Friday, August 21, 2009

-2.4%

That is the quarterly number announced this week that tells you Venezuela is finally accepting a recession it cannot hide anymore.

But I did not need to know that number, I already knew we were in a recession, since late last year, within a few weeks from when the price of oil started dropping. The government was able to pull enough reserves for a while, to hide enough statistics for a while, until the Central Bank could not hide it anymore. It did not matter what Chavez and his accomplices did, us that work in the reality of trying to produce something in Venezuela knew for a while that things were going downhill and we were trying to prepare for it.

These few days I spent in Caracas brought that hard reality stronger than at any time since Chavez is in office, stronger even than in the 2003 recession where people at least had the hope that a recall election would put an end to the recession. It did not but expensive oil did it, lifting us in a false sense of economic euphoria while the productive apparatus kept losing strength, transforming Venezuela into an import and distribution economy. Now, apparently we are entering a stagflation with really no hope in sight, even if oil were to increase again to say, 90 USD a barrel.

It all started when I arrived in Caracas. I was in a rush because my hair person was leaving for her annual vacation and I wanted to see her for a hair cut. Yes, I cut my hair in Caracas. Men tend to have this thing about being loath to change hair person. When my turn came she told me that she was losing yet another client, that the customer ahead of me was in one of his last visits to her because he finally had gotten an Italian passport, was selling everything and was moving to Italy, a country that he barely knew but where he could go because his grand parents emigrated from Italy. She is losing to emigration at least one customer a month.

On Monday one of my customers told me that the trimester CADIVI license he required to import an essential item to produce food in Venezuela was not coming. He needed that 150,000 USD at 2,15 to produce a particular food item because he could not find that supply in Venezuela. If he fails to get the CADIVI permit and has to go to the parallel market for dollars, that will mean at the very least up to 15% increase in his production costs which he would have to pass on his customers.

But that was not really his main worry: when you stop using CADIVI and go to the parallel market the chances for a SENIAT tax audit increase dramatically as you can now be seen as a speculator. See, the SENIAT only considers the 2,15 USD exchange rate and thus if you buy something at 7 USD and sell it accordingly, they consider that your price increase is directly proportional to an increase of your benefits, and tax you like hell. That your balance sheets show that you actually made LESS, is inconsequential, the SENIAT goes by the 2,15 cost system you showed them the year before. For a business into food production, with limited margins, a SENIAT audit that fines you or asks you back taxes on an earning you never made is enough to push you to bankruptcy.

That customer story was not the only one as my own company is debating whether to go to the parallel market once and for all and forget about CADIVI. As I reached the Caracas office I was told that we cannot access CADIVI because like dozens of other business we do not have the "solvencia laboral", a paper that certifies that you fulfilled all your legal requirements to your employees. We do fulfill all of our contractual obligations, of course, but we are not getting it not because we are at fault: "there is something in the system that we cannot fix, please, contact us next week" and this for already 2 moths!!! If by late August we do not get it, with import delays for our essential raw materials, we will stop production sometime in early October. But going to the parallel market for us is not a good solution: we produce with at least half of our raw material imported and that would mean simply a doubling of our costs and thus of our prices. Would our customers be able to follow? Previewing this situation we have not hired anyone this year and in fact through attrition we have already let go 15% of our work force. We are aiming at 30% by December.

I will not bore you with further tales of business woes coming from red shirts stirring trouble in business or organized land grabs by neighbors who want to get their "share" of the looting at any cost since it is clear that Chavez has stopped delivering in the country side. I will not write about the dismal state of roads in Venezuela which singlehandedly has added about an hour of road to my trips between Caracas and Yaracuy, in addition to the traffic increase which has added another hour. My shipping and delivery costs have doubled in one year. Let's talk instead about the degradation of quality of life in Caracas, not too high to begin with.

For the middle class of Venezuela, already subjected to heavy pressure at work, and an intractable traffic that robs the caraqueño of an average of perhaps three hours a day of life, plus the struggle to fight food scarcity which is back as a low chronic way, we can add insecurity at the mall. With increased traffic and crime in the streets, it has been a long time that the streets of smart or not so smart neighborhoods have been emptied of kids playing in the open. Patinetas and caimaneras are a thing of the past: now parents prefer, if they must, drop their kid at the mall with money for ice cream and a movie and hope for the best.

But what about those parents with small kids. Considering that there is no safe park now where to let them run free for a while, they have chosen to go shopping at the mall, kids in tow. Well, this might also be one thing in the past soon. A neighbor of my brother was surrounded at the mall so as to kidnap her kid INSIDE the mall as a "secuestro express" of sorts: the kid was to be held in hostage while she emptied her checking account and what not. By sheer luck she managed to set free her kid as the crowd simply ignored the scene. When she started telling her story she found out that this novel crime procedure had become a regular occurrence at certain malls such as the Sambil where all sorts of criminals can simply come through the subway and can easily disappear in the huge crowds of the Sambil. The Chacao Sambil had already a reputation that you could get robbed, in particular in the public rest rooms, now you can also get kidnapped!

The sad truth is that raising kids in Caracas is now a major challenge because simply there is no place for them to go safely. Be they middle class robbed or kidnapped at the Mall, bethey lower class kids in the ghettos where every week some bite the dust after receiving a "lost bullet". The modality varies but the anguish is the same for all parents.

On a personal note I could verify how my very own quality of life went down a further notch. I am tall, and with wide feet so I need to wear at least size 13 if I cannot find 12 or 12.5 in extra wide. My exercise walking shoes, all of them, died in the past two months. I had to go this week to more than a dozen sport shoes stores until I found one which had a SINGLE pair of size 13. No choice, no nothing, take it or leave it.

Granted, in the past it was always difficult for me to find shoes, but never like this time where in sheer despair I even considered buying "fashion" exercise shoes at more than 1,000 Bs.!! Fortunately in that store they did not have 13. Even in San Felipe I did find two years ago a pair of rather ugly walking shoes but that was OK. From my inquiry, since CADIVI became a problem they stopped importing and making size 13 and above and sizes 12 come in very short supply.There are stores that simply told me they have stopped receiving size 13. Period.

Now, you could tell me that since I have the privilege to travel I can buy my shoes overseas. But what about those that cannot travel? Must they spend a few days of their life every year just to find one single pair of shoes? And if CADIVI does not allow for imports of size 13 shoes, why do they now allot me some extra "cupo" on my credit card to buy shoes? Because with the 2,500 I am allowed just buying a dress pair and a walking/running pair will be a big dent on any vacation or business trip expenses!!!!

And there was more but I am tired, finally getting back home to San Felipe after a 7 hours drive which included a half an hour full stop in the middle of the A.R.C. around La Victoria, stuck in traffic, under the rain so I could not even get out of the car to stretch. In 1998 I counted an average of 3.5 hours between Caracas and San Felipe with an old car. Now with my two year old car it takes me never less than 4.5 hours, the average being around 5 hours, on week ends! That is also less quality of life, a degradation that I do not see as bringing an improvement to someone else. We are all into this down slide, poor and rich, as the state is simply incapable, unable and probably unwilling to try to bring some order into the Venezuelan anarchy. To try to make things work a little bit more efficiently, as a benefit for ALL OF US. Make no mistake, that supplies are getting harder to reach me or my capitalist customers means that supplies are also getting hard to obtain for lower income folks. We are all in this together, chavistas or not.

That is why this past week has been the most depressing trip to Caracas I experienced since Chavez came to office in 1999: form every angle I could see a country sinking.

-The end-

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