Caracas Chronicles

An awful lot of Venezuela’s crisis is down to bad policy made on the basis of bad ideology, and quite a proportion of it is down to plain bad luck. But some of it…some of it just bad planning. Take the US$1 billion debt for late shipping containers, the international economic equivalent of a library fine for failing to bring your books back on time. 

Quoth the Reuters:

Venezuelan state agencies have run up close to $1 billion (695 million pounds) in debts with shipping firms due to delays in returning containers, potentially boosting the cost of importing staple goods as the country struggles with product shortages and an economic crisis.

The agencies have held containers for months or simply never returned them, at times leaving the truck-sized steel boxes for years in oil industry facilities or on provincial farms even though this costs $100 per day per container, according to industry sources. […]

Freight rates to Venezuela have risen to become among the highest in region and in some cases are three times higher than other South American destinations, according to documents seen by Reuters.

Wait, though, it gets better…

In the country’s main port city of Puerto Cabello, containers worth $20,000 to $40,000 each are piled up in empty lots and along unpaved roads.

“Puerto Cabello is turning into one big warehouse,” said opposition deputy Deyalitza Aray, who has investigated what she calls the growing disorder in public imports.

A container bearing Hamburg Sud’s logo, for example, sits behind a trailer at a fertiliser plant owned by state oil company PDVSA outside Puerto Cabello. Its function is not immediately evident.

A Venezuelan shipping industry source said he traveled to a farm in the central state of Portuguesa in hopes of recovering 12 containers and ended up finding more than 100.

We can’t catch a break, can we?

But it’s not just embarrassing. Over time, this kind of mismanagement can have a consequence in the volume of imports, given Venezuela’s hard currency cash crunch.

The overvalued exchange rate/deep corruption that made bolichicos millionaires is old news. That’s one reason for the shortage crisis we’re living. In fact, according to Vz-based firm Ecoanalítica, as of 2012, 27% of total imports were made-up, accounting fictions necessary for some embezzlement shenanigan or another.

That’s bad policy made on the basis of bad ideology. Over-invoicing is pernicious because you spend dollars – which are scarce – but they don’t translate into goods in the abasto, they translate into expensive condos in Miami.

As far as priorities for the nation, buying corrupt businessmen nice condos should be pretty low on the list. It’s nobody’s idea of a priority asset. But hey, those dollars do buy something that somebody somewhere values. Container late fees don’t even do that. They’re just waste.

Without question, higher freight costs and the waste of money due to container late-fees make our imports as inefficient as the Guri dam with low water levels. This effect is boosted by the fact that the country’s ever-decreasing imports – the government is adjusting to its hard currency crunch by continuously cutting imports since the “budget party” of 2012- while keeping its domestic production stagnated. That’s one reason harsher shortages are on the way.

To put it in numbers, Venezuelan imports will collapse from USD65.9bn in 2012 to, if you believe the Wall St. consensus, around USD28bn for 2015. The same market consensus projects an even lower imports level for 2016. Possibly much lower.

When you’re this hard up, every penny counts. What you definitely cannot afford is waste because you’re not organized enough to get containers back to their owners in time. But that’s where we are.