Thursday, May 14, 2015

300

I am not referring to the title of a rather trashy movie purposely showing enhanced muscular bodies fighting it out with alleged Persians in dreadful drag. I am referring to a trashy banana republic that is unable to keep its economy inside the mere decency bounds where its citizens can hope to keep some of the value of their work. If they have any.



The US dollar has finally reached in the parallel/black market the 300 mile post {official rate is still the unbelievable 6.3 but nobody but the corrupt military can have access to it, of course}. Since I am out of the country in a place of bounty and mental partial recovery (because worrying sick that nothing happens to the S.O., to work, to relatives and to what not in no particular order as peace cannot be found even away) I have no time to go into the minutiae. I will just remind you that on February 25 I was writing about the bicentennial bolivar so on your own you can assess by yourself the effectiveness of Maduro's economic policies through March and April to restore trust and confidence in the economy of Venezuela.

But was amazes me further, even this far away, is the stupidity of the regime in admitting almost unwillingly that their policies have failed truly miserably. That is they have announced this week that the official dollarization of the economy has started. Since the regime is bankrupt and since they cannot even buy cars for their public administration routine, well, they decided to allow Ford motor corporation to start operating again selling cars in US dollars INSIDE Venezuela. How people are going to get highly expensive dollars to buy them I cannot figure out nor I am in a mind set to figure out from afar. And it ain't the point. The point is that the regime has started allowing for the sale of big ticket items in currency of the most reviled empire, the one for which a month ago they were still trying to collect gazillions of fraudulent signatures to bring to Panama to shame Obama.

The point is that the regime is accepting that they have reached the end of the road.

And the unraveling may be faster than expected. Already the Ford Trade Union wants to get paid in USD...  Note that trade unions in Venezuela are particularly corrupt, but again, I digress...

14 comments:

  1. It will be near impossible for any legitimate even smart capitalistic gov't who may inherit this mess to function. Yes with the recovery of oil prices and a lot of years the country may recover but it owes its future wealth to the world, its production is all but gone, and I can only imagine the leverage China has over everything. Who ever inherits this mess will not survive after one term as they will have to implement intelligent policies that the poor will hate, even if they are ultimately for their own good.

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  2. Island Canuck12:22 PM

    First of all welcome back Daniel.
    We missed you.

    Recently Maduro said that a "gang of banditos" was using the SIMADI rate to set prices.
    Sigh!

    I would believe that most businesses are now using the DolarToday rate rather than SIMADI which just doesn't function. When you see current prices they are much higher than Bs.200 to US$1.
    I don't know what he thinks is happening in this country. He's either in denial, outright lying or just so stupid that he doesn't realize what's happening in the streets & malls.

    We are facing a depresion with huge rates of unemployment. Not next year - within the next few months.

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  3. The military and other friends of the gov't can now buy USD at 6.30 and use it to buy Ford cars, and they can drive them to Colombia and sell them at full value. This gov't never stops finding scams to steal the peoples present and future.

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    Replies
    1. Anonymous10:46 PM

      You can't just drive a car into Colombia and sell it. Sorry, you need an import license. Colombian law will require that standards be met and Colombian law requires a "paz y salvo bancario" that certifies that the car was legally obtained in the first place. And why would any one in Colombia buy a car at "full value" from a Venezuelan when they can buy a car legally in Colombia? We don't have Venezuela's problems. We have a market-economy and we can get any car we want. For your scheme to work, that Venezuelan car would have to be sold at a discount for starters. Plus I don't think you understand that 6.30 Bs rate is for exports. Given that Ford is assembled in Venezuela, it's not eligible for a discount dollar rate. Now admittedly, the 6.30 Bs rate is rife with abuse but to obtain that rate you technically have to submit paperwork for some sort of basic imports.

      Delete
    2. Boludo Tejano1:53 PM

      Smuggling gasoline from Venezuela is a lucrative business because gasoline currently sells in Colombia for around US $3.58/gallon compared to Venezuela's ~ 10 cents/US per gallon. [official or black market $ price? Most likely official.] Venezuela's insanely low price of gasoline compared to international and Colombian prices drives the smuggling of Venezuelan gasoline to Colombia.

      Like gasoline, the market for cars in Venezuela IS decidedly different from the rest of the world. But here the similarities between car and gasoline prices in Venezuela end. Consider this BBC article from a year and a half ago: Why used cars can fetch more in Venezuela than new cars.

      From the article: there is a waiting list of 3-4 years for new cars. That in and of itself would imply that with a high domestic demand for cars, there is little incentive to smuggle a new car to Colombia to make some money. You can make money in Venezuela on a new car. No need to send it to Colombia.

      Because it is so difficult to buy a new car, a paradoxical situation has developed in Venezuela, where new cars are now cheaper than used ones.
      Economists say the explanation is simple and dates back to economic reforms introduced by the late president Hugo Chavez that were aimed at reducing inequality, poverty and malnutrition.

      Price regulations aimed at driving down the cost of everyday products, as well as currency controls brought in to avoid capital flight, has created several economic distortions.

      Reduced access to dollars has limited the ability of Venezuelan businesses to import goods and - combined with the price regulations - created shortages of basic items such as milk, corn flour and toilet paper.

      The automotive sector has not been spared. Imports have fallen and internal production has slumped because price regulations keeps profit margins low.
      The government blames "speculation and usury" for the situation.

      "A mafia was born around the car industry. Several actors are involved, from the production side to the commercialisation," Elio Serrano, a member of the National Assembly for the governing United Socialist Party of Venezuela (PSUV), told the BBC.

      "These people have been defrauding the Venezuelan people over the past 10 years," he added, arguing that this "mafia" made Venezuelans believe their cars were worth up to six times what they would fetch on the international market.


      When there is a very high demand in Venezuela for new cars, and one can make a profit on a new car simply by waiting a while and selling it as a used car, there is not much motivation for smuggling a car to Colombia.

      Delete
    3. Anonymous12:43 PM

      To Anonymous10:46 PM

      Question: How many stolen cars entered Colombia from Venezuela in the 70's, 80's, 90's and 00's?

      Question: How many of those cars were returned to their owners when presenting papers to Colombian police?

      Answer: Pretty much zero. Unless money changed hands.

      So to bring up licenses ans tarriffs and such is kind of funny, more than anything.

      I mean, really........

      Roberto N

      Delete
  4. Charles Lemos7:02 PM

    Hyperinflation, it's a coming.

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  5. So glad to see a new post from you, Daniel! I have missed your insight into venezuela's situation.

    ReplyDelete
  6. pi3141610:47 PM

    What Venezuela needs is the expertise of someone like Gideon Gono who once boasted that he could print money faster than it devalued. The problem was: he ran out of money to buy paper to print his dollars on. Ouch!

    https://www.glenstephens.com/June09-Zimbabwe%20100%20Trillion%20banknote.jpg

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  7. Relax. The rate is only 305 this morning.

    ReplyDelete
    Replies
    1. And only 313 this afternoon.
      It is not hyperinflation if you can measure it.

      Delete
  8. Anonymous10:36 AM

    Dollarization can be good or bad. It can be good for the economy, it will allow to regain some sense of normalicy. The bad part is Chavista regime may be able to survive in that way. It's what happened in Zimbabwe. A total collapse may be a lot better in the medium to long run than marginal improvements that lead nowhere.

    ReplyDelete

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