|Capriles and the Pope, the real|
news of Wednesday
I am not going to go into the official announcements which were in reality of a political nature, timed to hide from view that Capriles
has been received by the Pope yesterday. Instead I am going to go into what it means for me, a small businessman. I will pick up a some of them to dissect and you will be able on your own to infer that things are going to get worse, faster. Besides the opposition has a detailed answer on the expected failure and experts like Santos are on it.
But first the indicators that we inherited from the gargantuan expenses made in 2011-2012 to reelect Chavez just before he croaked.
On the left the scarcity one, which means that for any given item the odds are that at least one in five stores will be out of it. Which means that for the crucial ones like flour and milk, at best one in five stores will have it. On the right you can see the monthly variation of the annual inflation rate. What does this mean for my job? Supplies are more difficult to be found and prices are increasing. As a consequence I will need to keep increasing my own prices and stop any hiring, any investment project because I am not sure whether I will be able to keep producing. Not making money, producing. We have forgotten about making money, content to survive in the increasingly faint hope of better days. Note: you can update the charts above with a 5.1% inflation just for October 2013 accompanied by a 22.4% scarcity index, as ADMITTED by the regime...
The worst administrative measure Maduro announced was the intention of the regime to basically control all prices relevant to your average household. I will note that all the control schemes created since 2003 have led us to the current situation, an economy overly regulated, with extensive price controls that still manages 50% inflation. What does this mean for me? Well, nobody works extended periods of time at a loss. Some of my clients will be deeply affected and will either buy less, produce less or close altogether. Less clients, less work for me.
The regime will increase the military control and inspections over business. A renewed wave of fear will sweep manufacturers which will be tempted to produce as little as possible to avoid formation of stock which can be seized by any inspector or any armed lout trying to score brownie points. You need to understand that having a few days of stock in your warehouse so as to plan well your distribution schedule across the country is considered as hoarding by the regime. What the regime wants is a "dispatch at once" policy which is unpractical and actually increases costs. Since my business is upstream to food producers there is a chance that I will get a nasty inspection which of course will find nothing wrong with me but will be a waste of time and create psychological trauma to the employees.
That hoarding specter is one that is so ridiculous that I cannot understand why Maduro keeps harping on it. Jorge Roig of the business association state it clearly last Monday: "there is not a gram of food that does not move without the government control". As I have described already in May 2010, gotten worse since, to transport any food item across Venezuela you need a government permit. It is thus EXTREMELY difficult to hoard, or at least to hoard in large amounts. The only possible hoarding these days is at the level of SMALL shopkeepers and of sheer physical storage space availability we are never talking more than a few days supply in 99% of the cases reported.
The regime will once again screen the registry for all business that ask for dollars for imports. Since it is unable and unwilling to do the audit work to detect fraudulent business, it it will probably end up forcing everyone to re-register, or some variation of the theme. This is terrible because to import anything you need about a dozen of "solvencias" and permits which are not time synchronized and which you must all have valid at the same time before you can ask for dollars. If you have to process some of them again just for the sake of it, that means that you may not be able to get your act together for several months and cannot import raw materials for that long. For my business just to get all of these permits anew would mean a time investment of at least three months in which I could run out of all my stocks of raw material, forcing me to close down. And I run a business that is favored in that I am involved in food production!
But that is not all, the regime threatens to become the sole importer. That is, I will have to ask the regime to buy for me what I need to work. I will let you imagine how an inefficient regime can guarantee me timely supply of what I need to work, at what price and under which bribing conditions...... Chigüire Bipolar calls this new center for import the centralization of all corruption. We even have Giordani announcing that the regime will give the private sector less dollars to punish them, as if the private sector was responsible for the robbery committed by chavista operatives with bolibourgeois like Derwick Associates who by themselves may have stolen as much as 2 BILLION dollars.
In short, what Maduro has proposed yesterday is in fact inapplicable. Why do I write this, in all confidence? Because the people that have been UNABLE and UNWILLING to apply controls porperly in the past are not only going to be unable to apply the new more complex controls but are probably not going to look forward to it. Not because they fear to be discovered in their corruption, incompetence and inefficiency, but because today they are so brash that they simply will resent anything that delays their cashing in of mega bribes.
It is that simple.
But unfortunately the country in the process will grind into a standstill and then shit will happen. You read it here, first or not, it does not matter, it is all common sense.
As a bonus I will publish below the flow chart of corruption in Venezuela as investigated by INFODIO and our great @AlekBoyd. This what Maduro needs to look into if he wants to get back the cash he so sorely lacks today.