Mexico. Petrostate. Strong non-petroleum export growth even while fighting a massive narco war.

          • are you seriously denouncing use of ad honinems (by whom?), etc. while calling such (apparent, but where?) use a symptom of mental illness? you take yourself seriously?

            • I agree Juan jumped the gun here. There aren’t any ad hominems in the original.

              • The broader point, though, is that non-oil exports have kept falling for over a decade. Petro-dependence is only growing.

              • Excuse me, but some anonymous person on the Internet questions my degrees just because I didn’t do the comparison he/she wanted me to do, and that is not ad-hominem? He/she is basically saying I’m an idiot because I didn’t propose the ratio he/she thinks is best.

                This is typical mediocre US academic bull-crap. Any way you slice it, any ratio you come up with, and Venezuela’s performance in this aspect is a) paltry, and b) getting worse. Hiding behind methodological back-and-forths is just a way of diverting the discussion, it’s pointless, and it constitutes trolling. It’s pointless to even have this conversation.

              • Exactly my thoughts. The main point here is the abysmal state of the country’s exporting capacity. Everything else is besides the point. Just don’t feed the troll so that he doesn’t get paid.

        • venezuela could not “easily” export “4-5 times as much within one year”.

          do you have any reason to believe this is true, other than blind wishful thinking?

          sure, there’s lots of potential. there’s a potential capriles could win the election, too.

          but when was the last time a country doubled, much less ‘quadrupled’ or ‘quintupled’ their exports?

          i see zero evidence to support your claim. if i’m wrong, it’s up to you to show me.

          to refute my point, why don’t you compare non-oil exports under the chavez govenment to exports under previous administrations? maybe you’ll find something there.

          or are you a dishonest member of the opposition? i assume that is not redundant.

          i am an observer from the united states. i have defended the current venezuelan government against the opposition, and the opposition against the current government.

          • Hey-Unsorted. How is that “plantain project” to ship plantains to Russia going?
            Another of Chavez’s brilliant ideas you would agree? Anyway, I am sure that will be
            very profitable for Venezuela, agreed?
            Tell us more from your lofty observation perch, pal.

            • wtf? how rude. i’ll look into chavez’s “plantain project”, but assuming from the tone of your voice i’ll assume just for the moment that it was not at all a brilliant idea. if the evidence available (not merely anecdoctal) confirms that, i’ll be happy to admit to it.

    • Toro, that doesn’t say much, considering how small Venezuela’s non-oil sector is! Do you know percentage of the country’s economy is constituted by the non-oil sector?

      Let’s pretend that Venezuela’s non-oil sector constitutes 50% of its economy. And let’s assume the non-oil sector in non-oil producing countries is something like 100%.

      What Nagel is really doing is complaining that 50% of Venezuela’s economy pales in comparison to 100% of the ENTIRE economy of this list of other countries.

      Of course, Venezuela’s non-oil sector is far less than 50%. So if that small a sector of Venezuela’s economy is equal to the entire economy of other countries, that’s actually quite impressive, don’t you think?

      • The other thing is that it’s hard to have this discussion if you’re not acquainted with the basics of the Venezuelan economy. According to BCV, in 2011, GDP per sector in constant 1997 bolivars (their baseline year) was:

        Actividad petrolera 6,593,126
        Actividad no petrolera 45,055,572

        The non-oil economy is much bigger than the oil economy. It’s just that the non-oil economy is almost entirely composed of non-traded sectors – services, commerce, construction, etc.

        Another part of this that’s not often appreciated is that even the “non-oil” exports are largely exports of embodied forms of natural resource abundance. When you export aluminum, what you’re really exporting is cheap electricity – its main input – embodied in aluminum. Steel is another energy-intensive, natural resource based export, as are petrochemicals. But, of course, aluminum, steel and petrochemicals are like 75% of the non-oil export sector.

        So by the time you get to the real non-embodied-energy/non-mining based export sector you’re talking about a vanishingly small sliver of the Venezuelan economy. A couple of eccentrics exporting rum, a handful of coffee/cocoa farmers, two or three weirdos weaving hammocks or exporting mangos. Marginal, marginal stuff.

        • Thanks for clarifying a bit of the economics. I did not have all of this in mind when stating my assumption regarding the relative size of Venezuela’s non-oil sector.

