Tuesday, August 16, 2016

Esau would get a good deal from Jacob in Venezuela

The new minimum wage increase decreed by Maduro is of course a fraud. No need to insult the gentle reader reminding him or her that the inflation has already pre empted any increase Maduro may give us; and the relatively large but very insufficient increase will not solve the workers purchasing power problem while adding yet more fuel to inflation. Only chavistas do not know that, or worse, do not care about that.

The new minimum wage is officially 22,576 VEB. At the SICADI exchange of today we see that the VEB is at 645 to the USD. In short the minimum wage is officially 35 USD PER MONTH.

There goes the glorious bolivarian revolution in the name of workers.

And do not complain, I could have used the black market rate of 1,007 instead of 645 because that is the only one I can use to buy dollars with my 22,576 VEB. It would be, well, 22 USD.  How people can live off such a paltry amount is a mystery beyond belief, less than 1 dollar a day.

Ah! but the well informed reader will tell me that I forgot about the food bonus!!!!  That is right. And I will explain that next.

For reasons too long to explain Venezuela has a complicated system of severance payments. That is, when you fire someone, or they simply resign, you have to pay them X amount of money based on all the income that person has gotten while working for you. The trick here is how do you define income. One way the Venezuelan government, before Chavez already, found to go around ballooning severance sums was to give its employees bonuses not counted as regular income. The most creative way was to establish a food bonus for lower scale wages. First it was limited to large business. Then it spread to small business, then everyone got it, not only lower scale workers. Now, I have been informed that even as an associate in my business I could get fined if I did not receive that food bonus, something that I have refused to receive until now.

Chavismo in recent years has steadily been increasing the food bonus as a way of slowing down the amount of severance pay that the state today cannot meet anymore, by the way.  The pay increase I refer above raised stupendously the food bonus to 42,480.  Yes, that is right, the food bonus is now almost twice the basic monthly wage.

So why should I complain? Very simple: that food bonus comes through tickets or a bank card AND can only be used in food stores. Guess what? the worker may want to use part of that 42K to buy such things as public transportation to go to work or medicine for her children. And one of the few ways to make good on that 42K for cash is to go to certain grocery stores that will give you cash in exchange (illegal, of course) but at a 20% discount.

So there you go, no matter how positively you try to look at that minimum wage hike it is a fraud to the worker, its severance pay will be negatively affected and s/he can only buy food (which incidentally cannot be purchased through that food bonus from black market).

But it gets worse.  Today I got from a relative in France a a tweet and a picture.  The tweet is from Miro Popic, food editor at Tal Cual.

Cheaper and yummier
So about a pound of lentils in Venezuela costs 3.995 which at the SICADI in euro of 727 is 5,49 Euros. Why Euros? Look at the picture on the right on how much is a pound of lentils in France this week: 1.73 Euros.

Now you be kind and explain to me at which level this could possibly make sense. There is certainly a speculative factor from the merchant in Venezuela, no doubt. But it is not enough.

At any rate, with the new minimum wage 65,056 VEB, food bonus included, you can buy 8 kilos of lentils. That's all you will be eating that month, lentils, 86 grams per meal (and let's forget about cooking gas, water, etc... to prepare them).

I am sorry, but unfortunately such things cannot be made up........


  1. If you want to i can send a ship loaded with lentils to hover offshore 20 km from Higuerote. You send peñeros over, and we drop 500 kg of lentils on each boat. That's about €4 per kg profit after expenses (we need to bribe the Venezuelan navy, the national guard, and Jaua). So each boat trip makes €2000, we take the bolis to Cucuta using a return trip by one of the avionetas bringing in cocaine for the FARC (I'll talk to Pollo Beck to set it up). The key is to get the lentils all the way to Caracas from Higuerote and avoid a truck jacking or looting. That I'll arrange with Diosdado and my Cuban contact. Then we need to pay off Policaracas and Jorge Rodriguez so we can sell the lentils without a hassle. But overall we can probably clear 20 thousand euros per 5 thousand ton ship load after we pay off all those bribes, interest on bank loans, and the Antigua Mafia to avoid paying taxes.

  2. "the relatively large but very insufficient increase will not solve the workers purchasing power problem while adding yet more fuel to inflation. Only chavistas do not know that, or worse, do not care about that."

    This increase is just another political move, trying to buy time while the thieves in power steal some more. Trying to cool things down a bit, for a while. There's little food, long lines, people are pissed off. So give them a little something.. Just to avoid mass riots.

    When you're used to get less than $35 per month, any raise will be a cooling measure for a a while. As inflation continues to rise, then, even the most 'humilde', under-educated people will realize that this was all a sham.

    But they count on peoples' ignorance and good nature, to get by and steal some more for a few years. People earning minimum wage are usually not very well educated, if you know Venezuela. So when you throw them a carrot, they will gladly accept it, and even be grateful. At least, they will calm down a bit. That was they wicked idea behind this ridiculous raise. And to some extent, sadly, it will probably work for a while.

    1. That's exactly what it is about, just avoid an all out riot long enough to get rid of anyone with a backbone or of any intelligence and have the remainder adapt to such misery that when the Cuban life style is fully implemented it is accepted as survivable and not riot-able. Hence control the masses.

  3. Labour expert here. It's even worse than you picture it, the government (N° 1 employer) doesn't even pay severance packages until 2-10 years after people quit or get fired, so what you see now is the need to lower payroll in short term (christmas bonuses and such).

    It's ironic, in 1997 food stamps and transport bonuses were higher than minimum wage and it was outrageous for early chavismo, today it's twice the minimum wage without no transport bonus.


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