          • If you are not living in Venezuela, or try to understand the country from media abroad, Francisco’s comment might seem exaggerated. However, this discussion is very important because it deals with what will likely be among the worst consequences of Chavez if he continues in power, which is that the total breakdown of productivity (due to his pseudo-communist economic “policies”) will cause wide and deep scarcity with the horrible social consequences and conflict that will carry in Venezuela, especially since the government will blame it on some scapegoat. This hasn’t been felt yet, because the economy is surviving on borrowed money and what’s left of the private sector. The public sector is mostly an ever-growing black hole.

            This government is presenting itself as saving the country from oil-dependence. It is all the time critizing the 4th republic for letting the country only export oil, and all the time brags about new Iranian car-plants, land expropriations, chinese cellphone factories and imaginary sattelite factories as means of being self-sufficient and industrial. You often hear chavistas say “aqui siempre se dependia del petroleo”, like it was something of the past, when in reality the country has become a LOT more dependent on oil, especially since 2007-8 when the government’s effort to gradually outlaw, threaten and sabotage private enterprise reached a tipping point. It seems to me that up until 2009-10 the government could still float on what was left of private enterprise to achieve some results both in terms of economy and infrastructure. This is why you had quite good GDP numbers (even if they might have been exaggerated) and some infrastructure projects being finished up until 2009. After 2009 the government has done almost nothing constructive, but has destroyed productivity on a large scale.

            The government falsify a lot of statistics, so whenever some real meaningful statistics are found it is important to study them and evaluate the government’s failed policy against them. With decent policities, it is not hard to raise exports in Venezuela, rather it is EXTREMELY HARD to destroy non-oil exports at the rate which this government has, given the country’s resources.

        • In Europe and Canada, they pay on the order of US$2 for a mango. In Venezuela, most of the mango production goes to rot. Rich people actually pay poor people to come collect windfall from their yards and throw it all in the garbage. In a country with essentially free fuel and cheap labour, it should be child’s play to set up a company to collect mangoes, process them into pulp, and send tankers of frozen orange goo to cold countries. There are just two problems. First, anything that requires maintaining a product cold requires a functional electricity system. More importantly, any export from Venezuela is mangled by exchange controls. Europeans are happy to pay $2 per mango, but because of exchange controls, a Venezuelan will have to exchange those $2 for 9 bolivars. Then, when the company needs to buy imported stuff, it will go to the currency market, where 9 bolivars buys only $1. The government effectively taxes all non-oil exports at 50%. It is possible to avoid some of this by setting up overseas subsidiaries to hold the dollars until needed, but for an honest small businessperson, it all quickly becomes a nightmare.

          • “Just two problems”?!??!?

            No pana, those are just the two most pressing ones. There are at least 85 others.

            Like the Guardia Nacional anti-drug inspection seals that you have to pay off some fat guardia (who’s probably a narco on the side) just to certify it really is mango pulp and not cocaine. Which expires after two weeks, two weeks you’ll use trying to get the INCES solvencia you need to get an export license…during which time your IVSS solvencia will have expired, and so you’ll have to run around and get that and in the meantime, ooops, there goes your SENIAT solvencia…better go renew that…actually, it takes a minor miracle of gestoria virtuosity to coordinate all the solvencias and the GN seal so they’re all actually valid at the right time and even if you somehow pull it off you still have to pay off the cuban at Bolipuertos to actually get your stuff on the crane…oh and good luck getting your load insured since CADIVI is serially years late paying out dollars to insure cargo for big international cargo insurers and what’s that? export credit? Dream on…you gotta have a contact on the inside and on and on and on in a kind of kafkian nightmare of bureaucratic obstructionism and petty corruption.

            Honestly, you should talk to one of those guys from AVEX some time. The real wonder is that anything gets exported at all…

          • This is a very good example. Another one: here where I live (northeast coast, USA) you can find juice oranges from everywhere, even – from all places – South Africa. Venezuelan Valencia oranges are amongst the best. Being addicted to freshly squeezed orange juice all my life, I can tell you that very few can match the taste of our Valencia oranges. I am 100% certain that they would be a hit in the US, and a lot easier to export there. But then, yes, you have to solve those two crucial problems. Really, it is all a matter of having the right attitude, something impossible with the thugs currently ruling the country.

            • Let’s not discuss all this. Instead, let’s focus on the actual ratio one would need to actually convince people this is a problem. It’s an academic problem, people, why mess it up with talks of mangoes and fat national guards? Those are just anecdotes, you need hard data I tell you! Oh, and if the data confirm what your little anecdotes say, then it was worse before Chavez, and by the way, have you seen Saudi Arabia? Good luck trying to export something from there. Why, I have a friend who tried to export women’s lingerie out of Saudi Arabia, and he was beheaded, so Venezuela is a paradise compared to that. Thank Mi Comandante Presidente for at least having the decency to make bureaucracy a little more sane, and ultimately, aren’t you free enough to be spewing out this nonsense in the first place. This is participatory democracy at work.

              • OMG… on your friend exporting women’s lingerie out of Saudi. What a horror, too, for his family.

              • Damn you, Juan. And you have the osadía to get all hyper if someone questions your degree?

              • Good one. But i got it after you made Syd out in first base (baseball slang for those who are not fans of the game). Actually, the fat national guard is a very big component of the problem. The export/import business would get a very big relief if this corps of morons were to be disbanded for good.

          • About two decades ago, in my north Toronto neighbourhood, I found this at a little fruit and vegetable store run by “chinos”: one small box containing 10 mangoes. The handwritten sign identified them as “Venezuelan”. I was amazed. And I thought, finally the country’s agricultural sector had put on its high-beams, maybe just starting small. Alas, I never saw the product or the sign again, even though you could bank on seeing mounds of fresh grapes from Chile, all season long, year after year. Even Argentina was getting its act together (I knew the transplanted Mendocino who made that his business: commercializing and delivering the imports of fresh fruit to several greater Toronto area supermarkets). Qué vergüenza.

            And yes, as sapito says, you need reliable refrigerated capacities in the production chain, to name just one of the requirements. That is, if the trailer/container exports are to be repeated on a large scale. Key, too, is the cooperation among banks (financial), national government (regulations/export permits), and host permits. Finally, multiple national producers, quality control requirements and PLU stickers would all point to a got-its-act-together chain.

            Do I hear a Mango Producers Assn in the making? (Honorary memberships for households with more than two mature mango trees — just kidding)

            So refrigeration is not reliable — por ahora (oh God of Basketcases, let it not be para siempre). As an entrepreneur, you would have figured it out on paper and found alternatives. Yes, processing the mangoes requires other types of permits, and (much) more marketing/packaging, but nothing that others have not been able to do with great consistency (i.e., South Africa). I’m thinking tetra-pak mango juice, pure or combined with other fruit. What about smaller niches for mango jelly from green mangoes? Ditto for chutney, giving some of the Caribbean islands a run for their money.

            In sum, it takes well thought out logistics at the producing and the receiving ends. The question is, why even before Chávez, has this opportunity not been exploited?

            In sum,

  2. Why would you export anything if you need to handover the USD proceeds to the Central Bank for official exchange rate Bs. ?

    If you are a capable organization it makes much more sense to just setup business in a Business Friendly Country. Take your pick … like many others have done.

    Alternatively you can just put a sales office in Ureña, and everything else will be taken care of.

    Just make sure you are not selling below replacement cost otherwise you will go broke.

  3. The picture for Venezuela is even worse. Sometime ago I was dismayed to learn that while the export per capita figure for Germany was about $18,000/year, the figure for Spain was about a “paltry” $7,000/year for European standards. This low-competiveness of the Spanish economy explains their high unemployment. Countries just cannot depend on tourism and construction (40% of their PIB in 2008) to produce sustainable growth.

    Nicaraguan exports in 2011 were about $4.1 billion. Their export per capita figure, with a population that is approximately 5 times less than that of Venezuela, is about $715.

    Enter Venezuela. Only 5% of its exports come from the non-oil industrial sector. The export per capita figure is just about $150/year. Compared to the general workforce, very few people work in the oil and oil-related industries. Therefore, it can be concluded correctly that except for the money that grows on trees (translation: the money that it is extracted from the ground), the country’s true export capacity is one of the lowest of the world. If it weren’t for oil, we would be receiving humanitarian aid like some African country to avert or relief a famine.

    And people think that Venezuela is a rich country and that we will reap the benefits of having oil forever. Pajaritos preñados, pues.

    • “And people think that Venezuela is a rich country ” It’s rich in that it has that money growing on trees. Clearly not everyone uses your definition of “rich”; doesn’t make them wrong.

      • And as long as we keep thinking that oil revenues is all the we need, and that there’s no need to increase our productivity, we will go nowhere. It’s not just about improving the distribution of the oil revenue. It’s about increasing productivity in Venezuela. That’s the only way out of poverty. Stop believing in the mirage of oil wealth.

        • A. Barreda,

          1) Stop with the strawman.
          1a) No one is saying that oil revenues is all that we need.
          1b) No one is saying we do not need to increase productivity.
          1c) No one is saying that it’s *just* about improving oil revenue distribution.
          So just stop. Get the thought that anyone is pushing for those out of your head.

          2) It’s about the market.

          2a) Cash distribution of oil revenue INCREASES PRODUCTIVITY in NON OIL areas. How? Because people spend money on goods and services –non oil related. That increases the provision of those GOODS and SERVICES –non oil related. To increase these provisions, the providers must spend on other goods and services, and so on. If the providers don’t expand themselves, others will come in to meet demand by also offering competing goods and services. This increases JOBS. These jobs mean people working have more money to spend. SPENDING INCREASES DEMAND in other goods and services, which translates to MORE JOBS.

          2b) So much cash entering the S&L banking system forces INTEREST RATES DOWN. This increases loans for BUSINESS and CONSTRUCTION. This increases JOBS, which increases income which increase spending which takes back to 2a and creates MORE JOBS.

          Cash distribution not only gets people out of poverty, directly, short-term, it is the way out of poverty, LONG-TERM via the MARKET, NOT GOVERNMENT.

          3) Oil wealth is not a mirage. Oil money is REAL MONEY that is simply not trickling down directly, NOR is its VALUE reaching those in the worst situations. Ít’s also money that BELONGS to someone and you are suggesting to continue regressively grafting it. If you want people out of poverty, then EMPOWER THEM with THEIR MONEY to help THEMSELVES out of poverty, while the government fulfills its role with the money from NON OIL taxation. As it is, the government has no incentive to improve non oil productivity because it feels fine with its oil money. If it only had spending money from taxation, it would have incentive to increase the productivity of ALL AREAS in the nation.

          It’s you who needs to stop believing in the mirage of government using “money from trees” with any respect.

          • Like I said before, I’m not against CCT/UCT. There’s historical evidence that proves that an increase of consumption leads to economic growth. So, you don’t have to explain that to me.
            My criticism about us being rich or poor comes down to this: Nobody can predict how markets behave. Nobody can predict oil prices. Yes, right now oil revenue is high, but nobody can say that the high prices will last forever. They might crash next week. They might keep on rising. It has already happened in the 80′s it might happen again. You can predict that. I cannot predict that. So, neither you or me can predict if tomorrow we are still rich or poor.
            Before you can convince anyone about your POV, you should listen to them and understand them. Otherwise, you’ll come like a zealot and will scare people away. Chill out, man.

            • About UCT: in extremely simple terms, just imagine what would happen if today’s cash transfer per capita – BEFORE TAXES – roughly $3,200/year or about $8.75/day, calculated at about $110 per barrel, decreases fairly quickly, as a result of a drop of oil prices to $80 per barrel, to about $1,900/year or about $5,20/day. How do you explain this to people, especially the ones that despite 13 years of utter destruction of the country still keep voting for Chavez? Good look with that.

              • “How do you explain this to people, especially the ones that despite 13 years of utter destruction of the country still keep voting for Chavez?”

                Actually it’s very simple. It’s the poorest people that have the least amount of trouble accepting the simple math of: oil revenues distributed equally, regardless of ups and downs. They LOVE the idea. It takes no more than five minutes to get them on board. Try it. In fact, when I first started testing the idea it may have taken 10 minutes because the barrel was at 20. Yet, I had 100% success rate with anyone class E or D. It’s the people who think they could run things that don’t think E and D can understand fluctuations in oil prices, yet they are the ones who suffer most the fluctuations in non oil prices. The part they understand the fastest is that it’s their money. Guess what part is the toughest to get across to the non poor?

            • Clarifying what I wrote: what would happen if UCT was actually implemented today.

              • That sounds a lot like an imaginary example I like to think about. Imagine we had had UCT of 100% oil revenue for the last 40 years? How would you justify the government deciding that to improve Venezuela’s situation it was going to start taking over everyone’s daily stipend, leaving 25% of the population below critical income, and 40% below poverty line income of 2 $/day? How do you explain taking from each Venezuelan 8 dollars a day, from the poorest the same as from the richest, to fund whatever government project. How do you justify such a regressive decision?

                If it were implemented starting today, you would immediately have fewer people going hungry, many people celebrating, many businesses booming and many others blooming, interests going down, oil money related corruption halting to a standstill, prices going down, cities decongesting, …

                …and almost guaranteed that Capriles would lose the election.

            • A. Barreda, you should reread your own comments to realize what is coming across. It’s you who stated the strawman described above, not me. You claim to understand how markets behave in your last comment, but in the previous one you implied worse than ignorance.

              As to being a rich or poor nation, read! I have agreed with your position; I’ve merely pointed out that the other positions are not wrong given THEIR DEFINITIONS. I even used the word semantics for you. Venezuela, compared to a Venezuela without oil, is rich. Given the current price of oil, it’s rich. Compared to poorer nations, it’s rich. Here’s yet another way to look at it: if you were to take all the estimated natural resource of Venezuela, including the number of geostationary locations over its geopgraphy and the hydroelectric power potential, and divide it by population, in what quintile do you think Venezuela would fall?

              It’s rich. It has the potential to be rich. It’s OK to think it’s rich. Now let’s get its citizens out of poverty. Because it’s also poor. Your complaining about people thinking Venezuela is rich isn’t part of the solution. Get the point now?

              • “You claim to understand how markets behave in your last comment, but in the previous one you implied worse than ignorance” Geh, thanks for calling me ignorant. You don’t have to go all preachy on me just because we have different points of views. Like Goethe said: “What we agree with leaves us inactive, but contradiction makes us productive”.
                Yes, I don’t have a degree in Economics, but I understand the logic behind the UCT/CCT scheme. You don’t have to explain it to me over and over again. Besides, you are not adding anything new or interesting to the discussion.
                Yes, UCT/CCT “might” jumpstart the economy and the market, but the Dutch Disease might bring the whole thing down. When I mention that Dutch Disease might not play a role, it’s because there are some researchers that question the mere existence of it. I am not an expert on the subject, so I cannot say if who is right or wrong, but that’s something to consider.
                If Dutch Disease is a reality, the most likely outcome is that the UCT/CCT will be a poverty alleviation program and nothing else, i.e. it won’t jumpstart the economy. Given the poor state of our infrastructure and the harsh legal and economical environment for entrepreneurs, the odds in favor of the worst case scenario increases.

                p.s. I am not a retarded biggot classist baby-eating nazi just because I do not agree with you prima facie. If you do not like some antagonism, you might as well stay at home and talk to your cats or parrots about your ideas. I’m quite sure that they will not complain about you telling them that 2+2=5.

            • Regarding Dutch Disease, again, UCT does not cause it, instead UCT makes any possibility of Dutch Disease less likely AND better off AND more likely to subside. So what’s your argument against? When someone tells you a proposal is better than anything else, you either have to find a flaw in it, or come up with something better, or else accept that it’s the best alternative on the table.

              “UCT/CCT will be a poverty alleviation program and nothing else”. Firstly, isn’t poverty alleviation good enough? Secondly, not true, it would get rid of the Petro-state model, which is not nothing else. Thirdly, it eliminates the regressive taxation which you seem to be supporting and avoiding discussing. Finally, it would improve your life with almost 4k extra dollars a year; I hope you put it to good use, if I get my way of getting you your money. In the meantime, someone is stealing from you 4k dollars every year. And that’s something else!

          • And you may as wel check the FT’s and sapitosetty’s posts up there to find out what kind of problems will challenge the potential entrepreneurs trying to ride the wave of the increased consumption. Demand is one part of the equation, the other part is supply. Unless you fix things like infrastructure, CADIVI and many others ASAP, the market wll be overflown by cheap brasilian and chinese products, just like it’s happening right now. And lets not forget about that thing called Dutch Disease (a thing that you don’t even mention), which might or might not play a role in the whole thing…

            • I am well aware of the challenges that attempting to increase supply would create. Of course I support policy changes that would make those supply increases easier. But regardless of whether they are changed or not, it is a no brainer that if consumers don’t have money to spend, the market will see no sales. So, step one, cash to consumers.

              As to influx of foreign goods, you point it out as if it would be a problem only with UCT. It’s a problem now, and it would still be a problem with UCT’s but it would be LESS of a problem, because with UCT it’s not a fat cat in office deciding to bring in millions of some food staple from abroad; it’s a local provider deciding if he sells from a local farmer versus bringing stuff from abroad. UCTs puts the purchasing decisions in the hands of LOCAL consumers and providers. Competition would increase not just local versus foreign, it would increase between foreign products, so prices go down.

              I don’t know why you want me to mention Dutch Disease, when you yourself state that it may not play a role at all, but here’s my take on it, anyway: UCT does not increase the natural resource revenue, nor the foreign aid, or any other influx of money into the nation, so it has no cause in Dutch Disease. All it is is a bottom up distribution of the SAME revenue, instead of the status quo top bottom distribution. For Dutch Disease to kick in PDVSA would have to start pumping the increase of oil they are promising at price levels that increase the total amount of revenue from non manufacturer sources.

              But even if there were a surge in income from oil or other source, UCT would still ensure the most efficient way to prevent anyone from going below the poverty line, it would still be the most efficient way to keep the market active with current or new businesses, it would still be the most efficient way of keeping interest rates low, etc.. It is simply the most efficient alternative to Venezuela’s economic situation.

    • You said something that Juan should have told clearly in his post and did not. That the the comparison with Nicaragua and Cuba is humiliating because Venezuela’s exports are smaller, having whole number multiples of people and land area of Cuba, Malta, El Salvador, Honduras, Yemen, Papua New Guinea, Zambia, etc. That per capita Venezuelan exports stand to shame. I cannot begin to imagine how shameful it would be if you drafted a figure like agricultural exports / cultivable area.

      • It is even worse than I originally thought. If it is true that 75% of the non-oil sector economy is comprised of services, commerce, and construction (this one, not in good shape I would think) and that our exports are mainly comprised of what the “industrias basicas” produce (Again, basically commodities), with some guys anecdotically exporting rum and cocoa (and I don’t have any reason to doubt these estimates), then things are really, really, really bad. All those countries mentioned above have more diversified economies, so when we put Venezuela’s situation in context, the picture that we get is despairing.

        Furthermore, we won’t reap the benefits of oil forever. Forget the Chavez’ idiotic mantra that we will have oil for 200 years. Hell, it is very plausible that with the new emerging green technologies in 20 or 30 years the industrialized countries won’t need as much oil as they need today (Perhaps, half of it?). I see movements in this direction every day. For instance, Spain derives a very good percentage of its energy needs from eolic sources. As a matter of fact, they are a world leader in this field. Also, several local companies are developing electric vehicles. Same in the U.S. Just consider what would happen to oil prices if the world economies reduced their oil consumption by 20%. In the case of Venezuela, wouldn’t it mean an automatic crisis? If we keep following this course (vivir de la renta), in 50 years the only thing we will have to eat is going to be oil.

  4. “Rafael Ramírez, who also functions as President of PDVSA, Oil Minister, Vice-President for Territorial Development, coordinator of Housing Policy, and Vice-President of the government’s party, the PSUV.”

    Wasn’t there something in the long-forgotten constitution about not allowing a person to hold 2 or more different public jobs at the same time? (I remember Chaderton getting a “naughty, naughty, shame on you” because of something like that.)

  5. Great post Juan! Sadly, Venezuelan exports were never that large. The difference is that before oil shot up, they were significant on the scale of oil exports. Now, between controls and nationalizations, they have been cut in half.

    The Chavez administration has nationalized many industries which used to contribue to these exports, like cement, coffee and steel. With the new Labor Bill, it becomes harder and harder to be competitive, cocoa is about the only area that we keep having huge advantages, but it is a limited advantage, we produce small amounts of very high quality stuff.

    And yes, exchange and other controls just make it uninteresting to set up a business for export. Easier to import widgets with SITME at Bs. 4.3 and sell them as if they were purchased at twice that. Why would you want to export anything, when you bring the dollars back at Bs. 4.3 per dollar, when you can sell the stuff locally as if the exchange rate was Bs. 10 per dollar? Chavismo has never set up any policy that promoted exports. On the contrary, buy importing huge amounts from Brazil, Argentina and other countries, it promoted exports out of those countries. It is a tragedy. A very, very sad tragedy.

  6. And as a consequence Miguel a large part of the “private” sector lives mostly to get cadivi or sitme dollars. It’s going to be interesting to see what happens when these damn exchange controls are dismantled.

  7. “Easier to import widgets with SITME at Bs. 4.3 and sell them as if they were purchased at twice that. Why would you want to export anything, when you bring the dollars back at Bs. 4.3 per dollar, when you can sell the stuff locally as if the exchange rate was Bs. 10 per dollar?”
    Yes, this is what the chavistas are doing and hurting ‘el pueblo; in the process of laughing all the way to the bank.

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